Are your customers happy? Whether they are, or they aren’t, do you know why?
These might seem like simple questions, but the implications of the answers are extremely complex. Every business, brand, and bottom line depends on happy customers. Companies do not go a day without assessing financial performance. The same should be true of measuring customer satisfaction. The two are inextricably linked.
Many different metrics and methodologies for measuring customer satisfaction exist. No one piece of customer feedback tells the full story. Combining metrics to paint a picture of what happens when customers interact with your business is vital.
Conducting CSAT surveys and using customer feedback to develop a strategic plan can be the best road map for business growth. Measuring customer satisfaction and acting on the data to drive up scores will earn new customers and develop loyalty among existing clients.
Satisfied customers buy more, buy longer, and bring their friends and families along to do the same. That makes measuring customer satisfaction one of the most important activities a business can undertake.
Why Is Customer Satisfaction Important?
Customer satisfaction is the measure of how happy consumers are with the products, services, and brand interactions they receive from a business. Data clearly indicates that customer satisfaction is a leading metric in predicting a company’s long-term financial performance. That is because happy customers purchase more and stick around longer. Even a world-class marketing campaign for a superior product/service cannot make up for a company unconcerned with low customer satisfaction scores. The best companies in the world know what their customers think and feel about their products, how they are performing against consumer expectations, and constantly invest in improving the client experience. Those that don’t pay the price—literally—in lost customers, lower margins, and diminishing revenue.
The stakes for posting high customer satisfaction scores continue to escalate. Conservative estimates show acquiring a new customer can cost five times more than retaining an existing one. However, many companies ignore this statistic when it comes to allocating marketing and sales dollars.
Research released by CallMiner found that U.S. businesses are embroiled in a consumer “switching epidemic” that costs companies more than $136 billion annually. The data showed that 85% of adults switched suppliers 1.81 times over the previous 12 months. The top three reasons: 1) price, 2) product/service problems, and 3) a lack of focus on customer retention and loyalty.
With low entry barriers for new businesses and the prevalence of e-commerce, customers have options when a brand does not deliver. A study conducted by American Express found that one-third of Americans will consider switching brands after just a single instance of poor service.
Unhappy customers seek out alternatives, and a company’s churn rate climbs. Satisfied customers are less likely to leave, which generates big savings in customer acquisition costs. However, correlations also exist between increases in customer retention and profits, new and repurchases, and referrals. Sales success rates among existing customers average 60-70% versus new customers topping out at 20%. Those are big incentives to improve customer satisfaction and prevent churn.
Increase of Customer Retention, Engagement, and Loyalty
Customer satisfaction is an indicator of customer loyalty, but the two metrics present different information. A customer satisfaction score gives a numerical value to a consumer’s attitude toward a product, service, or brand. Customer loyalty measures the behaviors of a consumer that demonstrate fidelity such as repeat purchases, choosing a brand over a competitor, or recommending the company to a friend.
People become loyal based on a collection of positive, satisfying experiences. They develop trust in the brand and feel connected to its values. Therefore, customer satisfaction is the precursor to customer loyalty.
When it comes to share of wallet, loyal customers sound like “cha-ching.” Repeat customers spend more than new customers and shop more regularly. Their spending is more predictable, and they stay with brands longer. They also are more forgiving when a brand fails on a promise.
Loyal customers usually are engaged customers. They are more likely to visit brand websites, leave positive reviews of products and services, and communicate through social media. Their enthusiasm can be contagious for others.
Customer loyalty and engagement also help drive employee tenure—another big cost-saver for organizations. In fact, companies with above-average customer and employee engagement report substantially higher financial performance and employee retention compared to companies that excel at only one dimension. Employees able to contribute to higher overall satisfaction and loyalty among customers experience a greater purpose in their work, have actionable feedback to improve future efforts, and feel like they are contributing to the company’s success in a more substantial way.
[You may have heard the saying, “Happy employees make for happy customers!” But it is more accurate to say that engaged employees create engaged customers—and that considering both customers and employees leads to the best business results. Interested in learning more? Download the report “Effectively Combining CX and EX.”]
Customers talk. Satisfaction determines if what they share helps or hurts a company.
Word-of-mouth (WOM) marketing are actions taken by businesses to motivate consumers to talk about a product, service, or brand. This form of marketing also includes the actions taken by the customer in sharing their experience or making a recommendation to others. Interest in the product or service becomes part of their dialogue.
