In comparison to any marketing technique, “word-of-mouth” is still the cost-efficient and effective marketing technique. A good or bad review from the customer may affect the sales of the product or services in long run. Thus, “Customers” are considered the building block of any business. Opening and growing businesses not only depends on efficient deployment of strategic planning but takes a major toll when analyzing and managing their customer and their requirements and needs. If you see ongoing market trends, it’s very visible that the company invests massively to prioritize customer satisfaction so as to ensure that the customer works as a promoter and not a detractor.
What is Customer Satisfaction?
- Customer satisfaction is a metric to determine how happy or content customers are with a company’s products or services.
- It is a term frequently used in marketing that tries to quantify the degree to which a customer is happy doing business with a firm.
- This information derived from tools such as surveys and ratings can help a company determine areas for improvements or changes in its products or services.
- Most Businesses value this interaction as a crucial factor in ensuring brand loyalty, and buyer satisfaction, and encouraging repeat orders.
Examples
- Amazon is one of the biggest retailers in the world and is known for its innovative customer service. They utilize tools such as voice-activated purchasing software, loyalty programs, and drone-enabled delivery coupled with clear policies and a one-stop resolution, which makes it popular.
- Zappos track and observe the behavior of its customers with a focus on providing a personalized experience and developing long-term relationships. According to data available, it is said that 75 percent of the purchases on Zappos are by returning customers. Customers love them for going out of their way to deliver extraordinary customer experience.
- Apple, a leading global brand has a massive presence with over 500 retail stores in 24 countries. Retail stores are known to deliver exceptional customer satisfaction by prioritizing long-term relationships and effective solutions to their problems. Apple employees are knowledgeable, and trained to engage, communicate, and resolve customer problems, all the while with a focus on a personalized experience.
Customer Satisfaction metrics
Businesses can measure customer satisfaction using the following metrics:
1. CSAT Score
- A frequently-used key performance indicator to track how satisfied customers are with a product, service, or experience.
- We can calculate the mean average of all the scores combined on a scale to reach the CSAT score
- CSAT targets the satisfaction level of the customer in the present moment but is restricted when it comes to assessing a customer’s ongoing relationship with the business.
- We can also utilize multiple questions to focus on specific parts of the experience such as a certain cuisine, or the telephone service.
- There are various methods to collect responses for CSAT surveys, such as face-to-face feedback, Interactive Voice Response (IVR) based surveys, Email surveys, Mobile Surveys, and Social Media Surveys.
Example: XYZ Restaurants Ltd has been operational for a few weeks and is keen to understand if their business is doing well. One of the key indicators is to calculate the CSAT score, for which they decide to use a 5-point scale and survey 15 of their customers.
The result is as follows:
To calculate the CSAT score, only responses of 4 (satisfied) and 5 (extremely satisfied) are included in the calculation, as shown below
Using the above formula, we can come to CSAT score
CSAT = 8/15 X 100
= 53
A CSAT score of 80% is a good indicator of success, although it will vary by industry
2. Net Promoter Score (NPS)
- Refers to a metric developed by management consultant Fred Reichheld in the year 2003, with the goal to measure customer loyalty and predict future outcomes.
- It helps in evaluating the probability that a customer would endorse the product, service or experience offered by the business to his circle of influence, namely friends, relatives, or colleagues.
- Several studies prove that the NPS system correlates with business growth. For example, studies by a company called Satmetrix and first published in a Harvard Business review article in December 2003, have found that companies across industries earn a higher income when they improve their Net promoter scores.
- Generally, customers are required to answer a single question ‘How likely is it that you would recommend ABC limited company/product/service to a friend, relative or colleague?’.
Example: ABC limited sent an online poll with a 0-10 scale and the NPS question. In scale 0 indicates that they are not at all likely to recommend and 10 indicates that they are extremely likely. They received 150 responses from their customers and follow the steps below to reach the NPS score.
✔ Enter the survey responses into an excel spreadsheet and break down the responses by passives, detractors, and promoters.
✔ Responses between 0 to 6 are to be designated as Detractors, 7 and 8 as Passives, 9, and 10 as Promoters.
✔ Detractors are unhappy customers who may spread negative comments about the company and hurt its image.
✔ Passives are satisfied customers but not quite keen on recommending the organization or maybe lured by the competition with a better price or product.
✔ Promoters are loyal customers who keep buying and recommending to their circle of influence, which stirs company growth.
✔ Add up the total responses from each group
In this case ABC limited received the following responses
✔ Next, divide the group total by the total number of survey responses to get the percentage
✔ Subtract the percentage total of Detractors (20%) from the percentage total of Promoters (57%) to get the NPS score
The score is shown as an integer and not a percentage, so the NPS score for ABC limited is 37
According to the global benchmark data by SurveyMonkey.com, based on NPS of more than 150,000 organizations, the average score is +32
∙ The bottom performers have an NPS score of 0 or lower
∙ The median performers have an NPS score of +44
∙ While the upper or topmost performers have an NPS score of +72 or higher
3. Customer Effort Score (CES)
- It indicates how easy it is for a customer to do business with a firm or how much effort a customer has to exert to get a complaint resolved, a request fulfilled, or return a product while dealing with a business.
