What Is Customer Satisfaction? (With Benefits and Tips)
By Indeed Editorial Team
Updated June 23, 2022 | Published February 25, 2020
Updated June 23, 2022
Published February 25, 2020
Customer satisfaction is a focused strategy for many organizations because happy, loyal customers help businesses earn more money. Measuring customer satisfaction can help a company determine what’s working well with its products, services and internal processes and what it could improve or change. Learning about customer satisfaction can help you improve your sales skills and provide stronger products and services to consumers.
In this article, we explain what customer satisfaction is, what benefits it can provide and how you can improve yours.
What is customer satisfaction?
Customer satisfaction is a measurement of how happy customers are with a company's products and services. Customer satisfaction includes a customer's perceived quality, value and expectations of a company and what it offers. Companies use this data, which they can gather through methods like surveys and focus groups, to help them determine how they can improve their products or services to gain and keep more customers. This data also can reveal major insights into how customers relate to a brand and how they will interact with it in the future.
Companies in many industries focus on these metrics to ensure they’re meeting their customers’ needs. Customers can include anyone to whom a company provides products, services or experiences. For example, a car dealership's customers are individual buyers and a hospital's customers are patients. Great customer satisfaction and high customer retention have a strong correlation, and customer retention powers sales and helps businesses. Although metrics like sales and shares can show important details about how well a company is performing, customer satisfaction scores are one of the most reliable indicators to reveal how a company will perform in the future.
What are the benefits of customer satisfaction?
Monitoring and improving customer satisfaction can help companies or sales professionals in myriad ways, including:
Measuring customer satisfaction can help you understand what you’re doing well, which can allow you to continue emphasizing those processes. To determine whether customers are happy, you can measure and analyze their satisfaction rates using various customer feedback strategies, such as email campaigns or social media.
You also can create customer advocacy programs for these customers to encourage them to bring in more referrals and advertise on your business's behalf. This can help you bring in new customers while improving retention rates with your current ones.
Identify areas of improvement
Identifying and addressing unhappy customers is crucial for any business. Monitoring for negative customer reviews or word-of-mouth warnings to friends and family based on bad experiences can help you identify ways you can better address your customers’ needs. This can include lowering your prices, improving the quality of materials you use or simply having better customer service.
Asking for feedback through surveys and acting on any unfavorable responses by addressing problems and making adjustments can show customers they’re your top priority. When you show unhappy customers you care about them, they may have a higher chance of coming back.
Increase brand awareness
Creating more loyal and satisfied companies can have an exponential impact on a brand’s exposure, primarily through the internet. Customers who have an incredibly strong experience with a company or a sales professional may be more likely to tell their friends about it or post about it on social media or websites where customers can rate brands.
These channels allow other people who may be unfamiliar with a brand to learn about it, and seeing overwhelmingly positive reviews for it may make them more likely to engage with it. This can help create new customers who may discuss their positive experiences and attract even more customers.
Decrease customer churn
Customer churn, also called customer turnover or customer attrition, measures how many customers stop buying from a company over a certain period. For example, if a paper company started a quarter with 600 clients and ended it with 450, it lost one-fourth of its customer base. This means its churn rate is 25% for that quarter.
Customer churn can be costly because it often means a company is going to invest more resources into gaining new customers to compensate for losses. Satisfied customers are less likely to stop buying from a company they trust, so reducing the churn rate can help decrease costs and improve profits.
Improve customer lifetime value
Customer lifetime value (CLV) is a metric that measures how much profit a company can expect from a customer for as long as they remain a customer. This calculation compares a customer’s predicted revenue to their expected lifespan with the company. Because retaining an existing customer is cheaper than adding a new one, improving your CLV can yield higher profits for a company.
The longer the company can keep a customer, the greater value they provide to it. Companies also can use this metric to help them determine which customer segments can provide the most value to a company for a specific product or service. This can increase their loyalty rates and reduce their churn rates, which can improve profits drastically.
Tips for improving customer satisfaction
Here are some ways you can be proactive about tracking a company’s customer satisfaction, which can help you identify ways to improve it before negative reviews affect the brand:
Use customer surveys: These surveys are a good way to learn how customers feel about a variety of products or the way a business conducts itself. To get the most accurate feedback, try to use short, direct questions the customer can easily understand and answer.
Check social media mentions: While surveys can help you identify answers to questions you already have, comments on social media can allow you to identify trends or feelings your customers have that you otherwise might not have known about. You can use this information to improve your customer outreach and try to improve the brand’s perception.
Incentivize brand loyalty: Offering perks to customers can improve their satisfaction and ensure they continue offering you their business. You can do this by offering promotional or discount codes, providing store credit to customers who refer someone to you or providing exclusive sales to customers who enroll in your loyalty program.
Reduce response time: Ensuring you respond promptly to all customer feedback, whether by having a dedicated team of professionals do it or using automation, can help reassure customers that you care about their issues and remain dedicated to solving them. This can help make your interactions seem more genuine, which can help turn dissatisfied customers into satisfied ones.
Involve all team members: Professionals in a company’s marketing, customer service and sales departments all interact with customers regularly and may have a strong understanding of how they feel about a product or service. Encouraging these professionals to provide their feedback, including how to improve your processes, can create a more effective solution that better satisfies your customers.
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