The Complete Guide To Measuring & Improving Customer Satisfaction

U.S. companies lose over $75 Billion per year due to poor customer service and low customer satisfaction.

On the flip side, increasing customer retention by only 5% results in a profit increase of 25-95%.

If you want to increase revenue while lowering costs at the same time, improving customer satisfaction is your ticket.

In this guide, we’ll break down how to measure and improve customer satisfaction, even if you’ve never done it before.

Let’s get started.

What Is Customer Satisfaction?

Before looking at how to measure and improve customer satisfaction, we need to take a look at the concept itself.

The textbook definition by Philip Kotler, the Father of Modern Marketing, is "a person's feelings of pleasure or disappointment resulting from comparing a product's perceived performance (or outcome) in relation to his or her expectations". In other words, customer satisfaction is about measuring how happy a customer is with the experience your brand provides them from start to finish.

At the heart of it, customer satisfaction comes down to expectations versus reality.

When a customer engages with your company—whether through buying a product, asking a question, or returning something—they expect a certain level of service, quality, and responsiveness. How your company meets, exceeds, or falls short of that expectation ultimately leaves them with a positive experience or a negative one.

A positive experience leaves the customer feeling satisfied, and builds their trust and loyalty with your brand, because they know you’ll meet or exceed their expectations. A negative one hurts your company’s relationship with the customer, simply because they don’t trust you to deliver what they want in the future.

In practice, it goes like this: A customer wants to buy a product and has some questions before committing to their purchase. They send a Facebook message to two companies with some questions, expecting a response in 24 hours.

Company A responds in one hour answering all the questions, providing a link to more information and offering to help if the customer has any other questions. The customer buys the product, and is highly satisfied, because Company A met and exceeded their expectations. They shop again because they trust the brand, leave a positive review, and tell their friends to come back.

Company B doesn’t respond at all. The customer doesn’t buy the product from them, leaves a negative review about their experience, and tells all their friends to shop with Company A instead. In this case, Company B hasn’t just lost out on revenue for that purchase—they’ve also lost out on future revenue.

But what are the real effects of customer satisfaction for your company? We’ll let the numbers speak for themselves.

Why Customer Satisfaction Should Be A Priority

Your bottom line is key, and whether negative or positive, customer satisfaction has a direct effect on your company’s growth and profitability.

Most of us out there know that customer satisfaction is linked to loyalty and repurchase, but loyal customers are worth more to your company than you may think.

Loyal customers spend 67% more than new customers over time, and those who are emotionally connected to your company and invested in your brand have a 306% higher lifetime value.

However, the benefits of customer loyalty go beyond revenue. Loyal customers are also your company’s best marketers.

American Express’ #WellActually study of customer satisfaction found that:

• 90% of customers share their customer service experiences with others

• Happy customers will share their experiences and refer 11 people

• 53% of customers post positive comments about companies on social media

Given 81% of people trust recommendations from family and friends over companies, when a loyal customer puts in a good word for your brand, it goes a long way. Positive reviews also help with your SEO rankings—an added bonus when everyone turns to Google when researching products and services. This also works in the reverse. Unhappy customers can damage your brand with negative reviews, and take their money to your competitors.

The #WellActually study also found that:

• One-third of customers will consider switching to a competitor after one instance of poor customer service

• Two thirds will consider it after two or three instances

• 35% of customers post negative comments about companies on social media

• Angry customers will share negative experiences and give anti-referrals to 15 people

If you’re reading those last two figures and scratching your head, you’re not alone. Negative customers may not make as much noise as loyal customers on social media, but the damage to your brand’s reputation gradually occurs over time. In fact, you may not even know it’s happening.

In addition, companies that prioritize customer satisfaction are more likely to experience revenue growth, while those who don’t have stagnant or decreasing revenue.

Customer Satisfaction vs Customer Acquisition: Which Is More Important?

Customer acquisition is essential for businesses to grow. There’s no getting around this fact, and when faced with the decision of investing in existing customers or trying to get new ones, most companies place all their eggs in the acquisition basket. Paid media, prospection, influencer marketing, advertising—companies are pouring money in these strategies to get new clients.

