Increase Business Success by Measuring Customer Satisfaction: Four Key Metrics

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customer satisfaction program“A satisfied customer is the best business strategy of all.” Michael LeBoeuf, American business author and former management professor at the University of New Orleans

It’s indisputably better to have satisfied customers than dissatisfied customers. The research on the business benefits of superior customer satisfaction in both academia and business is extensive. Satisfied customers:

  • Buy more of your products and services
  • Buy your products and services more frequently
  • Have a lower cost of sales and marketing for your business
  • On average, are willing to pay higher prices for your products and services
  • Generate positive word of mouth
  • Refer others to your products and services
  • Are more likely to try your new products and services

Moreover, it goes beyond sales and marketing benefits. Having superior customer satisfaction can create a competitive differentiation for a me-too product as well as build your brand image. Employees would much rather work for companies with happy customers than with unhappy customers.

Large businesses have emphasized the value of customer satisfaction for a long time, but the same dynamics hold true for smaller business. According to a recent survey of 300 U.S. small businesses, those who describe themselves as “successful” are significantly more likely to measure customer satisfaction than small businesses who are struggling. Apparently, it’s not enough to work hard, and have a great idea. You need to talk to and listen to your customers, also.

The first question to consider when developing a customer satisfaction measurement program is the type of measurement you want to use. In general, there are two types of measurements. The first is the transactional survey. This survey evaluates recent customer transactions with your business. These surveys are typically administered very soon after the transaction, so that the experience is fresh in the customer’s memory, and they focus on aspects of the experience, such as how long you waited, whether you were greeted when you entered the business, whether the company representative was knowledgeable about your problem, and so forth.

The other common type of measurement is the relationship survey. This survey is administered to customers less often than transactional surveys, often only one time per year. The relationship survey focuses at a higher, more emotional level, asking questions about overall satisfaction, repurchase intent, and willingness to recommend your business to others.

Customer satisfaction surveys often have elements of both transaction and relationship in the same survey, so they are not mutually exclusive. But the timing and methodology of the survey will be determined by the primary purpose of measuring your customer relationship, or the more tactical issues that are addressed by the transactional survey.

Once you determine why you are conducting the Customer Satisfaction measurement program and how you want to do so, you need to think about what you want to measure. You first need to assess factors such as, your customer type (B2C or B2B), your business type (product or service oriented or both), how frequently your customers purchase, their average purchase size and value, and other purchase decision making variables.  You should consider how frequently you want to survey your customers (Monthly? Annually? Once every few years?) Of course, you also need to project what you want to do with the information you get back. Are you planning to use these metrics for coaching staff? Are you planning to incentivize leadership for improved customer satisfaction? Your research partner can help you think through these scenarios and match your needs with the appropriate methodology.

4 Key Metrics of Customer Satisfaction and beyond

Generally, marketers agree that any customer satisfaction measurement program must include four key metrics, combining emotional, cognitive and behavioral elements to yield a valid picture of customer satisfaction:

  1. Overall Satisfaction: This traditional measurement is usually worded: “Overall, how satisfied are you with ______________________.” The response scale is another decision, but typically, a balanced five or seven-point labeled scale is used: Extremely satisfied, Somewhat satisfied, Neither satisfied nor dissatisfied, Somewhat dissatisfied, Extremely dissatisfied.
  2. Factor-level Satisfaction: In order to understand what is contributing to your customer satisfaction or dissatisfaction, it is important to measure their experience with various factors or features that make up the customer experience. For example, you might ask about your product reliability or performance. For services, the elements tend to relate more to the customer experience of the service delivery, such as wait time, staff professionalism, helpfulness, and so forth. If you are just developing your measurement program, you may not really know what features are most important in creating satisfaction and dissatisfaction. You might consider conducting qualitative research with your customers to gain more insight into their evaluation process. Additionally, conducting a baseline measurement of customer satisfaction and then analyzing which factors are most important for tracking can also provide valuable information.
  3. Loyalty: In short, how much can you count on these customers for future purchases? Are they loyal to your products and services, or will they switch the next time your competitor offers them a coupon? Loyalty builds brands, so it is important to understand the dimensions of loyalty among your customers and how you can leverage that loyalty and relationship with your customers to strengthening your brand image. Customer loyalty is the holy grail of customer satisfaction: it is loyalty that leads to repeat purchase, increased purchases, paying higher prices, and being immune to competitive offers.
  4. Willingness to Recommend: In their best-selling book, The Ultimate Question, Fred Reichheld and Bain & Company posit that willingness to recommend is the only metric needed to determine the health of the business and the likelihood for success. While most companies find it useful to use additional metrics to determine how to make customer recommendations more likely, the power of the customer actually advocating for purchase with their colleagues is undeniable. It only makes sense that we listen to the evaluations of our friends and colleagues – after all they are the people whose knowledge we trust most. Moreover, if they are willing to recommend a brand, that is a very strong endorsement.

Beyond these four standard metrics, Infosurv believes that there are two other key areas of inquiry that can provide key insights to your whole organization.

Brand Image: What do customers think about your brand or your competitors’ brand?  How does buying your product or service make them feel?  Happy, proud, safe, smart, etc. or disappointed, frustrated, confused, ripped-off?  What is the perceive cost/value relationship of your product or service.  What is the relationship of your brand to their level of customer satisfaction?

Employee Attitudes:  How are your employees perceived in the eyes of customers?  Are they happy, helpful company advocates or are they sour, curt, and difficult to work with?  What is the relationship between your employees’ level of satisfaction with their job and with customer satisfaction with your product and service?

By adding these two metric areas, you can get a complete picture of what factors have the greatest positive, and negative, effects on the level of customer satisfaction that you have and clues as to how to make improvements.  After all, in the words of former Ritz Carlton President Host Schulze, “If you’re not at 100% customer satisfaction…you must improve.”

If you’re already tracking customer satisfaction: good for you. Make the most of this information by checking the trends and identifying timely quality improvement goals. Start to think about the impact of your satisfaction levels on your brand strength and image. Discover the relationships between your level of employee satisfaction and your customer satisfaction.  If you measured customer satisfaction once, but it’s been a while since you repeated that effort, now is the time. Dust off your old files and figure out what you need to add and what is still valuable for tracking how customer satisfaction might be changing. Check out your employees’ perceptions of customers as well – they are the ones on the front line every day. And finally, if you’re not measuring customer satisfaction now and never have…what are you waiting for?  Remember, you can’t fix what you don’t know.  Satisfied customers are the engine that creates more business efficiency, stronger brands and greater profitability – you can’t afford not to benefit from that.

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Christian Wright

Christian Wright is the VP of Client Services at Infosurv. With a master’s in marketing research, he’s equipped to design actionable research that yields impactful insights and drives change.