5 Key Types Of Metrics That Measure Customer Satisfaction
Customer satisfaction is arguably the most important factor in any business wanting to ensure growth and stability.
Measuring customer satisfaction has become the core focus for many successful brands. Undoubtedly, one of the best ways to get right to the source is through the use of customer feedback software.
Successful, customer-focused companies strive to delight their customers and enhance the relationship between the brand and the human being. When done properly, their efforts result in strong brand loyalty and that all-important customer satisfaction.
In this guide we’ll examine:
- What types of metrics measure customer satisfaction.
- Why it’s so important to be measuring customer experience.
- How to measure the customer experience.
- What these metrics can mean for the health and future of your business.
What Is Customer Satisfaction And Why Is It So Important To Measure It?
Customer satisfaction refers to how happy customers are with a product or service that your business offers.
This can range from how they felt about your customer service representatives to how much they liked a product that you supplied. Wait times, delivery fees and after-sale support are just some of the factors that can influence the customer’s satisfaction.
Without the ability to capture feedback and measure it, you cannot properly understand the most important aspect of your business: your customer.
A single negative experience or review of your business can have a detrimental impact on your success. According to Zendesk:
“90% of customers are influenced by positive reviews when buying a product.”
It’s critical that your business procures insights into how your customers feel about what you offer, their interactions with your business, and how you can improve on it.
The best way to guide improvement is to focus on measuring the right customer satisfaction indicators.
Key Metrics To Measure Customer Satisfaction
To ensure that you’re moving in the right direction, the best metrics for measuring customer satisfaction are:
- Net Promoter Score.
- Customer Satisfaction Score.
- Customer Effort Score.
- Five Star Ratings.
- Customer Acquisition Costs (CAC).
1. Net Promoter Score (NPS)
The Net Promoter Score or NPS refers to a measurement taken from asking customers how likely they would be to recommend your product to a friend or colleague. Customers are asked to rank this on a scale of 1-10.
NPS can be collected via relational surveys or transactional surveys:
- Relational surveys are sent out bi-annually or quarterly to gain a periodic snapshot of how your customers are feeling.
- Transactional surveys are sent out following an interaction of a customer with your business, allowing more detailed insights.
It is recommended to utilise both methods of collection. This is because it provides a more holistic view of your business by assessing it at a micro and macro level.
Pros And Cons Of Measuring NPS
- Allows you to track and quantify customer reactions over time.
- Provides data that allows businesses to develop a targeted, mission critical goal.
- Works for businesses of all sizes from a small local store to huge multinational companies.
- Lacks context. Doesn’t provide enough information on its own, NPS needs additional follow-up questions to be of highest value to decision makers.
- Sample sizes can be too small to provide accurate data.
- Relies on business to solicit feedback.
How To Calculate NPS Score
First of all, categorize your respondents:
- Customers who answer the NPS question with a 6 or lower are known as detractors.
- Customers who answer with a 9 or 10 are counted as promoters.
- Those that rank between 6 and 9 are known as passives, and their response is not usually counted.
To calculate your business’ NPS score, a basic equation is all it takes. Simply minus the percentage of your detractors from your promoter percentage.
Steps to calculate your NPS score:
- Add up the total responses from each group.
- Take the group total and divide it by the total number of responses.
- Subtract the detractor percentage from the promoter percentage
The result is your NPS score.
NPS Score = % Of Promoters - % Of Detractors
2. Customer Satisfaction Scores (CSAT)
CSAT scores serve to indicate how a customer felt about a specific product, transaction, or interaction they had with your company.
This metric asks the customer to rate their experience, and it can be done over several targeted questions. Utilising targeted questions makes it easier to obtain feedback about specific aspects of your business, enabling improved health and growth.
CSAT scores are usually expressed as a ranking from 1-100, with the scoring opportunity presented as a question. These questions are most often a variation of the phrase ‘How would you rate your overall satisfaction with the service you received today?’.
Pros And Cons Of Measuring CSAT
- Obtained by asking numerous questions, making it more versatile than other survey methods.
- Customizable for a specific interaction or product, allowing better, more nuanced insights.
- Improves communication, engages customers, and helps them feel that their opinion matters, thereby helping improve brand image and retention of customers.
- Heavily influenced by expectations rather than outcomes, especially with new customers.
- Existing customers tend to adjust their expectations over time. CSAT only captures short term, ‘in the moment’ sentiment.
- Not accurate at measuring quality, because it measures expectations more than deliverables. Results can be more heavily influenced by a customer’s pre-existing perception of your business, rather than by genuine interactions.
How To Calculate CSAT Score
To calculate a CSAT score, divide all the positive responses by the total number of responses and multiply by 100.
For example, should you have 30 positive surveys with a total of 50 surveys overall, your CSAT score would be 60%.
3. Customer Effort Score (CES)
A Customer Effort Score or CES is a metric used to determine how user-friendly your products and services are.
Rather than an email survey sent out after a transaction, CES is done by immediate prompts or pop-ups following a customer action. This immediate feedback is designed to help improve how a company manages the customer’s journey on their site.