It may seem like the logical choice; after all, your existing customer base is already there. You’ve already gotten them in the door. You can’t sustain growth on loyal customers.

If you think this way, you’re not alone. 82% of companies agree that retention is cheaper than acquisition, yet 44% of companies focus on acquisition compared to 18% on retention. However, business doesn’t work the way it used to. Getting new customers is more expensive and more challenging than before.

This is where customer satisfaction comes in.

It’s easier and cheaper to sell to loyal customers than it is to new ones. It costs 5x as much to attract a new customer than to keep an existing one. What’s more, it’s easier to sell to loyal customers, with a success rate of 60-70%, while the success rate of selling to a new one is anywhere between 5-20%

Plus, loyal customers can also help fuel your acquisition efforts with positive reviews and referrals.

Acquisition is important, but investing in customer satisfaction is a double win: You can continue to sustain revenue from existing customers, while attracting new ones through word of mouth. Your loyal customers are your foundation, and taking care of them helps build a revenue model that’s more predictable and profitable, which, in turn, allows you to invest more in getting new customers.

Part 1: How To Measure Customer Satisfaction

Once you understand the importance of customer satisfaction, chances are the next question you’ll have is: Okay, well how do I measure it?

To do this, we have to first look at how a customer’s satisfaction can be affected at different touchpoints throughout the customer journey.

Understanding The Stages Of The Customer Lifecycle

Intuitively, it’s easy to think customer satisfaction boils down to two parts: the purchase itself, and any issues that may spring up post-purchase in the form of complaints or returns. However, a satisfied customer is a sum of all parts of the customer journey, not just the moment a customer buys your product.

If a customer asks you a question on Facebook, your brand’s response affects their overall satisfaction with their purchase experience. The actual purchase process affects it. How your team handles complaints, issues, or returns comes into play; as do the offers and communications your company sends them after.

In other words, every interaction your brand has with your customer can affect your relationship with your customer—and their satisfaction—to some degree. Delivering a consistent experience is key.

Each stage of the customer journey has some influence on customer satisfaction:

1. Awareness. First impressions count, and the initial moment a customer hears about your brand has a significant impact on their overall perception. Consider this: If you first hear about a company because they were plastered across Twitter in a customer service scandal, you’re far less receptive to what they’re selling than if a friend shows you a product they’ve been using. Nielsen says that 84% of customers trust recommendations from people they know. Referrals and word-of-mouth matters, especially during the awareness stage, and setting up positive foundations at the start helps set the tone for future interactions.

2. Consideration. When a customer considers your product, they’re on the lookout for information—in the form of your website, engaging with chatbots or your sales team, social media posts, and reviews. 34% of customers read 4-6 reviews before making a purchase, and customers who have a negative experience on your brand’s website are 88% less likely to return. At this stage, delivering customer satisfaction comes down to building trust through positive interactions at different touchpoints (such as through your website, chatbot, and so on).

3. Conversion. This comes down to the purchase experience and your actual product. During the conversion stage, customers expect an easy path to purchase and a product that’s in line with the price they paid for it (or that’s a good deal).

4. Retention. This is the stage you probably associate as the ‘make or break’ of customer satisfaction. Retention includes the actions you take to value your customers and encourage repeat purchases. In other words, how you continue to nurture the relationship after you’ve sealed the deal with that first purchase. How you handle customer complaints, the feedback and surveys you send them, and loyalty offers all affect your customer’s satisfaction at this phase.

5. Advocacy. Not every customer reaches this point, but the more advocates you have, the stronger your word of mouth. Advocacy is the end-game for customer satisfaction, which in turn improves your referrals during the awareness stage, kickstarting a positive acquisition loop.

What Tools Are Out There To Measure Customer Satisfaction?

This is the million-dollar question many companies have: How can we track and measure how happy our customers are? Without empirical evidence, you’re shooting in the dark and spending your marketing budget inefficiently.

All customer satisfaction measurement comes down to collecting quantitative feedback from your customers through surveys.

