Let’s start off with the big question.
Why is Customer Satisfaction important?
Research by Frederick Reichheld of Bain & Company has shown that an increase in customer retention of 5% can increase a company's profits by anywhere between 25% to 95%.
You may not know who Frederick Reichheld is, but the spirit behind his research is universally understood.
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Happy customers are great for businesses.
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And when you see what satisfied customers mean for your bottom line, it’s easy to see why.
Existing customers who aren’t subjected to high-effort purchase experiences have been shown to:
- Buy more (higher cart values)
- Buy more often (more frequently)
- Close more (60%-70% chance vs 5%-20% for a prospect)
- Close quicker (in lesser time)
- Spend more (33% more per purchase) and
- Saves you money (low acquisition costs)
Providing support in a manner that prioritizes customer satisfaction is key.
Companies have started to move away from traditional support tools like phone calls, emails, and tickets. Chatbots and Live Chat have become the new norm.
But measuring something as subjective as “satisfaction” is challenging.
There are just so many types of satisfaction surveys that choosing between them can be daunting.
The three major metrics for Customer Satisfaction are
- NPS (Net Promoter Score),
- CES (Customer Effort Score), and
- CSAT (Customer Satisfaction Score).
What is a csat score?
This blog post will cover one of the most popular methods; CSAT, or the Customer Satisfaction Score.
The Customer Satisfaction Score is one of the most straightforward survey methodologies. It is used to measure customer satisfaction with a business, purchase or interaction.
It is calculated by asking customers a question and having them answer on a scale.
For example: “How satisfied were you with your purchase experience? Please rate on a scale of 1 to 5.”
There are two primary methods of calculating a CSAT score.
I. Composite Customer Satisfaction Score
Assume a question, as follow.
“How would you rate your satisfaction with the service you received?”
Respondents pick out options from a predetermined scale that looks like this.
As you can see, each answer has a numerical value attached to it.
i.e. if a customer is very satisfied, he scores the process a “5”.
If the customer is partly satisfied, he scores the process a “4”.
And so on.
Add up the sum total numerical value of the replies. Divide by the total number of responses.
If you had 7 responses with responses that looked like (4+3+5+5+5+4+3), you’d get 4.14.
The value you get is the average score of your process – a.k.a. A Composite Satisfaction Score.
II. Top-2-Box method.
It is used to calculate the percentage total of your customers who had satisfactory experiences.
Use the following formula.
*# of Satisfied Customers (80) ----------------- # of Satisfaction Survey Responses (100)
X 100 = % of Satisfied Customers (80%)
*”# of satisfied customers” is calculated using ONLY the users who rated the process “4” or “5”.
By only taking into account the two highest possible response ratings, you can establish the percentile breakdown of the customers who had a favorable experience.
So, if 100 people respond to your survey, and 80 of them are “Satisfied,” that means you’d have an 80% CSAT score.
One of the biggest strengths of the Customer Satisfaction Store lies in its simplicity.
It’s a quick and easy way to close the gaps that would usually exist between company action and customer reaction.
To that end, a CSAT score can be used in various situations.
Implementing a CSAT score for customer complaints is a lifesaver. It helps you identify exactly when and where a customer struggled with a problem.
In customer feedback, interactions scored a 4 or 5 are considered reliable.
Customers who’ve had an experience that they score 3 or below however need to be followed up with.
Three metrics should be tracked when using CSAT to handle customer complaints.
- The number of complaints received.
- The time it took to reach out to the customer who complained.
- The total number of complaints resolved.
If you’re launching a new product or feature, it helps to know how your customers are receiving it.
Feedback through CSAT scores can help you identify problems with your new additions.
By measuring satisfaction at each stage of improvement, you’ll be able to engage with customers better.
The probability of selling to an existing customer is up to 14 times higher than the probability of selling to a new customer.
Customers who are engaged exhibit loyalty. By encouraging them to be a part of the decision process, you can make them feel like cogs in a larger machine.
Use CSAT to listen to their feedback, incentivize openness and keep them informed when their suggestions are implemented.
CSAT Pros and Cons
Cheap – CSAT scores don’t cost much. If you have a live chat provider, you can build one for free.
Easy – CSAT is easy to answer, and understand. The extracted data is easily analyzed and very actionable.
Benchmarked – The American Customer Satisfaction Index provides stats dating back to 1995. You can use this to compare where you to stand to industry standards.
High response – Questions on CSAT are short, immediate and precise. This means they have high response rates since they aren’t a hassle to fill out.
Versatility – You can use lots of entry fields for CSAT scores, like emojis, stars or ratings.
Validation – Customers who are encouraged to give feedback – even negative – are more engaged than the average customer.
Subjective – “Satisfaction” is a word that is open to interpretation. “Five star” is not the same as “highly satisfied”.
Skewed – Research has shown that for every customer who files a complaint, there are 26 customers who don’t say anything. They simply up and leave.
Cultural bias – Besides the basics like survey language, there are serious cultural biases at play in surveys. American customers are often extreme in their scoring (0’s or 10’s), while Europeans are most restrained.
Short term – CSAT score isn’t as impactful as other survey tools. Simly clicking a button isn’t an engaging experience for a customer, especially one you know thousands of other customers have filled.
In case you’re looking at alternatives, CSAT has two distinct rivals. The Net Promoter Score (NPS) and the Customer Effort Score (CES).
Net promoter score
The NPS follows a simple idea.
Customers fall into one of three categories – promoters, passives, or detractors.
Promoters are the kind of customers who’d go around and sell pro-bono for you. They’re loyal, often repeat customers who stick by you.
Passives are neither here, nor there. They lack enthusiasm and loyalty, often quite susceptible to switching to another company.
Detractors are those customers who don’t like you or your product/service. They could even be liabilities to your business.
NPS is calculated by asking a customer, “How likely is it that you would recommend us to a friend?”
The numerical scores categorize customers: Detractors have scores in the 0-6 scores range; Passives are in the 7-8 range; Promoters have scores in the 9-10 range.
customer effort score
Much like the NPS, the Customer Effort Score aims to answer a simple question.
How much effort did a customer have to exert in order to have their needs met by your company?
A high effort experience would make for disloyal and generally unhappy customers.
CES is usually the go-to metric to determine customer loyalty. In fact, it’s the best indicator of it.
You can ask: “How much effort did you personally have to put forth to handle your request on a scale of 1-5?”
Customers choose between 1 and 5. A very low effort would be indicated by 1 and 5 would indicate a very high effort.