Every customer-facing business today knows — Happy customers come back for more. According to Harvard Business Review, customers who rate their experiences the highest spend 140% more than those who rate their experiences the lowest.
Measuring and improving customer satisfaction is the key to customer retention and business growth. Yet, everyone stays confused about how to measure customer satisfaction (CSAT).
In this blog post, we'll explore the concept of CSAT, how it's different from NPS, and how you can measure it.
So, let's get started!
Table Of Content
What Is Customer Satisfaction (CSAT)?
It is a metric that measures how satisfied customers are with your product, service, or experience. You can measure it through surveys or other feedback forms, where customers rate their experience on a scale of 1-5 or provide open-ended feedback.
It's often used to establish the level of satisfaction during various touchpoints. For example, it can be during a support service, purchase process, or onboarding for a service.
Why Measure Customer Satisfaction?
To succeed in the long term, you should measure customer satisfaction. Here're some of the reasons that you should indeed measure customer satisfaction:
1. Reduces Churn Rate
The more you focus on measuring CSAT, the better your product or service becomes. It results in satisfied customers more likely to continue doing business with you. This, in turn, helps reduce churn rates and increase your revenue and profitability.
2. Identify Areas For Improvement
CSAT surveys are a means to appeal more to your customers. The survey results provide valuable insights into how customers perceive your business, products, or services. Analyzing the data lets you identify areas to improve performance and meet customer needs.
3. Maintain A Competitive Edge
By identifying areas for improvement, you can differentiate yourself from competitors by offering a better customer experience (CX). It also helps you compare scores with competitors, thus helping you adjust your business strategies to gain a competitive advantage.
4. Increases Customer Loyalty
CSAT helps identify customer preferences and needs to personalize the customer experience. Personalization helps build a stronger relationship with your customers, which increases loyalty. It also helps identify loyal customers to offer reward programs, increasing loyalty towards your business.
5. Brand Reputation
CSAT is an essential component of a company's brand reputation. If you're someone with high levels of customer satisfaction, your brand is more likely to be perceived as trustworthy and reliable, which can further help to attract new customers.
As we continue our discussion on measuring customer satisfaction, it's essential to distinguish between two famous customer feedback metrics - CSAT (Customer Satisfaction) and NPS (Net Promoter Score). So, let's compare and contrast these two metrics to gain a better understanding.
Why Is CSAT Different From NPS?
CSAT and NPS help you better understand your customers, but both have some characteristics that make them differ. Here're some of the significant reasons that differentiate CSAT from NPS:
1. Serve Different Purposes
CSAT and NPS are metrics that describe how much your customer enjoyed doing business with you; they have slightly different focus points. They take into consideration various aspects of your customer's experience.
NPS asks your customer how likely they are to recommend you to others on a scale from 0 to 10.
Depending upon the response, they are categorized as — Detractors (score of 0 to 6), passives (score of 7 or 8), and promoters (score of 9 or 10).
The NPS is calculated by subtracting the percentage of detractors from the percentage of promoters.
While CSAT helps measure your customer's satisfaction with a specific interaction, product, or service, NPS measures your customer's loyalty and sentiment to your company or brand.
For example, your customer may give you a high NPS for their overall love for you but a low CSAT score for a recent customer service interaction that did not meet their desired expectations.
2. Deployed At Different Times
CSAT and NPS surveys are sent out at different customer journey points to gather distinct types of feedback. You should send CSAT surveys immediately after a specific interaction or touchpoint, such as a support ticket closure or a purchase.
In contrast, you should send NPS surveys at the end of the customer journey. Once your customer has had enough experience with your product or service to form an opinion on your brand. They will help you measure overall satisfaction with the brand rather than just one specific aspect.
By administering both CSAT and NPS surveys at different stages of the customer journey, you can understand how customers feel about your product or service, identify areas for improvement, and make data-driven decisions to improve customer satisfaction and loyalty.