CES is usually captured by asking customers to rate the ease of using your product or service on a sliding scale. This scale ranges from ‘very difficult’ to ‘very easy’ with the option to be somewhere between the two.
Think of CES as a thermometer for judging customers warmth or lack thereof towards your business.
Pros And Cons Of Measuring CES
- Allows clear insight into how customers navigate your website, invaluable for ecommerce businesses.
- Helps resolve customer concerns rapidly, helping your business to retain customers in the long term.
- Provides an easy way for customers to let you know how they feel about your business.
- Allows your team to provide proactive and targeted customer care to clients. With CES metrics, you are better able to see what they want and create a culture that preempts these wants, so that you can wow them from the outset.
- Only measures a specific experience, not a broader review of a company as a whole.
- Cannot measure retention or loyalty of a customer base.
- Measures ease of interaction, rather than satisfaction.
How To Calculate CES Score
CES is calculated by dividing the sum of all individual customer effort scores by the number of customers who responded. You will then obtain a number between 1-5. The lower the number, the better.
4. Five Star Ratings
Five star ratings are exactly what they sound like: Customers are asked to rate you on a scale of 1-5 stars.
As far as customer satisfaction rating indicators go, they look appealing but are not always helpful to a business on a deeper level.
Many businesses use star ratings to incentivize, monitor, and reward their staff. However, this type of behaviour can lead to false positives when surveying customers. Staff may ask customers for positive feedback as they are reliant on it or wear themselves out trying to achieve it. This emotional labor can impact negatively on your business and lead to burnout and attrition in staff.
Interestingly, product purchases are more influenced by reviews between 4.2 and 4.5 stars rather than a full 5. This is because a mix of positive and negative reviews shows transparency, which incites trust in customers.
Pros and cons of five star rating systems
- Adds appeal to your business on a visual search.
- Can improve conversion rates on sales.
- Helps build a reputation and improve social chatter, leading to more customer interest.
- Doesn’t provide useful, actionable feedback.
- It may not represent a customer’s true feelings about their interaction with a representative. Customers may feel coerced to respond positively if they know staff are incentivized.
- Can lead to skepticism in consumers if they only see positive reviews.
5. Customer Acquisition Cost (CAC)
This metric looks at the costs of convincing a potential customer to buy a product or service, usually via marketing.
If your goal is growth, CAC is incredibly helpful. A business that is poorly managed is unlikely to grow successfully.
Managing costs and finding ways to understand if your marketing is working is key: you cannot manage what you cannot measure.
“[CAC] is important to two parties: companies and investors. The first party includes outside, early-stage investors who use it to analyze the scalability of [...] companies. They can determine a company’s profitability by looking at the difference between how much money can be extracted from customers and the costs of extracting it.”
Pros and cons of measuring CAC
- Can help you to fine-tune your customer acquisition strategy.
- Provides insights into the sustainability and scalability of your business.
- By understanding acquisition costs you can work to reduce these costs and boost the value of each customer transaction.
- On its own, CAC doesn’t provide enough information to allow informed decisions.
- Can distract from other important customer satisfaction metrics that help to build a repeat client base.
- Doesn’t build relationships with clients or capture their feedback. Focuses on the cost of growth, not the how.
How to calculate CAC score
The simplest way to calculate a CAC score is to follow this basic equation:
CAC = MC / CA
That is, you divide all the costs spent on acquiring more customers (your marketing costs, or MC) by the number of customers acquired (CA) in the same period as the expenses.
For example if your company spends $200 in a year and acquires 200 new customers, your CAC is $1.00.
What Are Some Best Practices In Measuring Customer Satisfaction?
To ensure that you’re eliciting the best possible communication with your customers, you should follow these best practices when measuring customer satisfaction:
- Keep your surveys non-invasive.
- Make sure that your questions are relevant.
- Keep questions short and precise.
- Ask intelligent questions that give the customer the feeling that you respect their input.
- Do not ask leading questions that make you appear untrustworthy and could compromise the results of your survey.
- Keep your formatting consistent. Don’t mix stars and smiley faces or switch between lettered or numbered scales.
Ultimately, a business should never feel afraid of negative customer feedback or try to hide it. The reality is that both negative and positive feedback matters. By valuing the good and the bad and implementing new strategies as a result, you’ll gain new opportunities for growth.
To successfully grow a business, your best practice should be to develop a customer-oriented culture and management structure. Measuring the customer experience is the best way to do this. You’ll be better positioned for success when you use these insights to build a targeted business plan that better services your customers’ needs.
When a customer is heard, and their feedback is acted upon, their loyalty and word-of-mouth recommendations increase. This can lead to improved organic customer acquisition: customers who are already positioned to appreciate what you offer.
At AskNicely, our software can help you connect your real-time customer feedback with your teams, systems, and processes. Our speciality is in ensuring that your business makes the most of all feedback so that it can continue to grow.
Contact us today to see how we can help you make the most of your customers' voices.