Regular, active levels of word-of-mouth marketing are the goal for any company. In a study conducted in partnership with the American Marketing Association, 64% of participating marketing professionals indicated that word of mouth is the most effective form of marketing.
First, word-of-mouth marketing is low cost with high returns. Happy customers become extensions of the sales and marketing teams. They willingly share their positive brand experiences with their networks of friends, family, and online social connections. Awareness grows with every face-to-face conversation, share, repost, or retweet. Estimates show as few as 1,000 consumers can generate 500,000 conversations about a brand.
That level of amplification comes from the second major benefit of WOM marketing: trust. According to Nielsen, 92% of people trust word-of-mouth reviews and referrals from those they know above all other forms of advertising. This holds true for both B2C and B2B. When a person hears or reads a rave review from someone they know, they become much more likely to buy.
Consider the true power and effectiveness of word-of-mouth marketing. Satisfied customers are more likely to repurchase, offer free advertising for the company, and help generate additional sales among new customers. That means improving customer satisfaction levels offers the most valuable and cost-effective form of marketing possible.
Upsell Generation, Cross-selling, and Profit Increase
Customer satisfaction equals sales. In the book Marketing Metrics, the authors found that the probability of selling to a new prospect is 5-20%. That number increases to 60-70% for an existing customer. Not only do satisfied customers increase sales by number of purchases, but also through higher price points and across different product or service lines.
Consider a customer who loves shopping with Best Buy. For the holiday season, they want to splurge on the latest and greatest television. Having done their research and read the online reviews, they decide on a brand and size. However, in talking to a Best Buy entertainment center expert, they discover the value in a larger size with enhanced features. Plus, the associate recommends a sound bar for a theater-like experience and the extended warranty to keep such an important investment protected. The customer wins by purchasing the perfect electronics package and Best Buy makes more money. When friends and family visit, the customer talks up their experience. And, when the customer gets a little too excited and damages the TV as the game goes into overtime, Best Buy replaces it quickly through the warranty before the next playoff match-up.
In this scenario, previous positive experiences created the return customer. Trust generated the upsell and cross-sell. Customer satisfaction led to word-of-mouth marketing. But most important, both sides walked away winners. The relationship deepened, loyalty increased, and customer lifetime value likely will grow.
Seven Customer Satisfaction Metrics to Capture
The importance of customer satisfaction is clear, but only what gets measured gets managed. Implementing a cadre of customer satisfaction metrics relevant to the business shows true performance. By knowing the numbers, companies can identify challenges, capitalize on improvement opportunities, and drive customer satisfaction numbers in a positive direction. Plus, comparing trends in customer satisfaction with financial performance makes a clear case to the c-suite as to the ROI of keeping consumers happy.
Following are common tools for measuring customer satisfaction. Find the right combination to meet your business goals.
Customer Service Satisfaction (CSS)
People often consider customer service and customer experience as synonymous. They aren’t. Customer experience represents all touchpoints along a customer’s journey with a brand or business. Customer service represents an engagement within that larger experience. Customer service satisfaction (CSS) measures the effectiveness of that post-purchase interaction.
Companies generate a CSS score by seeking customer feedback each time they connect with the service department. Feedback can come from forms, pop-ups, live chat, a digital survey, or automated questions following a phone call. Asking standard survey questions across platforms produces trends over time that help isolate areas for improvement.
A CSS survey provides an overall score of how customers rate the service. For example, an average 92% “great” score would be cause for celebration. However, a score that drops 20 points would require investigation.
Unlike other customer satisfaction metrics, CSS measures a single interaction rather than a person’s comprehensive feeling about a brand. However, 58% of U.S. consumers contacted customer service in 2020. That provides a lot of opportunities to get it right, or very wrong. There are big rewards for the companies that focus on improving CSS. According to Bain & Company, businesses can grow revenues above market by as much as 8% when they prioritize the customer service experience.
Net Promoter Score (NPS)
Net Promoter Score (NPS) is used to measure customer loyalty to a company. The score generally comes from one straightforward NPS question: “On a scale of zero to 10, how likely are you to recommend our [product/service/company] to a friend?”
- 0 – 6 = Detractors – These are not loyal customers and may be inclined to speak negatively about the brand.
