• Business Tips

How to Measure Customer Satisfaction: 6 Steps and Key Metrics

  • Felix Rose-Collins
  • 5 min read
How to Measure Customer Satisfaction: 6 Steps and Key Metrics

Table of Contents

Intro

Customer satisfaction is crucial to the growth of any business. Only satisfied customers will keep giving you their money.

In fact, research shows that 58% of American consumers would switch companies simply because of poor customer service. So, keeping customers happy is for sure a priority.

What is Customer Satisfaction?

A customer satisfaction score (CSAT) measures how pleased customers are with your products, services, and the experience as a whole. In short: it measures whether or not you meet the needs of your customers.

Customer satisfaction scores vary across various businesses and industries, but a good score would normally fall between the 75% — 85% range.

Why You Should Measure Customer Satisfaction

Measuring customer satisfaction helps you gauge customer sentiment around your products and services. Such information gives you a better idea of what to improve to serve your customers better.

Customer satisfaction surveys should not be a one-off event. You need to repeat it regularly to get continuous feedback. Be careful though: sending surveys too often might irritate customers.

Benefits of Monitoring Customer Satisfaction for Your Business

Monitoring customer satisfaction offers several benefits, as outlined below.

1. Communication With Customers

Most customers ditch a business after one bad experience, without communication or feedback.

Research shows that only 1 out of every 26 customers will reach out about a negative customer experience. The other 25 customers (i.e. 96.1%) will simply take their business elsewhere.

Monitoring customer satisfaction creates a channel through which you can get to know your customers and their perceptions concerning your services and products.

That way, you can figure out what might be missing, and remedy negative experiences before the customer leaves.

Communication With Customers

2. Smart Investment

It can be very frustrating for a business to make investments, create new strategies, and launch new product features, only to discover that those adjustments don’t serve any of their customers’ needs.

Measuring customer satisfaction eliminates that challenge: you get to learn what customers expect from your products and services before making any sort of adjustments to your business model or product features.

Understanding your customers’ needs will help you avoid wasteful investments so that you can focus on the challenges your customers want to solve.

3. Better Retention

Customer satisfaction surveys help to point out areas where changes are necessary in your business proceses. This improves the overall quality of the services you offer and leads to better customer retention. When working on a customer satisfaction survey, take into account that modern people bother about online privacy, so it's important to make sure that you never share your participants' information and data with third parties.

Your customers will also feel heard when you ask their opinion before any critical change.

4. Improved Brand Image

Businesses that regularly conduct customer satisfaction surveys are also more intentional about their brand.

Sending surveys shows your customers that you’re interested in giving them the best experience and makes them willing to stick with you for the long run.

5. Increased Profit Margins

Quality customer satisfaction surveys lead to improved business methods and customer service.

This will no doubt lead to higher customer retention and increased profits.

How to Measure Customer Satisfaction (CSAT)

Here’s how to get started:

1. Define Your Research Focus

You don’t want to spend money, energy and resources only to find out that you achieved nothing. Finding a clear focus ensures that you have a clear understanding of what you want to do, why you’ve chosen to do so and whom exactly you’re doing it for.

Customer satisfaction surveys take quite a lot of time and resources, you want to be sure that what you will be spending in the process will totally be worth it and will bring about a positive result.

2. Craft a Plan

Ask questions such as:

  • How do we ensure that our customers communicate with us, without bias?
  • How do we fix the issues customers identify?
  • How do we design our surveys to capture attention and get more customers to repsond?
  • How do we group and analyze the collected data?

Devising a plan gives you an outline of how the survey is expected to run and establishes a set of procedures for success.

3. Select the CSAT Survey Metrics

Now you have a clear cut goal and a plan. The next step is to select a CSAT survey metric.

Which metrics to choose? It depends on what you aim to achieve.

Net Promoter Score

The more satisfied a customer is, the more likely they would refer your business to friends and family. NPS measures the likelihood of that, on a scale of 1 — 10.

You calculate your NPS by subtracting the percentage of detractors from the percentage of promoters. Note that not every customer will fit in perfectly as a promoter or a detractor as some are passive and do not really have their minds made up.

Customer Effort Score (CES)

Customers get frustrated when they have to jump through hoops to reach your product and might decide to look elsewhere.

The customer effort score measures how much effort customers expend in order to interact with your business.

The formula for customer effort score is:

(Total sum of responses) ÷ (Number of responses) = CES score

Customer effort service is calculated by dividing the sum of all individual customer effort scores by the number of individuals who responded.

Customer Churn Rate

No matter the quality of your product or services, some customers will leave at some point, for various reasons.

Your aim is to get your churn rate lower that your customer acquisition rate so that you can record positive growth.

The formula for customer churn: (Lost Customers ÷ Total Customers at the Start of Time Period) x 100

An increase in churn rate shows could indicate that customers are getting dissatisfied with your services. Soon, they might be picking your competitors over you. That is why it is important to build loyal customers who will be convinced of your services.

Customer Churn Rate

4. Choose a Method and Design Effective Surveys

Keep your surveys simple, attractive and straight to the point.

A study by Microsoft shows that the average human attention span has dropped to eight seconds. If your customer surveys go on and on, most of your responders will quit halfway. What is more, you can also include social media icons in your survey to help interested participants contact your business on social media channels. Not only does it result in higher customer satisfaction, but it also helps to get more social media followers which can be beneficial for your brand.

Consider the demographics and your typical customer profile, to segment and target specific groups with relevant questions.

5. Select CX Measurement Software

Customer experience (CX) software can help you measure customer satisfaction using metrics like churn rate, CES, Net Promoter Score, etc.

You can send these surveys through various channels, such as via email, SMS, in-app notifications, in-person, and so on.

6. Collect and Review Data

Once you collect enough responses from customers, it’s time to review the data and make necessary adjustments.

Separate the data into groups and segments in order to ensure proper scrutiny.

Grouping and reviewing helps you to make deductions and know clearly where you stand as a business. It helps you rate your services and products exactly the way your customers do.

Higher Customer Satisfaction = More Profit

According to metrics shared by Harvard Business Review, a 5% increase in customer retention can increase your profit margins by up to 95%.

The customers you manage to retain will bring in 1,000% more value over their lifetime vs. the new ones you struggle to acquire, according to the White House Office of Consumer Affairs

Measuring customer satisfaction enables you to understand how your customers view your business which will help you adjust and serve them better so that they can return and bring you more profit over their lifetime.

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