Customer Satisfaction Metrics & KPIs: Measuring Satisfaction and Success

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July 7, 2023
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Measuring success is not just about profits and revenue. For sustainable growth and long-term success, you need to build and maintain a loyal customer base of happy customers.

So how does one determine the level of customer satisfaction? In this blog post, we’ll discuss the importance of measuring customer satisfaction and explore seven key customer satisfaction metrics.

Why Should You Measure Customer Satisfaction?

To improve your product and customer satisfaction, you first need to collect feedback from your customers and find out what they think about your product. Ideally, your customer feedback strategy should include gathering and analyzing both quantitative and qualitative data. Qualitative data is gained through written customer reviews, while quantitative customer data is numerical and includes purchase history, website analytics, customer feedback ratings, and specific metrics you can track to determine where you stand with your customers.

By choosing and continuously tracking those metrics, you can get a clear understanding of customer satisfaction, identify customer pain points, and track the impact of improvements. With relevant KPIs, you can make customer satisfaction more tangible and make data-driven product decisions that your customers will appreciate.

What Types of Metrics Measure Customer Satisfaction?

There are several customer satisfaction metrics that businesses can track to assess customer satisfaction levels.

1. Net Promoter Score (NPS)

Net Promoter Score (NPS) is by far the most popular customer satisfaction metric. The purpose of NPS is to measure how likely the customers are to recommend your company, product, or service to other people. If your customers remember your product, bring it up in conversations, and recommend it to their family or friends, it is safe to say they are happy with the product and will continue buying it.

NPS is calculated by asking customers a simple question: "On a scale of 0-10, how likely are you to recommend us?" Based on the responses, customers are categorized as Promoters (9-10), Passives (7-8), or Detractors (0-6). The NPS is derived by subtracting the percentage of Detractors from the percentage of Promoters. For example, if 60% are Promoters and 20% are Detractors, the NPS is 40 (60-20=40).

2. Customer Satisfaction Score (CSAT)

Customer Satisfaction Score (CSAT) is a metric used to measure the level of customer satisfaction with a specific touchpoint, product, or experience. It helps businesses understand how well they are meeting customer expectations and which areas need improvement.

CSAT is typically measured with a survey where customers are asked to rate their satisfaction on a scale of 1-5, 1-7, or 1-10. The average score of all responses represents the CSAT. Monitoring CSAT is a simple and effective way to assess customer satisfaction levels, determine your product’s strengths and weaknesses, and prioritize improvements.

3. Customer Effort Score (CES)

Convenience and ease of use are one of the top drivers of customer satisfaction. That’s why you should track your Customer Effort Score (CES), a metric that measures how much effort customers have to make to accomplish a task or resolve an issue.

You can calculate your CES by asking customers to rate the effort required on a scale, such as 1-5 or 1-10. The average score of all responses represents the CES. On a scale of 1-5, 2 is considered a satisfactory CES, while 3 and higher indicate that your processes need improvement.

4. Customer Service Satisfaction

Customer service and customer support are now more important than ever. People gravitate towards companies that take care of their customers before and after the purchase. Customer service satisfaction is a useful metric that allows businesses to assess the effectiveness of the customer support team and the customers’ satisfaction with the support and assistance provided by the company.

There are several ways to measure customer service satisfaction. It can be done through post-interaction surveys or by asking customers to rate their satisfaction with specific aspects of the service. For example, if 80% of surveyed customers indicate high satisfaction with the speed and helpfulness of customer service, the customer service satisfaction rate is 80%.

5. Customer Retention Rate

Customer retention rate measures the percentage of customers a business retains over a given period. It reflects the company’s ability to retain customers and maintain customer loyalty and satisfaction over time. Customer retention is vital because it costs more to acquire new customers than to retain existing ones. Loyal customers tend to make repeat purchases, try new products, have a higher customer lifetime value, and become brand advocates.

To calculate the customer retention rate, subtract the number of new customers acquired from the total number of customers, then divide the result by the number of customers at the beginning of the period and multiply by 100. For example, if a company starts with 500 customers, acquires 100 new customers that month, and ends the month with 450 customers, the customer retention rate is ((450 - 100) / 500) * 100 = 70%.

6. Customer Churn Rate

Customer churn rate is the opposite of customer retention rate. It is a metric that measures the percentage of customers who stop using a company's product or service within a given period. A high customer churn rate can be a sign of low customer satisfaction and a lack of competitive advantage. Ultimately, a high churn rate indicates lost revenue and the need to acquire new customers to sustain growth

Calculating churn rate is done by dividing the number of customers lost by the total number of customers and multiplying it by 100. For example, if a company starts with 1,000 customers and loses 50 customers in a month, the churn rate for the month would be (50/1000) * 100 = 5%.

7. Online Reviews and Ratings

Online reviews are one of the key indicators of customer satisfaction. Customers leave feedback and share their experiences on a variety of social media platforms and review websites. Most review platforms allow customers to rate brands and products on a numerical scale and add a comment to describe their experience in more detail. Tracking trends and sentiment in these reviews can help businesses identify areas for improvement and boost customer satisfaction.

Unstructured data such as social media posts and text reviews may be harder to analyze, but they are your best source of customer insights. With a customer feedback analysis solution like Essense, you can extract important information from your reviews in just a few clicks. Powered by AI, Essense applies NLP techniques such as sentiment analysis and topic modeling to turn unstructured data into actionable insights for your business.

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