In customer relationship management, customer satisfaction (CSAT) is a measure of the degree to which a product or service meets customer expectations.
This information is mostly obtained through customer surveys, where consumers who purchased a product or service self-report their level of satisfaction. Typically, customers will be asked to assess their satisfaction on a scale from "very dissatisfied" to "very satisfied," with the option to voice a comment.
Customer satisfaction, beyond the CSAT metric, is an important indicator for the health of a business. Other measures, such as Customer Health Score, can use other types of information to assess how satisfied customers are with a business's products or services.
How to measure customer satisfaction
Customer satisfaction surveys may be distributed via channels such as email, social media, post-purchase screen, phone call or in-app survey. Typically, a customer satisfaction survey will include:
- A scale for each customer to self-report their satisfaction levels. Units on the scale may be quantitative, representing satisfaction levels with numeric scales (1-10 in satisfaction, or willingness to recommend to a friend), or qualitative. A common qualitative scale will range from "neutral" to "(dis)satisfied" and "very (dis)satisfied." Customers may be asked to report their satisfaction scores for multiple criteria or points in the customer journey.
- A short response prompt. This prompt, oftentimes optional, is for specific voice of the customer (VOC) feedback or comments.
The results of the customer survey can then be used to calculate a CSAT score, which is most often expressed as a percentage. When calculating CSAT scores, the number of customers that selected "satisfied" or "very satisfied" (or comparable numeric values) would first be added together. The sum of those responses would then be divided by the total number of survey responses, and then multiplied by 100 to be expressed as a percentage.
Customer satisfaction metrics
Along with CSAT, there are other metrics to provide insights into customer satisfaction:
- Net Promoter Score (NPS). On an index ranging from 0 - 10, customers are asked to select a number on the scale that represents their willingness to recommend a product or service to others. Customers who fall in the 0 - 6 range are considered "detractors," the 7 - 8 range are "passives," and those in the 9 - 10 range are "promoters." The final NPS value is then calculated by taking the percent of "detractors," and subtracting it from the percent of "promoters."
- Customer acquisition cost (CAC). Measures the average marketing and sales costs for the business to acquire new customers and maintain existing customers. A high CAC number can indicate customer churn as a result of displeasure. CAC is measured by taking the sum of all sales, marketing and advertising costs -- and dividing it by the number of customers.
Customer acquisition cost = (sales, marketing, advertising costs ÷ number of existing customers)
- Customer effort score (CES).CES uses a scale from "strongly disagree" to "strongly agree," for customers to self-report their answers to the question: "Did the company make it easy for you to handle your issue, or get what you want?" Typically, CES surveys are deployed immediately following a customer's interaction with a service representative, or after an interaction with a product or service.
- Customer churn rate (CCR). Measures the customers lost over a certain period of time. To calculate CCR, a period of time to be measured must be determined. CCR can be calculated by dividing the number of lost customers by the number of acquired customers in a time period, and then multiplying that number by 100 to express as a percent.
Customer churn rate = (lost customers ÷ acquired customers) x 100%
- Customer retention rate (CRR).Opposite of the churn rate. It measures the number of customers that have been maintained over a period of time. CRR is calculated by first defining a period of time. The number of new customers from that period is subtracted from the number of customers at the end of the period. Then, that number is divided by the total number of customers at the start of the period. The result is then multiplied by 100, to be expressed as a percent.
Customer retention rate = ((# customers @ end of period - # new customers within that period) / # of customers at start of period) x 100%
- Customer health score (CHS). CHS factors in several types of consumer behavior measurements to determine how likely a customer is to churn. The term is somewhat subjective, as specific algorithms will vary between different types of products and businesses. CHS considers measures such as how long customers use a product, upsells, number of website visits, free vs. premium service usage, and sum of all purchases.
Why is customer satisfaction important?
As a metric, CSAT information is important because it allows businesses to assess how well their product and/or overall customer experience (CX) is being received by customers. This information is valuable because it provides insight into what is working well, what isn't working well and requires change, and how an acute change is being received by customers. Since CSAT is measured in a gradient or scale, as opposed to a simple yes or no dichotomy, subtler changes in satisfaction levels (such as 'satisfied' vs. 'very satisfied') can be detected among customers. Open-ended short answer questions in CSAT surveys can also point businesses to specific problem areas.
In terms of the inherent customer satisfaction that the CSAT metric captures, the business value of satisfied customers is well documented:
- Having satisfied customers creates customer loyalty and prevents churning. Having many one-time customers is typically more expensive than having a more consistent base of happy customers, after factoring in marketing, sales and advertising costs required for customer acquisition.
- Customer satisfaction is particularly important for growing companies. For smaller businesses scaling up, satisfaction levels of current and previous customers can be formative factors for brand and reputation moving forward.
- Overall customer satisfaction can also be a critical point of value in a product or service offering.
- Word of mouth will affect reputation. Dissatisfied customers are very likely to be outspoken about their dissatisfaction.
How do you achieve high customer satisfaction scores?
Common ways of achieving high levels of customer service include:
- Using customer feedback to find the problematic point(s) within the customer journey. Possible solutions and improvements can then be identified and implemented.
- Attempting to convert dissatisfied customers into satisfied customers. Vocal critics can be converted to loyal customers -- if their specific cause of dissatisfaction is properly considered, and the right course of action is taken.
- Identifying specific drivers of customer satisfaction for the business, and acting to support them. These drivers may vary considerably across businesses and products, and identifying them might involve the use of business intelligence (BI) tools.
- Focusing on the improvement of employee experience and satisfaction. The quality of a customer's interaction with a brand oftentimes will depend on the specific frontline employee. Employee disgruntlement will seep into customer interactions.
- Implementing a social media plan that provides multichannel support and prevents the spread of negative reviews.
- Offering swift, proactive customer service that provides short waiting and response times.
- Shortening, and increasing the number of communication channels between the business and customers can lead to better customer effort scores.
Example of customer satisfaction (CSAT) survey
Most customer satisfaction surveys follow the same general format, with a scale for customers to rate their satisfaction with the product or service, as well as an optional text field for customers to leave comments or feedback. Oftentimes, there will be more than one criterion for customers to rank their satisfaction.