We all know happy customers come back to do more business with our company. They also provide priceless word-of-mouth marketing by sharing their experience with others.
Clients who rate our products and services as highly satisfactory are usually the ones that promote us to their colleagues, friends, and family. This improves both our conversion rates and profitability margins.
To fully grasp the importance of Customer Satisfaction, we need to understand that keeping an existing client happy usually costs much less than converting and onboarding a new prospect.
One way to track such performance is the Customer Satisfaction (CSAT) score. By figuring out where the metric is low and improving the customer experience, we can improve our processes and ensure our customers are happy. After all, the worst thing we can have is a customer saying to others, “don’t use this, it’s horrible,” “customer support is horrible,” or anything like this.
Let’s dive deep into the CSAT score, understand what it is, how to calculate and track it, and most of all, how to improve it.
What is the Customer Satisfaction Score (CSAT)
Customer satisfaction plays a significant role in overall customer retention.
The Customer Satisfaction (CSAT) Score is a customer loyalty metric that helps us evaluate the satisfaction level of a client’s specific interaction or overall experience with our services and products.
The metric is one of the ways brands measure their success. It looks at the level of satisfaction customers experience with the business while interacting with our products and services.
CSAT is one of the most widely adopted metrics to evaluate customer engagement and loyalty, alongside Net Promoter Score (NPS) and Customer Effort Score (CES).
When we focus on delivering a great customer experience, the Customer Satisfaction Score is an important metric to track and optimize.
Customer satisfaction can have a considerable impact on revenue. It can also optimize the Cost to Serve we incur to provide services and products to our clients. In addition, satisfied customers are much more likely to upgrade to a higher tier of our services or add additional services and purchase more products.
Measuring the CSAT Score
When we measure Customer Satisfaction, we usually ask clients for a rating on a 1-5 scale. Such a scale can have descriptive words associated with each rating, or these can be numeric only.
A text scale can replace the numbers with something in the line of:
- Very Unsatisfied
- Very Satisfied
Once we have enough responses to our one-question survey, there are two ways to present the aggregated data.
One way is to show the average score between 1 and 5. However, the more popular representation calculates the percentage of happy clients, which provides more insight as a metric. In the example above, we would consider all customers that replied with a 4 or 5 to be satisfied with our services and products. The calculation then becomes:
We measure CSAT by asking a variation of the question:
In the question above, X can be a service, product, feature, specific interaction with our brand or others.
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Analyzing Customer Satisfaction
We use the CSAT score to assess customer satisfaction at various critical points of the customer interaction with our business. For example, we would typically have a client journey map outlining the key moments where we track customer satisfaction.
The Customer Satisfaction Score can gauge how the business is doing if we analyze it over time. If our CSAT keeps improving, it means we are serving our customers right.
Another application of a CSAT survey can be to measure the success of deploying a new product or feature. For example, we can measure customer satisfaction after our clients engage with the new feature for the first time and evaluate how successful the deployment was.
It is also a great performance metric that helps us reply to questions in the line of:
- Are we meeting our clients’ expectations?
- Will they come back?
Positive customer feedback can have a tremendous impact on the team’s motivation to perform better. On the other hand, negative feedback can be a source to derive areas for improvement.
Surveying our clients on the satisfaction levels usually relates to easy questions to ask and answer, so we can implement our CSAT scoring at many steps across the customer journey and track their whole lifecycle with our business.
Once we have a robust CSAT score tracking strategy in place, we can identify the steps where the metric is low and focus on improving the experience.
We consider a good score to be anywhere around 75% to 80%, meaning three out of four people gave our service positive feedback instead of neutral or negative.
CSAT represents an emotional response to a critical point in the customer journey, so it’s best to get feedback right away to ensure it’s honest and as unbiased as possible.
Customer Satisfaction surveys help us identify pain points for our clients in advance and decrease churn by improving the overall customer experience.
CSAT, NPS, and CES
The CSAT score is not the only customer satisfaction metric out there. Many companies and analysts also track Net Promoter Score (NPS) and Customer Effort Score (CES).
The significant difference between the Customer Satisfaction Score and NPS is that while CSAT measures satisfaction with a product or service, the NPS metric focuses on customer loyalty as a whole.
On the other hand, CES defines the level of effort the customer has to exert to interact with our company. With this metric, in particular, less is more.