There are three common methodologies out there: Customer Satisfaction Score (CSAT), Customer Effort Score (CES), and Net Promoter Score (NPS). Even if you don’t know their names, you’ve definitely come across them before as a customer—and maybe even used them in your own company without knowing it.

The Customer Satisfaction Score asks a customer to rank their satisfaction for any given interaction with your brand. This is generally focused on their feelings towards your product and services, and usually looks something like this:

The Customer Effort Score looks at the amount of effort a brand put into the customer experience compared to the customer. These questions focus on how easy it was for a customer to complete any given action on your website, whether it’s finding information, purchasing a product, or handling a complaint.

They typically look like this:

Lastly, there’s the Net Promoter Score. This asks how likely a customer is to recommend your services to someone else on a scale of 0-10, like this:

Based on their score, you can rank customers as Detractors, Passives, or Promoters:

0-6: Detractors

• Unlikely to recommend a company or product to others

• Unlikely to purchase again

• Could give anti-referrals in future

7-8: Passives

• Not actively recommending or damaging a brand

• Could become Promoters if nurtured

9-10: Promoters

• Can act as brand advocates

• Very likely to refer friends and family

• Will probably make repeat purchases

The final NPS you get is based on the % of Promoters - % Detractors, and ranges from -100 to +100. If your score is negative, it means your company has more unhappy customers than happy customers; if it’s the opposite, your customers are happier.

That brings us to the following question: Which customer satisfaction survey is best?

To do that, we need to look at the arguments for each:

	Pros	Cons
CSAT	Straightforward to use Easy to interpret Versatile and customizable questions	Limits scope to a single interaction Cannot accurately predict repeat business
CES	Shown to be more predictive of customer loyalty Helps businesses identify barriers for customer service	Generally doesn’t explain the reasons behind a response
NPS	Simple and straightforward for customers Can be benchmarked against others in your industry Puts the focus on satisfaction and referral	Seen as too simplified by some critics

As you can see from the table, there are benefits and drawbacks to each method, and each customer satisfaction survey is useful in some shape or form.

The best way to get a comprehensive understanding of your customer satisfaction levels is to use a combination of these methods and play to each survey’s strengths.

CSAT is valuable at key customer lifecycle moments (such as making a purchase or asking for support), and you can use this information to create actionable results based on tangible interactions with customers. Meanwhile, emailing a customer with an NPS survey can shed insight into long-term trends in loyalty and retention from your customers.

Above all, no matter which metric you choose, the most important thing is to have some form of measurement and consistency. Anything is better than nothing, and choosing one will help you gauge your customer satisfaction in a quantitative way—and consistently tracking these will provide your brand with trends, insights, and actions over time to improve the number of happy customers you have.

Designing An Effective Customer Satisfaction Survey

Every measurement of customer satisfaction comes down to a survey, and crafting an effective survey will help you extract the right information to understand how happy your customers are, and where your efforts are exceeding or falling short of expectations.

An effective customer satisfaction survey is:

• Short. The more questions there are, the lower your response rate, which is why CSAT and NPS are effective tools to gather customer feedback on a regular basis. Research by SurveyMonkey showed that customers were more likely to drop off after a survey took 7-8 minutes to complete. For longer surveys, aim for a maximum of 10 questions and 5-minute completion time.

• Timely. In order to get the most accurate and reliable data possible from your survey, it’s best to send out the survey as soon as possible. If you’re trying to track changes in satisfaction over time, make sure to be consistent in the follow up: for example, 3 or 6 months after purchase.

• Goal-oriented. This comes down to what you want to know. Do you want to measure how happy a customer is with your product? Are you trying to track customer service? Be deliberate—-for each question, make sure you know exactly what you want to find out and how you’ll use this information.

While you may have some idea of what questions you want to ask in your survey, here are some ideas to get you started:

• Overall, how satisfied are you with [product/service name]? This can give you an overall understanding of how happy a customer is.

• How responsive have we been to your questions about our products? This answer can help you identify response times by your customer service team.

• How helpful were our team in dealing with your inquiry today? This can help track customer service efforts.

• How likely are you to purchase our products again? This can give an indication of repeat purchase rates.

