Measuring satisfaction – the very concept seems weird. It’s either there or not, what’s there to measure? Yet, it turns out that you can, in fact, measure customer satisfaction, and in more than one way.
Why do you need to measure customer satisfaction?
The most obvious reason is that customer is the central entity in most businesses, and whether the customer is happy with you or not is a key factor of your success.
It is that point on which everything hinges, and while customers may be hard-pressed to define satisfaction, we know how to measure it.
Why is customer satisfaction important?
If you can’t measure it, you can’t manage it.
These words by Peter Drucker apply to customer satisfaction perfectly. Indeed, once you find a way to translate this ephemeral concept into facts and figures, you will know how to make it work to your advantage.
By measuring, you learn how much your customers are satisfied and can compare this level to a certain benchmark.
You will immediately see whether you are OK or whether some urgent measures are in order. In its turn, the increase of customer satisfaction will help you achieve quite a number of other goals:
Customer churn is a key parameter that all businesses are afraid of and thus monitor very closely.
Churn occurs when your existing customers abandon you. When you notice that your customer churn accelerates, this should trigger very loud alarm bells.
The reason is that retaining customers is far less expensive than getting new ones.
In fact, customer acquisition costs about six to seven times as much as retention. Thus, you should try to prevent churn as much as you can, and here measuring the satisfaction and monitoring the trend will help tremendously.
Increase of customer retention, engagement, and loyalty
Satisfied customers are loyal customers. When you are happy with the product or service, you will hardly start looking for a different provider. The importance of customer satisfaction in this respect is difficult to overestimate.
A high level of customer satisfaction means high loyalty and retention.
On the contrary, poor satisfaction can lead to customer engagement dropping. And when customers become disengaged, they leave.
Word-of-mouth marketing and referrals
Word-of-mouth marketing, viral marketing – this is something many businesses will kill for.
On the one hand, word-of-mouth marketing is insanely effective, on the other hand – it is cheap. Your customers are advertising your business by their own free will with no effort on your side.
Well, almost… For viral marketing to work, your product must be worth telling others about. Otherwise, viral marketing might backfire with unpredictable consequences.
Obviously, when your customers are satisfied, they are more inclined to share their experience of your business.
This is another reason for you to analyze customer satisfaction metrics – you can steer the word-of-mouth marketing and encourage customers to refer your business to their friends, but only when you are sure that they are happy with you.
Upsell generation and profit increase
Upsell and customer satisfaction are like the chicken and egg – one causes the other, and vice versa. A satisfied customer is more likely to consider an additional service, a premium version, or a complementary product.
On the other hand, upsells create better customer experiences and, thus, increase satisfaction. The circle closes.
A high level of customer satisfaction opens wider opportunities for upselling, this is why it is critical to measure it. Upsells, in their turn, lead to higher profit – and isn’t it what you started your business for?
7 metrics to measure customer satisfaction
Theory should always be supported by practice, and this is what we are going to do now. How do you measure customer satisfaction? The answer is simple – you ask. That’s it, to gather the data you need, you survey customers. However, there is a catch – you need to ask the right questions.
Now, customer satisfaction is a complex concept consisting of a whole line of different metrics that allow you to evaluate the general level of your service as viewed by your customers.
For each metrics, you need a special customer satisfaction survey. By interpreting its results, you will get the knowledge you need to improve your performance.
Let’s look at the key metrics used to measure customer satisfaction and how to gather them.
#1 Customer Service Satisfaction (CSS)
Customer service satisfaction shows exactly what the name suggests – how the customers are satisfied with your service.
CSS can be measured by displaying a chat rating form after each interaction between the customer and the service.
For example, enable a satisfaction form in your live chat asking customers to rate their customer service experience on a scale from “Great” to “Poor”.
You can measure CSS on an ongoing basis and observe the trends and patterns. As you gather data over time, you will see where improvements are in order.
Usually, CSS surveys also provide an overall score showing how your customers rate your service.
If, for example, 90% or more customers rated you as “Great”, there is, probably, nothing to worry about. However, if your score drops to 60-70%, that’s an indicator that you should take some measures.
The great thing about CSS is that you can measure it on a regular basis without preparing and launching a special survey.
On the flip side, however, CSS does not give you a complete picture of your product and the customer’s satisfaction with it.
It only shows how happy the customer is with the particular interaction. Still, this is valuable knowledge that can help you in your strategic planning.
