If you want to retain more customers and increase customer lifetime value, it’s essential to keep customer satisfaction high. Otherwise, customers won’t hesitate to switch to a competitor that offers better prices, better product options, and better customer service interactions.
Customer satisfaction is a critical concept to understand and live by, especially if you’re a customer success professional, a salesperson, or a marketer. It may sound simple, but it's about more than a money-back guarantee — it’s about the entire customer experience.
This post will define customer satisfaction, explain why it’s important, and outline the benefits that understanding customer satisfaction can bring to your business.
What is customer satisfaction?
Customer satisfaction (CSAT) is a metric used to quantify the degree to which a customer is happy with a product, service, or experience related to your business. This metric is calculated via customer satisfaction surveys that ask how a customer feels about their experience, with answers ranging between 'highly unsatisfied' and 'highly satisfied'.
Customer satisfaction takes into account various facets of the customer experience, such as:
- The availability of your products
- The purchasing process
- The steps after purchase
- The responsiveness of your team when resolving issues
Let’s look at Trader Joe’s as an example. One of my favorite things about shopping at Trader Joe's is its generous return policy. Customers can return any product if they're not happy with it, even if it's already been opened and consumed.
This policy is undoubtedly an expensive one for Trader Joe's, but customer satisfaction programs like these pay off for businesses — and end up earning them more revenue.
Customer satisfaction is ultimately a reflection of how a customer feels about interacting with your brand, and businesses quantify these feelings with customer satisfaction surveys. These responses can give you a picture of customer loyalty, which predicts the likelihood of customer referrals.
It all might feel nebulous, especially if you’re not used to sending out CSAT surveys. To begin fostering customer satisfaction, you should start with the basics: a customer support strategy.
The good news is you don’t have to create it from scratch. Use the template below to get started.
Featured Resource: Customer Support Strategy Template
This customer support strategy template will help you outline key pieces of information about the customer experience at your company. You’ll have space to create a customer support vision, a support process, and a list of goals and metrics to measure success by. The template includes instructions for filling out each section.
You’ll be able to create a support strategy that helps you methodically improve customer satisfaction.
Why is customer satisfaction important?
Customer satisfaction is important because it helps you solve problems, prevent churn, and identify happy customers that can become your advocates and evangelists. It’s an essential step in the process of building customer loyalty, creating customer delight, and generating positive word-of-mouth.
If you don't measure customer satisfaction, you can't identify unsatisfied customers that could churn or leave you negative customer reviews. You also can't identify happy customers you could activate as evangelists or referrers. Finally, you can't predict, prevent, and proactively plan to prevent customer churn without metrics to analyze.
To properly measure it, it’s important to avoid common CSAT survey mistakes.
Still not convinced, or think you can wing it? Below we’ll discuss the additional benefits of understanding and increasing customer satisfaction.
Benefits of Customer Satisfaction
1. Customer satisfaction helps you understand where you excel.
By tracking and measuring customer satisfaction, you can understand what your business does well, and thus continue doing it. But you can’t find out unless you carry out customer satisfaction surveys.
Growing companies prioritize customer success, and an essential way to identify satisfied customers is through customer feedback.
Results will let you know who these customers are and what you’re doing that’s leaving them satisfied with their experiences with your brand. When you have this information, you can continue doing the things they like in the hopes of inspiring customer retention, and you’ll reap the following benefits:
- It’s cheaper to retain an existing customer than it is to acquire a new one.
- Repeat, loyal customers spend more.
- Satisfied customers engage in word-of-mouth marketing, helping you with free acquisition.
2. Customer satisfaction helps you understand where you can improve.
Where do you fall short? The gaps in customer satisfaction can help you find out where you can improve in your customer service strategy.
If you don’t understand why your customers are unhappy, you can’t make changes to your product or services that make them happy and align with the experiences they desire.
Ensure you’re sending out customer satisfaction surveys, analyzing the results, and acting on negative customer feedback. This is especially important if the feedback is tough to hear, as it will help you ensure that you take steps to prevent customer churn, negative reviews on your product pages or social media, or negative word-of-mouth reviews to family and friends.
3. Customer satisfaction leads to higher customer loyalty and advocacy.
If your business has positive customer satisfaction, then you have customers who are loyal to your brand. These customers will refer new leads to your company and generate more testimonials for your marketing team. You can create customer advocacy programs for these users and encourage them to advertise on your business’s behalf.