• How likely are you to recommend our products to a friend or colleague? This is data you can use to calculate your NPS.

The timing of these questions is key. Questions about customer service should be asked immediately after the interaction, or within 24 hours, so the experience is fresh in a customer’s memory. On the other hand, questions about a product or purchase should be tailored to your product’s lifespan to get the most accurate response. For example, customers may need more time to try out a car or phone, so your survey should be sent at least a week after purchase.

The design of your survey can also affect your response rate. The key here is to make it as easy and straightforward as possible for customers to give you feedback.

To illustrate this, take a look at these two surveys side by side:

The one on the left is easy to understand, quick to fill out, and customers know exactly how long it will take to complete. Meanwhile, the survey on the right can leave a customer feeling confused and frustrated, increasing survey drop-off rate and even negatively impacting customer satisfaction.

Integrated NPS software, such as Thermostat, includes custom and beautiful surveys that can be sent to customers in a number of ways, such as via email, a pop-up, a link, or through API integration.

Tools like Typeform, SurveyMonkey and Google Forms are also affordable survey-building platforms which you can use to create well-designed user-friendly forms.

Identifying Trends And Next Steps From The Results

The entire point of measuring customer satisfaction is to identify trends and actions to improve retention and loyalty. Data is just that—data—unless you can deep-dive and extract the right insights from it.

Once you have a decent sample size, you can look at the trends in the data and draw conclusions and next steps:

Is your NPS score low? If so, this means you have more unhappy clients than happy clients. This means your company’s churn rate could continue to increase over time and retention needs to form a key part of your strategy going forward.

Which interactions are pulling down your customer satisfaction? Data from CSAT surveys can help pinpoint problems at a particular part of the customer lifecycle. For example, if customers indicate low levels of satisfaction just after purchasing a product, this could suggest that your path to conversion needs to be improved.

Is there a disconnect between my data and customer behavior? Sometimes your data may show highly satisfied customers, but your brand may still suffer from low retention rates. In this case, there could be an underlying issue to tackle. For example, your offers and loyalty programs may not be appealing enough to encourage a repeat purchase.

What CRM actions can you put in place based on your data? No matter which survey method you use, you can use this information to create automated CRM cycles. With NPS, for example, you can leverage your Promoters with dedicated refer-a-friend offers, target Passives with discounts or extensions on product trials, and get in touch with Detractors for more information on their answer.

Talk directly to your customers. Customers are the backbone of your business, and they’ll also be the first to tell you what they want and where you can improve. If you’ve identified low customer satisfaction during a particular phase, reach out to your customers and ask for more information on what could be improved. This gives you concrete examples to form your next steps.

How are my efforts paying off? Over time, you can graph your data and start to identify long-term trends and measure your retention and loyalty efforts. If you’ve brought onboard a new customer service team, you can track CSAT results to gauge their performance. Likewise, if you’ve implemented a new loyalty program, you can look at your NPS scores over time to see if this helps encourage referral and loyalty.

It’s best to use an integrated survey platform that automatically calculates NPS and CSAT scores, so you can quickly have an overview of results and trends over time without needing to do the legwork. However, you can also pull numbers directly from your survey tool and plot it out manually in a way that works for you.

Remember that asking about customer satisfaction can impact customer satisfaction. If customers feel their feedback is falling on deaf ears, they may trust you less—plus, you’ll have invested that time and effort for nothing.

Putting It All Together

There’s a lot of information to take in, so are some of the key takeaways to keep in mind:

• Customer satisfaction is impacted at every stage of the lifecycle: awareness, consideration, conversion, retention and advocacy.

• Surveys are the best way to measure customer satisfaction.

• Use CSAT surveys immediately after key customer interactions: for example, after a customer has made a purchase or contacted your customer service team.

• Use NPS to measure long-term trends in customer loyalty and retention.

• No matter which survey method you choose, it’s all about tracking and consistency. Track regularly and using the same set of conditions to get reliable and actionable insights.

• Invest in a customer satisfaction survey platform like Thermostat.io to help calculate NPS and CSAT scores and visualize trends in the data.

