What Is The Business Importance Of Customer Satisfaction
To nobody’s surprise, sturdy success starts with good foundations. While the building materials have changed drastically and improved remarkably over time, the foundation of any good business is ultimately the satisfaction of its customers.
Arguably, it’s easy to overlook the importance of customer satisfaction when the issues aren’t obvious. Just like the wiring of a house, you expect it to be there and working perfectly. You want to invest time into the flashy farmhouse sink and the french doors— but if the wiring is bad, that expense will set you back far more than what you prepared for. This is why it’s important to lay down a good foundation of customer satisfaction first.
What is customer satisfaction?
Customer satisfaction (CSAT) is a measure of the customer happiness quotient associated with a product, service, or an entire brand. Broadly, it can be considered a metric that defines how customers rate their experience with a company. However, broad as it may be, satisfaction scores can be the make-or-break element to success.
How to calculate customer satisfaction?
Typically, CSAT scores are calculated by dedicated CSAT surveys, often sent after each interaction. Some examples of common questions asked on CSAT surveys are: “Did you find our resolution useful?” and “How do you rate the support you received”
To calculate CSAT scores, divide the number of satisfied responses by the total number of responses, and multiply it by 100. For example, 75 happy customers out of 100 total responses would therefore be a CSAT score of 75%.
There are two types of satisfaction: transactional and relational.
Transactional satisfaction measures how your customers feel after contacting your business. This is where CSAT questions such as “did you find everything you wanted to know on our website?” and “rate the support you received on a scale of 1-10” come into play. Following up on these replies gives you opportunities to quickly rectify any issues and identify patterns to solve them.
Relational satisfaction is the overall feeling customers have with your business. Instead of surveying customers directly after an interaction, try surveying customers quarterly or within your product to see how they feel about your brand more generally. Tracking the net promoter score (NPS) is an excellent way to measure relational satisfaction. This can be determined by consolidating online reviews, social listening, and product referrals.
Why is customer satisfaction important?
If you’re aiming for consistent customer satisfaction, then constant feedback is the best way to improve over time. Again, you might be thinking that this seems like a back burner problem when so many other things require your attention, but if you remember back to the wiring metaphor, the blunt answer is that the cost of bad customer service adds up. Quickly.
While customers may appreciate being offered refunds, free add-ons, and discounts when you’re trying to recover from a bad situation, not handling the situation effectively the first time can affect future profits. The probability of selling to an existing, satisfied customer is 60-70%, while the likelihood of converting a new customer is only 5-20%. Furthermore, over 33% of customers would consider switching who they purchase from, simply due to unsatisfactory customer service.
Offering customers a chance to provide feedback is critical to building positive word-of-mouth too, since a brand’s reputation is built increasingly upon reviews. If customers are satisfied, they’ll be more likely to leave a positive review in public. If they are unsatisfied, and they aren’t offered the opportunity to leave feedback after the interaction, you might be facing a public negative review.
5 reasons that highlight the importance of customer satisfaction
#1 Business decisions are easier to make
Focusing on customer satisfaction helps your organization align business goals with customer-centricity. For instance, you can get a list of customer-preferred communication channels using customer surveys, focus groups, and polls.
Customer satisfaction surveys serve as resources that help you gain insights into what customers want, and you can stop spending time on things that don’t seem to add as much value. Ultimately, you can tailor your services or products better by leveraging customer satisfaction.
#2 Customer satisfaction creates loyal advocates
On average, loyal customers are worth up to 10x as much as their first purchase.
After a satisfactory customer experience, 69 percent of people would recommend the business to others, and 50 percent would use the company more frequently. 95% of customers will “take action” after a negative experience – like sharing their concerns with friends and family or switching to a competitor.
An engaged customer base can expect about 80% of sales to come from 20% of their customers. Also, remember what we said about the increasing importance of reviews? Loyal customers can be a very effective form of marketing. A 2014 study showed that 85% of new business for small businesses came from word of mouth.
#3 Service culture becomes an organization-wide commitment
Customer satisfaction is a product of optimizing your entire organisation for efficiency, and optimizing can often mean a group effort. It’s not just the support team that’s responsible for customer satisfaction.
