Why Is Customer Satisfaction Important?

Jon Hill
4 mins
Woman opening a box at home

If you’ve ever been deterred from going to a restaurant after reading a negative review, paid for a service recommended by a peer, or returned to a store because the staff was friendly, then you understand the value of customer satisfaction.

Meeting customers’ needs will help keep your business financially afloat, but exceeding their needs helps you scale, meet ambitious revenue goals, and increase your market share. When you provide your customers with a quality product or service, excellent customer support, and a positive purchasing experience, you generate retention, referrals, and a healthy brand reputation.

Of course, keeping customers happy requires an investment of resources, and convincing senior leaders to open the coffers can be challenging without demonstrating exactly how customer satisfaction impacts their goals. To help you make the case, we’re answering the question, “Why is customer satisfaction important?” by illustrating precisely how it can support long-term organizational success.

Satisfied Customers Drive Business Growth

While some organizations may manage to stay operational despite a legion of unhappy customers, they’re missing out on an opportunity for market leadership and a massive amount of revenue.

There are three key reasons high levels of customer satisfaction drive business growth:

It’s more cost-effective

Companies spend a significant amount of money identifying, attracting, and nurturing potential buyers. Meanwhile, their greatest source of revenue is right under their proverbial noses. According to the Harvard Business Review, it’s 5 to 25 times more expensive to acquire a new customer than to keep an existing one. And increasing retention by just 5% can boost profits by as much as 95%.

It ensures a better lifetime value

Providing an excellent experience won’t just increase the likelihood of making a sale today—it also pays dividends in the future. A study at the University of Texas found highly satisfied customers are willing to pay more than unsatisfied customers. Over time, happier customers will spend more with your company and foster a better ROI for your marketing and sales efforts.

It helps generate referral business

When someone is delighted with your company, they’ll recommend your brand to their peers, which is essentially free marketing. And while it may seem like the internet is dominated by complainers, the reverse is true. A study cited by Forbes found people are more willing to share positive experiences on social media than negative ones.

Dissatisfied Customers Increase Churn

Happy customers help cultivate growth. But, as it turns out, unhappy customers also hinder your ability to scale.

When customers are unhappy with your offering or the level of service they receive, they won’t hesitate to take their allegiance elsewhere. In fact, according to one survey, 96% of customers said they’d leave a company after experiencing bad customer service. And customers aren’t very forgiving when it comes to negative interactions. Many choose to jump ship after just one bad run-in with customer service.

Then there’s also the chance they’ll share that poor experience on social media or review sites, where it’ll live for years to come. In other words, not only will poor customer service cost your business current customers, but it may also discourage new potential customers too.

Customer Satisfaction Drives Businesses and Product Decisions

Another often overlooked answer to the question, “why is customer satisfaction important?” is that happy customers help drive business decisions that can make your product or service even better.

That’s because happy customers are more engaged with your brand and thus more likely to participate in user research, surveys, and feedback requests. Their input can help you identify areas of opportunity only a familiar user would recognize and things your product team may not otherwise catch. Insights from your most loyal customers can help you come up with new ideas to solve their challenges, expand your offering, and delight them further.

Additionally, taking customer feedback seriously shows your organization cares about providing meaningful value. Not only will existing customers appreciate being recognized, but applying user feedback helps make any product or service more effective.

High Customer Satisfaction Helps You Stand Out from the Crowd

With so many brands and platforms vying for buyers’ attention, it’s become increasingly challenging to stand out from the noise. And having a high-quality product or service isn’t always enough to earn long-term loyalty.

When you take the time to examine popular brands like Apple, Starbucks, or Southwest, you’ll notice a common trend. Sure, each of these companies provides a good quality product or service, but so do many of their competitors. The key differentiator in each of these cases is the customer experience.

Apple’s Genius Bar, Starbucks’s streamlined ordering process, and Southwest’s signature fun-loving culture and flexible policies set them apart from others in their respective industries. Keeping customers happy and demonstrating an ability to consistently solve customers’ problems has helped each of these brands reach the front of the pack and generate a devoted following.

How to Boost Your Customer Satisfaction

There are several things you can do to improve customer satisfaction. For example, you should quickly address customers’ questions and concerns, provide a consistent customer service experience, and ensure every customer-facing employee in your organization is empowered with the information they need.

And the best way to achieve all of the above is by leveraging customer knowledge management. This way, you can collect, store, and evaluate insights and customer-facing information, and then ensure employees can easily tap into that information to help provide the level of service your customers deserve.

While prioritizing customer satisfaction may require an upfront investment of resources, the long-term payoff will be more than worthwhile.

May 3, 2022

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