Part 2: How To Improve Customer Satisfaction

Once you know how to measure your customer satisfaction and interpret the data, it’s time to supercharge your customer experience to increase satisfaction and loyalty.

A lot of the advice out there can feel a little bit cookie-cutter, which is why we’ve pulled together some tangible actions to put customer satisfaction at the core of your company’s sales and marketing strategy.

Set A Vision And Objectives For Customer Satisfaction

Your vision for customer experience drives your company’s direction and strategy. It’s important to be clear on the experience you want to give to your customers, in order to prioritize and focus your sales and marketing efforts. Without this vision, it’s hard to measure customer satisfaction and provide a consistent experience across the customer lifecycle.

Your vision can be one statement—"To create a better everyday life for the many people" like IKEA—or an entire paragraph. For inspiration, here are some of the world’s most recognized brands and their vision:

• To make people happy. - Disney

• Empower people through great software anytime, anyplace, and on any device. - Microsoft

• Make transportation as reliable as running water, everywhere, for everyone. - Uber

• To give everyone the power to create and share ideas and information instantly, without barriers. - Twitter

• We save people money so they can live better. - Walmart

Once you have this vision in place, you can funnel this down into objectives that bring it to life. To do so, consider how each department or function can contribute to this. For example, if your vision is to make people’s lives easier, how does your website design help them find the information they want in a quick and accessible way? If you’re aiming to make every person in the world happy, then how does your customer service team embody this in their interactions with customers?

This leads us on to the next point.

Assign Actions And KPIs For Each Stage Of The Customer Journey

After you’ve built your vision and objectives, it’s time to create actions and KPIs to measure performance and results at key touchpoints.

As mentioned above, a customer’s experience with your brand starts long before they actually make the purchase. Improving customer satisfaction requires consideration of the entire journey, which is why it’s important to keep the customer lifecycle in mind when building your customer satisfaction KPIs.

One way to do this is to sit down with team members from different departments in order to map out your entire customer lifecycle from awareness to loyalty. Using this map, you can identify the major customer interactions throughout their journey and set goals to track success.

These are just some of the KPIs you can put in place to improve customer satisfaction at different stages of the customer journey:

• Your customer churn rate

• Your company’s response rate and speed of response for inquiries on social media or website requests (ie. response rate within an hour)

• The number of positive and negative reviews left on social media (i.e. 90% positive reviews)

• Your overall rating on Google, TripAdvisor, Yelp, Facebook, and any other key rating platforms for your industry

• The percentage of follow-up and resolution for complaints (i.e. 100% follow-up for complaints, 95% of complaints resolved)

• The number of members you have in your customer loyalty program

• The number of customers who discover your brand through referrals

• Completion percentage for customer satisfaction surveys

Regularly Track Your Customer Satisfaction Through Surveys

We can’t say it enough: Tracking and measuring your customer satisfaction on a regular basis is essential if you want to see how your efforts are paying off. Your NPS and CSAT scores can help you understand if your actions are working, and should be tracked over time to measure any improvements or declines in customer satisfaction.

In order to get the best understanding of the effect of your actions, it’s best to review your NPS and CSAT scores at regular intervals—say, on a monthly or quarterly basis. This way, you can identify any trends and strengthen, or adjust, as needed.

Offer An Omnichannel Customer Experience

How many different channels does your brand use? No matter what the answer is, it’s probably more than you think.

A customer may do research on your Facebook page or website, then go into a physical store to see the product, do more research on YouTube, check out some Google reviews, purchase online, then return the product offline.

In a nutshell, omnichannel is about providing customers with a connected and consistent brand experience no matter where they find your brand.

Omnichannel is one of the main trends right now in customer service, and adopting this approach helps your brand supercharge your customer’s happiness in an increasingly multi-channel world.

A recent study by Aberdeen Group showed that companies with a strong omnichannel customer engagement strategy had an average retention rate of 89%, compared to 33% who had weak omnichannel strategies.