#2 Net Promoter Score (NPS)
The Net Promoter Score shows how willing your customers are to recommend you.
NPS is great in the way that it brings knowledge on more than one level. On the one hand, it shows the viral marketing opportunities.
On the other hand, it allows estimating your business growth.
To measure NPS, you need to ask just one question:
On a scale from 0 to 10, how likely are you to recommend our company to a friend or colleague?
The results fall into three groups:
- Detractors (0-6). These respondents are unlikely to become your promoters or even loyal customers. They may even play an adverse role by spreading negative comments about your business.
- Passives (7-8). People who rated their willingness to recommend you as 7 or 8 are, in fact, hardly likely to do so. However, they will not discourage others from using your product, either.
- Promoters (9-10). These customers are your loyal supporters that can refer others to you and promote your brand and product.
You can run this survey any way you want it – in a chat, by email, on your website.
To calculate your NPS, subtract the share of detractors from the share of promoters.
What does your NPS tell you? Of course, the higher the better, but there are subtle nuances that you should take into account.
First, NPS varies greatly between industries, department stores getting the highest score. Thus, if you do not get the highest figure, it may be a common trend for your industry.
Second, while you should aim as high as possible, an NPS score of 60-70 is quite OK. An NPS of 100 means that every single customer is highly willing to recommend you. Does not look realistic, does it?
There is one aspect where NPS falls short. While it tells you that you are not performing as you should, it does not tell you why. However, there is a way to find this out, too. Just add a follow-up question to your NPS survey:
- For detractors and passives: What can we do to improve?
- For promoters: Thank you! What do you like about our product to rate it so highly?
This survey is also a great opportunity to gauge the Product-Market Fit – see whether there is a market for your product and whether your product satisfies this market.
You can do it by adding one more question:
How would you feel if you could no longer use our product?
If you get 40% or more people saying they are going to be very disappointed if your product disappears, this means there is a strong market for you and you can plan growth.
#3 Customer Effort Score (CES)
Customer Effort Score determines how easy it is for a customer to use a product or service.
Again, to measure CES, you need to ask a question. In this case, it is going to look as follows:
Overall, how easy was it to..?
Depending on what you offer, finish the question with “…have your issue resolved”, “…install our application”, “…have a product returned”, and so on.
Let customers rate their experience on a scale from very easy to very difficult. You can even use emojis as ratings if you wish.
Your CES scale can have 5, 7 or 10 values, 1 always representing “Extremely easy” and the highest number representing “Extremely difficult”. Your CES will be the average of all your responses. Obviously, the lower the better.
Alternatively, you can have only 3 values – “Easy”, “Neither”, “Difficult”.
In this case, subtract the percentage of “Difficult” responses from the percentage of “Easy” and discard the “Neither” and aim for higher scores.
Why do you need CES? CES gives you an idea of your customers’ loyalty to your brand and allows evaluating opportunities for word-of-mouth marketing.
Still, CES has its limitations – it only measures customer effort in connection with a single product or service without forming a complete picture of your business. But don’t worry, this is why we recommend using several metrics for measuring customer satisfaction.
#4 Customer Satisfaction Score (CSAT)
The Customer Satisfaction Score is one of the key metrics as it is a rather straightforward way to find out whether your customers are happy with you or not.
It is measured with a question that is equally straightforward:
How would you rate your overall satisfaction with our product/service?
The CSAT is rated on a 1-5, 1-7, or 1-10 scale, 1 usually being the worst experience the customer ever had.
Most often, a CSAT survey is offered to complete the customer experience of your product or service. This way, you can get the most relevant customer feedback immediately.
The CSAT is calculated as a percentage of satisfied customers in the total number of respondents. A CSAT of 70% or higher is considered good for the business. On the US market, CSAT usually varies from 60 to 80% depending on the industry.
The greatest advantage of the CSAT is that it is simple and intuitive. Moreover, since you usually offer a CSAT survey immediately following an interaction with the customer, they are still “in the context” of their experience and, therefore, can give the most realistic answer.
On the other hand, customers whose experience was unsatisfactory might simply refuse to answer the survey. This way, you may get results that show a higher percentage of satisfied customers while, in fact, their number is lower.
#5 Customer Health Score (CHS)
Customer Health indicates whether your customer is going to remain with you or is about to churn. Unlike other types of customer satisfaction metrics, CHS does not use customer surveys. It is based on the observation of customer behavior over time.
