What Is Customer Satisfaction?

Jon Hill
5 mins
woman arranging five star blocks demonstrates customer satisfaction

Customer satisfaction is arguably the most valuable metric for measuring brand success. While revenue is undoubtedly critical, sustaining an organization long-term and carving out a larger swath of market share is nearly impossible without a happy customer base. And depending on the size of your business, it may only take a handful of bad experiences to negatively impact your profitability.

But what is customer satisfaction, how can you accurately measure it, and where does knowledge sharing fit in?

We’re diving into the basics of customer satisfaction to ensure you have all the knowledge you need to begin tracking and improving your customer experience.

What is Customer Satisfaction?

Customer satisfaction measures how happy your customers are with the products and services you provide. Your customer satisfaction rating or score indicates how well your company meets the needs of its customers based on factors like the quality and value of your product or service, your customer service team’s effectiveness and efficiency, and whether your company meets or exceeds the expectations it sets.

Benefits of Highly Satisfied Customers

Meeting your customers’ needs isn’t just the right thing to do. Focusing on customer happiness also benefits your organization in several ways.

Here are just a few:

Increase brand loyalty

Think about businesses you frequent—the restaurants, retailers, and even technology providers you use at home or work. What keeps you going back even when you have a choice to go elsewhere? Like most buyers, you’re loyal to businesses because you know they’ll meet (or exceed) your needs and provide positive outcomes.

Every experienced business leader knows it’s less expensive to retain a customer than earn a new one. And given increasing customer retention by just 5% can boost profits up to 95%, according to research by Bain & Company, it’s well worth the investment.

Boost trust

When you demonstrate your ability to consistently meet customers’ needs, you earn their confidence. This fosters loyalty, improves your brand image, and ensures that you’ll have an engaged audience ready and willing to buy from you when you go to market with a new product or service.

Attract positive word of mouth

When people have a memorable and meaningful experience with a business, whether it’s positive or negative, there’s a good chance they’ll tell someone. And if it’s positive, it could translate into even more business.

By now, it’s common knowledge that people trust referrals from colleagues, friends, and family over marketing messages. But you might be pleased to know that referred customers also have an average 16% higher lifetime value than non-referred customers, according to data shared by FinancesOnline.

Grow your audience and sales

Given that satisfied customers are more likely to stick around and bring their friends with them, it’s safe to say making customers happy is good for your bottom line. Data shared by Forbes shows brands that provide superior customer experiences bring in 5.7 times more revenue than their competitors.

Factors That Influence Customer Satisfaction

A customer experience isn’t based on one single factor but a series of interrelated determinants. In other words, many factors can make or break your customer service scores.

These factors include:

Perceived product quality

This refers to a customer’s impression of quality. For example, a piece of clothing may feel premium regardless of whether it’s made from ultra-high-end materials or not.

Perceived product value

This refers to a customer’s idea of value based on how well the product or service meets their needs. For example, a service may provide greater value to someone in its target market than someone who is not.

Convenience

How easy is it for a customer to get what they need? The more streamlined and efficient you can make a customers’ experience, from the purchasing process to customer service, the more likely they are to be satisfied.

Customer expectations

No matter how compelling your product or service may be, if it fails to meet a customer’s expectations, it will leave them feeling disappointed. That’s why it’s crucial you set realistic expectations about your offering. It’s always better to underpromise and over-deliver than the reverse.

Communication

We’re willing to bet that most poor customer experiences result from miscommunication. It’s imperative that you keep your customers in the loop even when you have some not-so-great news. For example, if an order is running behind or a software feature is down, let them know immediately and share how you’re working to address the issue.

Complaint handling

Take all customer complaints seriously and work to resolve problems as quickly as possible. While an unhappy customer may seem like a liability, it’s actually an opportunity to turn someone around. In fact, if you prove your ability to fix their issue, you may earn their loyalty.

How to Measure Customer Satisfaction

There are several methods for measuring your organization’s customer satisfaction. Here are three of the most common:

Customer satisfaction (CSAT) score

The CSAT score is measured by asking customers to rate their overall satisfaction with goods or services on a scale of 1 to 5, where one is “very unsatisfied” and five is “very satisfied.”

Net promoter score (NPS)

A company’s NPS is calculated by asking, “How likely are you to recommend [company name] to a friend or colleague?” Customers rank their answers on a scale of 0 to 10, where zero is “not likely at all,” and ten is “extremely likely.” Then, the percentage of detractors (those answering between 0 and 6) is subtracted from the percentage of promoters (those answering 9 or 10).

Customer effort score (CES)

A CES score is based on a variation of the questions “How easy was it to get the help you needed today?” or “How easy was it to complete your order?” on a numerical scale.

You can also assess customer satisfaction by distributing customer surveys, using a social media listening tool, holding customer interviews or focus groups, and recording and documenting customer service calls. But, regardless of where or how you gather this data, be sure to leverage a customer knowledge management system to help you capture, store, and leverage the resulting customer insights..

How Can You Improve Customer Satisfaction?

Whether your customer satisfaction score is near-perfect or less-than-stellar, there is always room for improvement. Here are a few things you can begin doing right now to improve customer happiness:

Make it as easy as possible for customers to share feedback

Customer feedback is invaluable. It gives you insight into elements of your products or services from a users’ vantage point and can help you refine and optimize your offering in the future. Ensure customers have an easy way to provide their comments and suggestions, such as surveys or website feedback forms.

Monitor social media mentions and online reviews for valuable insights

Whether you know it or not, customers discuss your products or services on social media and third-party sites. Consider investing in a social media tool so you can easily gather their insights and check reviews for trends. For example, if multiple customers grapple with the same issue, it’s likely not a fluke. 

Empower customer-facing employees with the knowledge they need to assist customers in real-time

When it comes to customer satisfaction, interactions with customer-facing employees can be your best asset or your worst liability. One poor experience with an employee can permanently impact how a customer views your brand, and multiple poor experiences can ruin the relationship beyond repair.

On the flipside, consistently positive experiences with employees will delight customers and can even make up for shortcomings, like a product issue or service disruption. By developing a successful knowledge engagement strategy, you can ensure all employees have the information they need to best serve all customers.

Keeping customers happy takes effort. Even if you have the best product on the market, you still have to make a concerted effort to provide exceptional service, communicate, gather insight, and continually strive to exceed customer expectations. But investing in customer satisfaction pays significant and lasting dividends.

April 27, 2022

Want to learn more about increasing customer satisfaction through knowledge management?

Check out our guide to improving customer service training and operations through knowledge management.

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