For your brand, one of the best ways to link the customer experience across all channels is through capturing data. By having identifiers for your customers (a phone number, customer loyalty number, or an email), you can track their interactions across different channels to provide a seamless experience. However, customers don’t readily give up their information without a benefit, which is why most brands capture data through loyalty programs or competitions.

Building an omnichannel experience also means providing your sales and marketing teams with information on your customers’ purchase history and behavior so they can provide tailored recommendations and better service.

If your customer service team can see information on a customer complaint across Facebook and via phone, they can more easily resolve the issue. Likewise, if your marketing team has access to a customer’s purchase history, they can send special offers or rewards to encourage retention or referrals.

Create A ‘Win Back’ Strategy

Your brand may be spending hundreds or thousands to acquire new customers and overlooking one potential customer pool: previous customers who didn’t come back.

These customers are already familiar with your brand and have already demonstrated a need for your product, which means they’re a far more qualified database to be reaching out to. By having a ‘win back’ strategy for these customers, you can improve your retention and loyalty efforts for Passives or Detractors, while also improving ROI on your marketing spend.

Customers don’t repurchase for a number of reasons, but the main ones are usually price or poor customer service. Some are easier to win back than others: Customers who didn’t repurchase because of price are far more likely to come back than those that were unhappy with a brand’s customer service.

In addition, research has shown that the best targets for win back programs are customers who haven’t repurchased but referred others, customers who have never complained, or customers who have complained but had their complaint resolved.

When creating a win back program, it’s best to test and learn what offer works best on your customers. This can be a discount, upgrade, gift with purchase or a tailored offer—it’s up to your team to see which method improves repurchase rates for your customer pool.

Meet Expectations — And Then Exceed Them

The phrase "surprise and delight" is often thrown around in business, but it can have a very real impact on your customer satisfaction. Surprising and delighting is about exceeding customer expectations in order to increase your Promoters, improve word of mouth, and ultimately get more happy customers.

But before we look at surprising and delighting customers, it’s important to understand the expectations that today’s customers have. It’s no surprise that customers are demanding; they expect high-quality products, a seamless experience, and always-on service.

However, did you know that:

• 82% of customers believe a fast response (under 30 minutes) is important or very important when they make an inquiry?

• 73% of customers say that valuing their time is the most important thing a brand can do for customer service?

The way customers interact with brands has changed, and what was considered ‘above and beyond’ five or ten years ago may just be meeting customer expectations today—or even falling short. With this in mind, your customer service strategy should focus on satisfying your customer needs when they’re looking.

However, if this isn’t possible, your customer data can help you choose the best times to engage your customer service staff.

By looking at the time of your customer inquiries, you can get an idea of when customers are most active and staff your team to meet these needs. Remember to keep these customer service hours displayed clearly on your channels: Customer satisfaction is about setting expectations, and by being transparent with your working hours they’ll know what to expect.

Live chat services can also complement your in-house staff in order to provide 24/7 support, help conversion and increase customer satisfaction. As well as giving your customers another way to reach your team, live chat platforms use machine learning and data to generate automatic responses to customer inquiries. IBM Watson, Olark, Zendesk and Drift are some of the most popular tools out there today.

Lastly, there are the extra touches or random acts of kindness. These are ideas that go beyond your customers’ expectations: handwritten thank you notes, an advanced preview of a product, or even a birthday gift for your loyal customers. When executed well, these convert your Passive customers into Promoters. Plus, they’re handy for drumming up noise on social media.

Make random acts of kindness part of your company ethos. To start with, set goals to surprise and delight a customer each week: It can be through brainstorms or by using social listening tools (such as TweetDeck or Mention) to see what customers are saying.

Conclusion

Above all else, it’s important to remember that without happy customers, your brand can’t grow. Satisfied customers form the foundation of your business and are key if you want to achieve sustainable long-term growth.

Throughout this guide, we’ve given you all the tools your brand needs to understand what your customers want and how to measure your customer satisfaction and use this information to make informed decisions that give your customers an amazing experience at every stage of the customer journey.

Remember, if you put customer satisfaction at the heart of your company, there’s no limit to the creativity and innovation your team can deliver—and the payoff you’ll get.