Customer Satisfaction: Definition, Importance, Measurement

As a company, one of the most important benchmark metrics to measure customer service performance is CSAT. CSAT, or Customer SATisfaction score, measures how satisfied a customer is when interacting with your company. Improving customer satisfaction keeps customers around for longer and creates brand advocates who can help you grow your business.

Customer satisfaction (CSAT), also known as consumer satisfaction or client satisfaction, is a measure of a customer’s happiness and sense of value with your product or service. 

Customer satisfaction, like customer experience, allows your company to gauge the sentiment of your entire customer base or a specific set of customers.

Real-time customer satisfaction insights on Freshdesk

Let’s understand the definition of customer satisfaction better with an example. 

Let’s say you’re in the business of renting out cars, and you’d like to assess your customers’ satisfaction with important aspects of your service. Once your customers have taken the survey, the insights you derive might include:

• 80% of customers are satisfied with the cleanliness of the cars.
• 35% of customers are dissatisfied with the buying process.
• 72% of your customers would recommend your business to others.

Effectively, by analyzing your customer satisfaction surveys, you are now in a position to understand what’s working well (car maintenance and overall customer experience) and identify the things that you can do better (buying process). 

You can see in this customer satisfaction example that the insights you get are extremely valuable. And we’re still just scratching the surface of the importance of customer satisfaction. There are huge business benefits to measuring customer satisfaction, including the implications on product and business strategy. We dived into the benefits in the section below.

Why is customer satisfaction important?

Tracking customer satisfaction offers instant feedback about the customer experiences you deliver, making it one of the most important metrics for customer support. 

#1 Improves customer retention

Customer satisfaction score is also a primary indicator of the health of important business metrics such as brand loyalty, customer retention, churn, and revenue.

Think about it; satisfied customers are likely to become loyal customers who improve your retention rates. Also, 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.

#2 Fosters customer loyalty and advocacy

On average, loyal customers are worth up to 10X as much as their first purchase. After a satisfactory customer experience, 69 % of people would recommend the business to others, and 50 percent would use the company more frequently.

An engaged customer base can expect about 80% of sales to come from 20% of their customers. Loyal customers can be a very effective form of word-of-mouth marketing. 

#3 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. 

In addition to the customer support team, all teams in your organization, including product and sales, can refer to CSAT surveys to get a feel of what your customers are thinking and saying and derive insightful customer observations. These insights can be seeded into building a winning product growth and strategy. 

For instance, referring to customer satisfaction scores and feedback is one of the quickest ways to catch dissatisfaction with a product change or a potential bug — customers will never miss an opportunity to tell you something you’ve been doing wrong. Ultimately, you can tailor your company’s products or services better by leveraging customer satisfaction.  

"Your most unhappy customers are your greatest source of learning." — Bill Gates

#4 Customer experience becomes a major differentiator 

Customer satisfaction is a critical element and indicator of customer experience. According to McKinsey research, leaders in customer experience and customer satisfaction achieve 4X growth in value over ten years compared to their contemporaries.

On the contrary, 1 in 3 consumers leave a brand they like after one bad experience, reports PwC. Actively working towards achieving higher customer satisfaction levels improves the overall CX provided by your company and raises your brand value.

How to measure customer satisfaction

Customer satisfaction is usually measured as the response to a survey or a question like “How would you rate your overall satisfaction with the [goods/service] you received?”. Your customers can respond positively, negatively, or neutrally based on their experience. 

A few types of surveys to measure customer satisfaction include,

• Visual and interactive surveys

Using seven-point scales or visual representations can give you granular customer satisfaction data and more engagement when compared to plain-text pop-ups.  

• In-product customer feedback and satisfaction surveys

Most companies send out customer satisfaction and feedback surveys after a support interaction, such as a chat, email, or phone call. That being said, you can also gain insights by incorporating your survey into your product, especially after the customer has hit a real milestone of finding value or need in your service or product.

• Help center satisfaction ratings

Add a survey on your customer self-service portal that allows people to rate whether the content helped them or if they couldn't find what they needed. You can do this by triggering a CSAT survey to appear at the very bottom of a page that a customer has been browsing for a certain amount of time. 

Types of metrics to measure customer satisfaction

Customer satisfaction metrics give a quantitative measure of your customers’ satisfaction by calculating the CSAT score, net promoter score (NPS), and customer effort score (CES). Most customer satisfaction surveys also leave room for a follow-up comment to get some qualitative feedback.

1. CSAT score

CSAT score is calculated by adding the number of positive responses received from surveys and dividing that by the total number of responses. 

CSAT is usually expressed as a percentage ranging from 0 to 100%, with 100% referring to complete customer satisfaction. So, out of 500 survey responses, if 400 of them are positive, then your CSAT score is 80%.  

Alternatively, if you’d like to measure the responses to your survey using a Likert Scale, then you can use this formula to calculate your customer satisfaction score:

A new CSAT survey being created on Freshdesk

In this case, your definition of a positive response alone changes. For instance, if your scale ranges from 1-5, with one being low satisfaction and 5 being high, then 4 and 5 count as positive responses.

2. NPS

You can calculate your company’s NPS by subtracting your percentage of detractors from your percentage of promoters. Promoters are the customers who are most likely to recommend your business, while detractors are the ones on the opposite side of the spectrum. 

NPS survey responses are calculated on a scale of 1-10, while the metric can lie anywhere from -100 to 100.

Based on answers, the survey respondents are further divided into the following three groups:

Detractors – Customers who answer anywhere from 1- 6 

Passive – Customers who answer with 7 or 8 are 

Promoters – Customers who answer with 9 or 10 

Let’s say you survey 100 customers, out of which 20 rated from 1-6, 15 rated 7 or 8, and the remaining 65 gave you a 9 or 10. Since the sample size here is 100, each group represents a percentage. So, your NPS is 45 (65 - 20).

3. CES

Customer Effort Score (CES ) is a measure of how effortless your resolutions are. Lower the customer effort involved, higher the customer satisfaction. You can determine CES by asking customers to rate how easy or difficult their business interaction was on a scale of 1 to 5 or 1 to 10.

CES is calculated by finding the average score of all survey answers. You sum up all the responses received and divide that by the total number of respondents — the result is your CES