3. Offer Different Levels Of Insights
CSAT is a micro-level metric. NPS, on the other hand, is a macro-level metric. CSAT helps you identify areas where customers are less satisfied and pinpoint specific issues that must be addressed.
For example, if your customers consistently rate your add-to-cart process as difficult or troublesome, you can focus on improving the process to increase customer satisfaction.
On the other hand, NPS doesn't provide as much detail on specific areas of the customer experience but helps you identify trends in customer loyalty over time. By monitoring these trends, you can proactively address underlying customer loyalty issues.
For example, if your business sees a consistent decline in the NPS score, it could indicate a more significant trend of decreasing customer loyalty toward your brand. This could be due to reduced product quality, a shift in the market landscape, or increased competition.
4. Vary In Benchmarking Practices
CSAT is more helpful in benchmarking specific products or services against industry standards or competitors.
For example, a company selling laptops can compare their CSAT scores for laptop performance, battery life, and customer service to industry benchmarks or to competitors' scores to determine how they perform in those areas.
On the other hand, NPS can help you benchmark your performance against your industry competitors.
For example, suppose your business has a significantly lower NPS score than your competitors. In that case, it may indicate that you must focus on improving your customer experience to remain competitive.
5. Vary In Response Rates
NPS surveys tend to have a higher response rate than CSAT surveys primarily because it involves asking your customers a more general question relevant to all customers.
Every customer can answer, "How likely are you to recommend us to others?" regardless of their recent interactions. This makes NPS surveys more broadly relevant and can lead to a higher level of engagement from your customers.
CSAT surveys, on the other hand, are typically sent immediately after a specific interaction with your customer. So, for example, it could be a purchase or customer service interaction.
This survey may only be relevant to a subset of your customers who have recently interacted with you. As a result, CSAT surveys may have a lower response rate than NPS surveys.
How To Measure CSAT?
To measure CSAT, you must calculate the percentage of satisfied customers with your product or service. Here is an example of how to measure CSAT using a simple survey.
Step 1: Define The Survey Questions
Let's say you want to measure customer satisfaction with your online ordering process.
You create a simple survey with a single question: "How satisfied are you with the online ordering process?"
Customers can answer this question in five possible ways:
- Very Satisfied
- Very Dissatisfied
Step 2: Collect The Survey Responses
You send the survey to 100 customers who have recently placed an online order. Out of the 100 customers, 30 responded to the survey.
Step 3: Tally The Responses
Out of the 30 respondents, let's say:
- 10 customers answered, "Very Satisfied."
- 12 customers answered, "Satisfied."
- 4 customers answered, "Neutral."
- 2 customers answered, "Dissatisfied."
- 2 customers answered, "Very Dissatisfied."
Step 4: Calculate The CSAT Score
To calculate the CSAT score, you need to add up the total number of satisfied customers (those who answered "Very Satisfied" or "Satisfied") and divide it by the total number of respondents.
Here in this example:
- The total number of satisfied customers is 22 (10+12)
- The total number of respondents is 30
- So the CSAT score is 73.3% (22/30 x 100)
The CSAT score of 73.3% indicates that most customers are satisfied with the online ordering process. However, you can use this information to identify areas of improvement and make changes to enhance the customer experience.
It's important to note that the calculation may differ depending on the survey questions and response options used.
Additionally, it's essential to gather a large enough sample size to ensure the results represent your customer base.
Conclusion: What's Important For Your Business?
There's no one-size fits all strategy when it comes to measuring your customer's satisfaction with your product or service. While CSAT and NPS are metrics used to measure customer satisfaction, choosing one that best aligns with your business goals and customer feedback strategy is essential.
A continuous user feedback loop is critical for businesses looking to stay on top of customer feedback and make data-driven decisions. That's where Olvy comes in — providing a platform for companies to collect, analyze and act on customer feedback in real time.
By staying on top of user feedback and changelogs and closing the loop 1:1 with users, you can continuously improve the customer experience and drive growth.