Customer service should be a mindset across all functions of your business. When your employees feel like they are adding value as a whole, it can be more motivating than simply feeling like an underappreciated cog.
Additionally, when multiple departments truly understand the importance of customer satisfaction, they can more clearly pinpoint patterns and work together to find solutions.
Agent satisfaction is just as important. Simply put: fulfilled agents make happy customers.
#4 Customer experience becomes a major differentiator
Customer satisfaction is a heavy exponent of customer experience. According to a McKinsey research, leaders in customer experience and customer satisfaction achieve 4x growth in value over ten years, compared to their contemporaries.
Think of it like this: If multiple people had apples, and every apple seller delivered apples for free — then you could ask anyone to do so, right? However, it’s often the how, not the what that’s the deciding factor of customer service. You would choose the apple seller that was friendlier, more efficient, and remembered your name— yes? Personalized touches have become paramount in setting companies apart from each other, and it has shown to be a significant deciding factor in whether customers will continue service.
#5 Customer satisfaction improves customer retention
As stated earlier, retaining an existing customer by keeping them satisfied is cheaper than acquiring a new one. It’s 5–25 times more expensive to acquire a new customer than to hold on to an existing customer. Increasing customer retention by 5% can result in anywhere from a 25–95% increase in profits.
Important metrics that help keep track of customer retention
If you’re thinking something like 5% isn’t going to meaningfully impact your business and revenue goals, think again. It has been found that customer satisfaction directly impacts customer retention, and on the other end of the spectrum – customer churn.
Customer churn is the percentage of customers that stopped using your company’s product or service during a specific time frame. Most companies monitor customer churn on a monthly or quarterly basis to forecast business and revenue growth. Seeing a rise in customer churn could mean that you need to dig deep into your customer satisfaction metrics and surveys to identify why customers are leaving. The churn data can then be used to put preemptive measures into place and keep customers around.
CLV or customer lifetime value is the total value generated by a customer for the business over the entire lifetime of the customer-business relationship. In other words, it demonstrates who your best customers are and what they have in common. Therefore, having accurate CLV data helps businesses develop effective strategies in acquiring valuable new customers and retaining existing ones while keeping an eye out for profit margins.
CLV = Average revenue per transaction x Number of transactions during the customer’s journey x Number of years of retention
To improve CLV, locate necessary data like transaction history, customer demographics, profile data, marketing actions, and product interactions. As your customer lifetime value increases, you know you’re making a better impression on your existing customers. You can then reverse-engineer the experience to do the same for new potential customers.
Tips to improve customer satisfaction
- Design a fluid customer journey by mapping touchpoints to gain a 360-degree view of customer communication.
- Create SOP (standard operating procedures) for various support scenarios, boosting consistency amongst the team, regardless of who’s at the helm.
- Implement self-service options like chatbots, service portals, and knowledge bases to offer quick responses. If customers can help themselves, they most likely will, and this in turn will free up your team to work on more complex issues.
Brick by brick
We’ve talked a lot about why building satisfaction is essential, so we’ll leave you with a summation of the basic toolkit to outfit you for success.
- Start with getting actionable insights by automatically sending CSAT surveys after resolving every request. While doing this will help calculate the data and create more opportunities for efficiency, it will also remind your customers that you care about their experience and opinions — not just initially, but consistently, so that you can continue to meet their needs.
- Journey mapping is another vital tool to keep in your arsenal, as it gives you a complete 360-degree view of customer interaction.
- To further engage and delight your customers, start prioritizing customer satisfaction right from the first touch – whether that’s your website, your social media, or in-store experience, all the way to their post-purchase experience, whether that’s a self-service portal or a support interaction with your team.
Helpdesks are your brick house. They allow your business to deploy all the right tools to improve customer satisfaction while automating repetitive tasks that will increase agent efficiency and allow for more personal touches to continue to delight customers. An ideal customer service software like Freshdesk lets you harness the importance of customer satisfaction by letting you create and track CSAT surveys seamlessly.