- 9 – 10 = Promoters – These satisfied, loyal customers are happy to promote your brand with friends and family. Promoters are the cornerstone of a business. They will continue to purchase and market the business if they stay happy customers. Therefore, companies should treat promoters as the VIP clients they are.
- 7 – 8 = Passives – Passive customers do not feel a loyalty to the brand but also are unlikely to disparage the brand to others. These clients represent low-hanging fruit to turn into Promoters.
Organizations subtract the percentage of detractors from the percentage of promoters among the survey group to measure NPS.
Net Promoter Score represents one of the most universally applied metrics for gauging customer satisfaction. The simplicity of capturing and reporting the metric makes it a fan favorite. About two-thirds of the world’s biggest brands from Amazon to Zara monitor their score. But NPS surveys are not limited just to global companies. Even small mom-and-pop shops find the score valuable in determining how well they are serving their clients. Regardless of company size, response rates to the key NPS question are generally high.
Unlike CSS, a Net Promoter Score of 60-70% generally is acceptable. After all, achieving loyalty above 90% would be difficult and rare considering the many product, service, and brand options customers have.
Net Promoter Score offers an easy way to get a big-picture view of the success of the customer experience, correlates to future revenue performance, and gauges the power of word-of-mouth marketing strategies. However, the score does fall short in that it fails to give context to survey results. Companies often ask follow-up questions for additional information on survey responses to understand the why behind each score they receive.
Customer Satisfaction Score (CSAT)
Organizations use customer satisfaction (CSAT) scores to understand how satisfied clients are following key touchpoints along the customer journey. Like NPS, the metric is used widely for its simplicity and speed.
A common question on CSAT surveys is: “How would you rate your overall satisfaction with the [goods/services] you received?” Respondents typically use a five-point scale with answers ranging from “very unsatisfied” to “very satisfied.” E-commerce, auto dealers, and review websites commonly use a five-star CSAT survey method for generating a customer satisfaction score.
Companies calculate CSAT scores in percentages. The higher the CSAT score percentage, the more satisfied the customer. Most CSAT questions immediately follow a customer interaction. Think of the customer satisfaction score as a “right away” metric to gauge the success of a specific interaction rather than an ongoing customer relationship. CSAT questions often appear following a call to a contact center, a visit to a website, or in a post-purchase email asking the buyer to “Tell us how we did.” Each business unit may track a different satisfaction score as it applies to their function within the company.
Customer Effort Score (CES)
Customer Effort Score (CES) measures how much effort a customer must exert to interact with your business services or products, such as making a purchase or getting a question answered.
Like NPS and CSAT, the key CES survey question is straightforward: “On a scale of ‘very easy’ to ‘very difficult,’ how easy was it to interact with our company today?”
The Customer Effort Score is the average of all survey responses. Companies subtract the percentage of “difficult” responses from those that indicated “easy.” Eliminate customer feedback indicating “neither.” The higher the score the better.
The premise behind CES is that loyal customers emerge when a product or service does not require high effort. Research shows customers with a poor experience are less likely to buy and more likely to share a negative review among their networks. That makes a customer effort score a good indicator of churn rate.
CES offers a simple way to collect customer feedback, easily applies to multiple channels, and is trackable over time. Customer effort score is used best in tandem with NPS to gain a more complete picture of a customer’s loyalty.
Customer Health Score (CHS)
Customer Health Score (CHS) is a measure that assesses what is working in the customer relationship, where additional support is needed, and how to deepen the relationship. CHS offers a proactive way of predicting which customers will stay and those that will churn. What constitutes a “healthy” customer may vary by company, but common metrics include:
- The length of time they have been a customer.
- Frequency of product/service usage.
- Number of times contacting customer support.
- Money spent and account growth over time.
- Engagement with marketing efforts.
- Customer feedback and recommendations.
Rather than assessing satisfaction based on a touchpoint or point in time, Customer Health Score efficiently combines data across important factors to categorize customers as weak, healthy, or at-risk. The measurement identifies where teams should take action to grow customers, increase loyalty, or hold onto failing accounts. The score offers important data for each client and shows trends over time. Healthy users moving toward the at-risk category could soon show up in the churn rate without intervention.
“How many stars does it have?” This is a common question for consumers. According to Qualtrics, 93% of customers read online reviews before purchasing products or services. Anything below a 3.3 on a five-point scale usually prevents a potential sale. As for negative reviews, 80% of new customers have changed their mind about a recommended purchase after reading a bad post. Avoiding the bad publicity by not collecting customer feedback is not an option. An absence of any reviews also will impede a sale.