- It is a key metric to track business growth and a great indicator of customer loyalty. The idea is that customers are loyal to businesses, products, or services that are easier to work with.
- It’s a solid predictor of referral possibility as most customers reporting high effort mention that they would speak negative about the organization to others.
- CES surveys generally use questions such as ‘on a scale of ‘very easy to ‘very difficult, how easy was it to interact with us i.e. solving an issue with customer support, signing up for a trial, making a purchase, etc.
Example: Bank Pvt Limited did a survey to calculate to measure how easy it is for their customers to apply for a credit card. The scale they used is as follows:
Here a response mentioning ‘Very Easy’ will be marked as 1, and ‘Very Difficult’ as 4.
In the example, Bank Pvt Limited received responses from 10 customers
Next step is to add the responses (2+3+1+3+4+4+2+4+4+4+) = 31
And then divide by the number of respondents 31/10 = 3.1
The higher the number, the less effort customers need to exert to get things done. CES score is useful to observe if changes to a process or system can make things easier for the customers.
∙ Few other scales or metrics which is used in CES surveys:
✔ The Likert scale: The metric uses a 7-point scale and the responses are usually number as 1 to 7
✔ The 1-10 scale: Offers 1-10 range with responses between 1-3 observed as positive, 4-7 as neutral and 8-10 as negative
✔ Faces Scale: A popular scale and easy to run for minor elements of a product or service. Its visually appealing and easy for customers who do not want to spend
Basics of customer satisfaction
Good organizations study this subject in-depth and come up with guiding principles which can improve the customer experience
- Timely attention to issues brought to attention by customers is crucial and is the first building block of long-term relationships. A customer should not have to wait to get his problem addressed.
- Periodically assess the customers' experience through surveys, polls, etc.
- Make it easier for customers to complain either through online polls, complaint boxes, or posting on social media. They will be doubly frustrated with their poor experience and then with a lack of an outlet to fix the problem.
- Provide a single stop solution, which means the customer should be able to call the company’s helpline and solve his problem with the representative than being transferred to various departments. This can be frustrating as the customer has to explain the issue multiple times and feels nobody is willing to solve his problem.
- Educate customers and provide answers to possible customer questions on the company’s website. It can be upsetting if you cannot find answers to questions or concerns while using a product or service. Successful companies provide smarter content, live chat, and documentation to curb this problem.
Summary
- Customer satisfaction is a metric to determine how happy or content customers are with a company’s products or services.
- This information is derived from tools such as surveys and ratings which can help a company determine areas for improvements or changes in its products or services.
- CSAT is a frequently used key performance indicator to track how, satisfied customers are with a product, service, or experience. We can calculate the mean average of all the scores combined on a scale to reach the CSAT score.
- Net promoter score helps in evaluating the probability that a customer would endorse the product, service or experience to his friends, relatives, or colleagues. Companies use an 11-point scale to assess NPS, where responses between 0 to 6 are designated as Detractors, 7 and 8 as Passives, 9 and 10 as Promoters.
- CES or customer effort score indicates how easy it is for a customer to do business with a firm or how much effort, a customer must exert to get a compliant resolved. The higher the CES score, the less effort customers need to exert to get things done.
- These scores or rate card can help client take strategic decision and deploy many decisions for a longer and better future of the company.
FAQs
1. What is customer satisfaction?
Customer satisfaction is the metric to determine how happy or content customers are with a company’s products or services.
2. What are the factors affecting customer satisfaction?
Factors affecting customer satisfaction can vary but typically include: timeliness of issue resolution, quality of product or service, knowledge and friendliness of customer service representatives, and availability of support channels, among others.
3. How do I measure customer satisfaction?
Businesses can measure customer satisfaction using the following metrics:
1) CSAT Score - A frequently-used key performance indicator to track how satisfied customers are with a product, service, or experience.
2) Net Promoter Score (NPS) - This helps in evaluating the probability that a customer would endorse the product, service, or experience offered by the business to his circle of influence, namely friends, relatives, or colleagues.
3) Customer Effort Score (CES) - This is a key metric to track business growth and a great indicator of customer loyalty. The idea is that customers are loyal to businesses, products, or services that are easier to work with.
4. How can I improve customer satisfaction?
There are a few things businesses can do to improve customer satisfaction, including:
1) Deliver on what was promised - If a product or service is not delivered as promised, customers will be frustrated and dissatisfied.
2) Provide quality products and services - Customers want products and services that meet their expectations, if not exceed them.
3) Resolve customer issues quickly - Customers are more likely to be satisfied if their issue is resolved quickly and efficiently.
4) Make it easy for customers to do business with you - This could include providing clear and concise instructions, offering multiple support channels, and having knowledgeable customer service representatives.
5. What are the consequences of poor customer satisfaction?
Poor customer satisfaction can have a number of consequences for businesses, including:
1) Loss of customers - If customers are not happy with a company’s products or services, they are likely to switch to a competitor.
2) Lower profits - Satisfied customers are more likely to be loyal and purchase more products or services. Unhappy customers may seek refunds or discounts, which can impact a company’s bottom line.
3) Damage to reputation - A poor reputation can be difficult and expensive to repair.
4) Poor customer satisfaction is always bad for business, so it is important for companies to take steps to ensure that customers are happy with their products and services.