Customer Health uses lots of different factors. For example, you can process the following metrics to measure CHS:
- How long the customer uses your product
- Whether they are using one or several products
- Whether they are using a free version or a premium one
- The number of upsells, if any
- The amount of money they spent with you
- How often they contact your support service
- How willing they are to participate in other surveys
- For B2B products and services – whether top executives are users of your product
Of course, for each business, the methodology of calculating and analyzing their CHS will be different with a different weight assigned to particular metrics. What’s important is that at the end of the day you should be able to place your customers into three main groups: healthy, at-risk, poor.
It is critical not only to define CHS for each customer but to observe it over time. A healthy customer showing a steady decline in their health score definitely requires close attention.
#6 Online ratings/reviews
Adding an online review option to your product or service is a great technique of increasing your customer base and boosting your sales.
90% of customers value online reviews higher than product descriptions by brands.
We always look for those stars next to the product name and will hardly buy something with just one or two stars.
In the context of online reviews, we have two recommendations:
- Make sure your product is good enough to encourage positive reviews
- Provide an option for customers to rate your product and to write a review
No matter where you look, the general concept is the same – the higher the better.
If your rating is 4.6-5, you are totally OK.
The rating of 4-4.5 is also good but suggests that there is room for improvement.
If, however, your rating drops below 4, there is definitely something wrong with your product and you need to plan urgent measures.
Online ratings allow monitoring your market position in real time and your standing against your competitors.
On the flip side, online ratings can sometimes be a bit far from objective as some companies create high ratings artificially while others do not even bother to remind their customers to rate the service.
#7 Customer Churn Rate (CCR)
Churn rate is the percentage of customers you lost over a certain period.
As we mentioned already, getting new customers is much more expensive than retaining the existing ones. Thus, it is important to monitor your churn, too, in order not to miss a negative trend.
To calculate the churn rate, you need to determine the period for which you are going to calculate it. Then subtract the number of customers at the end of the period from their number at the beginning of the period. Divide the result by the number of customers at the beginning, and you will get your churn rate.
CCR is a rather comprehensive metric that shows whether there is a problem.
Then it’s up to you to find reasons for customers dropping out and take measures – adding new services or adjusting the existing ones, introducing reminder messages, etc.
#8 Bonus: Other customer satisfaction and service metrics
Customer satisfaction is a multi-layered concept that can be measured from lots of different angles.
In a support service, it may be a good idea to monitor such special metrics as first response time and time to close.
Customers appreciate it when you value their time, thus, include time-related metrics into your analytical toolset.
First response time shows how long it takes for your agents to pick up a call or chat. Customers do not like to wait on hold, thus keep the first response time as short as possible. If you find that your customer service takes too long to respond, it may mean that you need more agents on board. Alternatively, think of introducing additional training courses for your agents, so that they handle customer requests quicker.
Time to close shows how long you take to resolve a customer issue. Again, this knowledge is important in the context of customers valuing their time and wanting their issues to be cleared as fast as possible.
Most customer communication tools like HelpCrunch include the options for monitoring the first response time and time to close. You can follow the trends and patterns and see where improvement may be in order.
Of course, there are other metrics that you can use in your customer service.
Decide which are relevant for your business and set them up according to your specifics – and you will have a complete picture of your customer satisfaction level.
How to improve your customer satisfaction metrics?
Now that you have measured your customer satisfaction, the logical question is what to do with the knowledge you obtained. Make it work for your benefit – use it to improve the quality of your service.
Here’s the action plan for customer satisfaction improvement:
- Choose the types of customer satisfaction metrics that are right for you.
- Analyze the results to see the points of improvement – you may find that customers have issues with your product, have difficulties in communicating with your support, or consider your pricing strategy far from optimal.
- Take measures to improve the shortcomings that you identified.
- Keep gathering the metrics to see whether the steps you took have the desired effect.
By now, you may feel a bit overwhelmed with the number of metrics and the various methodologies of measuring them.
Indeed, measuring customer satisfaction may be a complex task. However, there is a way of making it easier – use customer communication software that has built-in analytical tools.
This way, you will only need to set up your communication platform in accordance with your business goals, and it will return the metrics you require in any form you wish – on a visual graphic dashboard or in a separate report.
Try HelpCrunch, and you will see how much useful information it can bring.
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