Customer advocacy programs reward customers for referring your business to potential leads. Customers are given incentives to join the program, then receive gifts or offers in exchange for reviews and testimonials. This creates a mutually beneficial relationship that rewards your best customers and keeps them loyal.
4. Customer satisfaction increases customer retention and reduces churn.
It should be no surprise that the happier your customers are, the better your customer retention will be. After all, happy customers won't have much reason to turn to competitors, so long as you keep them satisfied. On the other hand, unhappy customers will have plenty of reasons to churn, and it'll be up to your team to convince them otherwise.
By measuring CSAT, you can look at individual customer needs and create personalized offers for users who are likely to churn. Since 32% of customers would stop doing business with a brand they loved after one bad experience, you may only get one opportunity to stop someone from churning. Customer satisfaction optimizes your chances by providing you with relevant information about the customer's experience with your brand.
5. Customer satisfaction leads to a longer customer lifetime value.
Customer lifetime value (CLTV) refers to the expected profit you can make from a single customer for as long as they stay with your business.
If a customer is unhappy with your products and services, they’ll likely never return to your business after that initial purchase. That customer’s lifetime value is low, so you’d miss potential revenue opportunities.
If your customers are satisfied, however, they’ll likely stay with your business for a longer time, making repeat purchases and leading to a boost in profits.
It’s clear that customer satisfaction is important for improving service metrics and ensuring your company is delivering the best experience possible. But how does it impact other teams?
Let’s take a look.
Customer Satisfaction in Marketing & Sales
How does customer satisfaction impact other teams in your business, such as marketing, sales, and product development? There are plenty of reasons customer satisfaction is important for marketing and other teams.
1. Customer satisfaction helps you forecast and work proactively.
Without CSAT and similar customer success metrics, it’s hard for customer success teams to plan and inform other teams of the state of their customer base.
These metrics are helpful for other departments at your business. You can give sales teams the information they need to improve customer experiences, work with product to incorporate customer feedback and make improvements, and marketing can improve the end-to-end customer experience.
Leaders need data and trends to forecast team performance over the next month, quarter, and year to adapt strategy, if needed.
2. Customer satisfaction drives your inbound methodology.
Customer satisfaction does more than just measure your customer service — it optimizes other departments’ performance by providing them with helpful customer insights. This information is used to improve the customer experience, which leads to a cyclical increase in customer satisfaction. You can visualize the process using the flywheel model below:
Marketing, sales, and product development teams use CSAT to guide their work and interact with customers. Businesses with excellent customer satisfaction can easily attract and engage with customers because they've proven they can provide a delightful brand experience. If your company wants to adopt the inbound methodology, you'll need to integrate customer satisfaction into every function you perform.
3. Customer satisfaction helps marketers attract new leads.
Consumers are more likely to trust their peers than they are to trust marketing. In fact, 9 out of 10 consumers read reviews when making purchasing decisions. Consumers view someone like them (other consumers) as 14% more credible than brand employees. Without excellent customer satisfaction, your company won’t have these reviews to share.
Your marketers should rely on customer testimonials to attract new leads to your business. Since customers are more willing to trust other users, these reviews are effective in terms of attracting prospects. Positive reviews have also been proven to boost sales by 12.5%. The better your customer satisfaction, the more material your marketers will have to advertise your brand.
4. Customer satisfaction is a selling point for marketing and sales teams.
Sales and marketing teams benefit from customer satisfaction because it acts as a selling point on collateral and pitches. As mentioned above, customers are more willing to pay for an experience they know is excellent. If your customer satisfaction is superb, your marketing team should make it known in their communications and your sales team should highlight that during their pitches to leads.
Additionally, CSAT helps sales teams understand customer expectations. They can analyze happy customer reviews to see which parts of your product or service they should emphasize. That way, when speaking to customers, they can hammer in on distinct advantages that differentiate your business from its competitors.
5. Customer satisfaction guides product updates.
Negative customer reviews act as alerts that let companies know when a product or service has a problem that needs fixing. Product development teams monitor CSAT to identify these issues and quickly resolve them.
This is particularly important for SaaS businesses that regularly update their software. By keeping a close eye on CSAT, development teams can correct costly product roadblocks that may lead to churn.
Customer Satisfaction is Essential for Business Growth
Your customers are the most important part of your business. They’re not only a source of revenue potential, but they can spread positive word-of-mouth and influence others to try your products and services. By keeping customer satisfaction high, you decrease customer churn, increase customer lifetime value, and ensure your customers remain with your business for years and decades to come.
Editor's note: This post was originally published in October 2017 and has been updated for comprehensiveness.