Companies should actively encourage online reviews and respond to negative experiences. Social listening also helps organizations understand brand sentiment. When aggregated, brand ratings and reviews can provide actionable areas for improving overall customer satisfaction levels.
Customer Churn Rate (CCR)
Customer Churn Rate (CCR) measures how many clients stop doing business with a company over time. The metric calculates the number of customers lost as a percentage of the client population during a defined period.
A high CCR or a score trending upward indicates that a company should assess what is driving churn and put an action plan in place to bring the number down. High churn is expensive to a company’s budget and bottom line.
Cable and telecommunication providers notoriously experience a high churn rate for example. For most companies, retaining a customer is significantly cheaper than attracting a new one. That makes customer churn rate an important metric for tracking profits and projecting business growth.
Bonus: Other Customer Service and Satisfaction Metrics
Once companies master the more comprehensive customer satisfaction metrics, they can move to a more granular level. Measuring customer satisfaction constantly evolves. The following metrics deliver additional data impacting customer decisions and loyalty.
Customer engagement score looks at how actively customers use a company’s products and services. The metric takes various usage data to calculate a comprehensive engagement number. The higher the score, the more likely a customer is to renew, upgrade, or purchase additional products. Engagement scores also are great for businesses offering free trials because they estimate likelihood of earning the sale.
First Contact Resolution
Common in call centers, first contact resolution measures the number of customer support requests resolved during the first interaction. Remember, experiences that do not require high effort develop more loyal customers. Churn rate increases when the customer journey requires multiple attempts to resolve an issue.
Average Resolution Time
Average resolution time often pairs with first contact resolution. In addition to wanting to address customer requests during the first contact, average resolution time calculates how long it takes for an agent or support team to resolve the issue. Between the two metrics, companies should strive for quick and complete.
Things Gone Wrong
This may not be a fun customer satisfaction metric, but it is an important one. Things gone wrong tracks the number of complaints a company receives during a defined period. Complaints are divided by the total number of customer responses and expressed as a per-unit number. The lower the better. As an example, during peak holiday season, things gone wrong scores for retailers sharply increase.
How to Improve Customer Satisfaction Metrics?
First, just by collecting customer satisfaction metrics, a company moves in the right direction. The number of organizations not measuring customer satisfaction is astounding, especially considering its impact on business performance. Investing in happy customers always pays off.
For companies ready to pull back the curtain on customer satisfaction and use this powerful metric to meet business goals, following are some simple steps to get started:
- Select the customer satisfaction metrics that are right for your company. Focus on the ones that will make the greatest impact on the business’s overall performance. Make sure there is a commitment to act on the metrics tracked. Measuring customer satisfaction and not responding to the results is a waste of time and resources.
- Share the data throughout the company. Customer satisfaction is not controlled solely in the customer service department. Creating and keeping happy customers is everyone’s job. Making the customer satisfaction metrics transparent and actionable gets employees invested in improving the numbers.
- Use the data to identify opportunities for improvement. For example, Expedia identified that 58% of its customers contacted the call center after booking a trip. That equated to 20 million annual calls at a cost of $100 million. The team found that customers simply needed their itinerary. Once the Expedia team identified the problem, they enhanced their self-support system to fix the issue. Almost overnight, calls went down to just 15%.
- Track the impact of actions. Did they work and drive the intended result? If not, what went wrong? What should be tried next?
- Celebrate wins throughout the company. Involve all employees in generating ways to keep improving. Customer satisfaction metrics fluctuate, always offering new ways for companies to better serve their audiences.
The Bottom Line
Measuring customer satisfaction and using the data to develop loyal customers matters. Happy customers benefit nearly every financial metric in a company. They offer a competitive advantage, build a company’s reputation, and allow brands to grow. Tracking customer satisfaction and acting on the metrics is paramount to a business’s success. Having the right customer experience partner takes industry-leading customer satisfaction metrics from aspirational to attainable.
At Walker, we empower companies with customer experience data that drives decision-making. We are a Qualtrics-certified full-service Experience Management (XM) firm. Our team of experts provides technology implementation, end-to-end managed services, and expert strategic consulting so you can deliver best-in-class experiences to your customers. We manage by our motto: everyone deserves an amazing experience.