Asking CSAT Questions
If we start to look at all business processes, we can identify many interaction points with our customers. However, we should focus on the major ones that define the customer lifecycle journey. These can be renewals, upgrades/downgrades, finishing a project, closing a support ticket, and others.
For example, asking for a satisfaction score after our clients complete the onboarding process is an excellent place to track CSAT. It will give us a good sense of the customer journey, as, by this time, most customers would have already decided whether our solution will solve their issue or they have to look elsewhere.
Customer satisfaction surveys are usually one-question, so they’re not intrusive, and we can run them for many touchpoints and client interactions with our business. However, it is important to ask such questions at diverse points in the customer experience, and not only after new updates and feature releases, as this can significantly skew the results.
We usually present the CSAT questions as closed ones, meaning we provide a scale for rating the customer experience instead of asking an open-ended question.
When we formulate Customer Satisfaction questions, we should use unbiased, precise wording to ensure our surveys will catch honest feedback.
When we write such survey questions, we can use various formulations:
- A rating scale, e.g., 1 to 5 (we can present this as numbers, stars, smileys, and others);
- Binary questions, with a yes/no answer;
- Likert scale, e.g., very unsatisfied to very satisfied shown as a scale;
- A more descriptive question with a list of all options between very unsatisfied and very satisfied.
We can ask questions at various critical points of a customer’s lifecycle. Some of those may be:
- After a purchase;
- After on-boarding (access granted, tutorials passed);
- New product feature adoption;
- The first use of a feature;
- After customer support case;
- Some time before renewal/repurchase, to estimate the percentage of customers that are ‘with us.’
If you are looking to compare your business’s customer satisfaction scores to other players in your industry, there’s the American Customer Satisfaction Index (ACSI). The average CSAT index for the US for CY2020 is around 74.4%.
There are also various models online to build a European Customer Satisfaction Index (ECSI). Unfortunately, there’s no official website, but a quick google search yields good results.
Pros and Cons
Many analysts view CSAT as the most straightforward customer satisfaction metric. A significant advantage is the inherent simplicity of the methodology. It makes it easy to close the loop on the customer experience and evaluate how satisfactory it was. However, it is essential to remember that happy customers don’t necessarily convert into more revenue.
These are the most notable advantages of the CSAT score:
- Its simplicity is close to unrivaled;
- Rating scales are relatively easy to style to incorporate our branding and objectives (using stars, smileys, numbers, and others);
- Surveys of one-two questions see a much higher response rate.
As with most concepts in business, there are also some advantages to the CSAT model that we should mention:
- Unsatisfied or neutral customers are far less likely to respond to rating surveys, which may skew the results;
- It’s not easy to set a target CSAT score, as benchmark data shows significant variations within similar businesses;
- The metric is highly influenced by the short-term state of mind, which can also render our results invalid if we only ask for feedback after positive interactions.
The Customer Satisfaction score is easy to understand from the customers’ point of view. They don’t have to overthink or struggle with complex questions and answers. Such surveys take little time and effort to fill out; therefore, more people engage with them.
Improve Customer Satisfaction Score
Once we start tracking the CSAT score over time, we can begin to think of ways to improve it. Small increases in the metric can have a significant impact on the company’s revenues and bottom line.
There are many ways to approach the optimization of our company’s Customer Satisfaction. Some of the more common are:
- Take action on feedback immediately to decrease the time it takes to satisfy specific customer requirements;
- Timely apologize to customers for any mistakes our business potentially made;
- Investigate the pain points in the customer journey – identify the underlying factors and issues and work to resolve them;
- Provide more support channels or ensure our support team is available 24/7;
- Engage employees with the company values and pay attention to the employee experience – a happy team serves happy customers.
To better illustrate the concept of CSAT score analysis, let’s look at the following example.
Our business provides access to a platform for designing automated data analysis sets. Each month, we hold one-hour training sessions with twenty clients at once.
After each session, we ask our clients to rate their experience on a scale of 1 to 5 (very unsatisfied to very satisfied). We are looking at the satisfaction rating our customers gave after their last four monthly sessions for our analysis.
We can then start building our analysis by employing the COUNTIFS function in Excel to calculate how many customers selected each rating.
Next, let us calculate the less common representation of Customer Satisfaction, the Average Rating. We will also employ the CSAT score formula from above and calculate the percentage of clients who gave a 4 or 5 rating from the total number of client ratings.
We can then add simple charts to visualize the results.
If we look at the Average Rating, we notice a good improvement trend over the last four months. Our average rating increased from 4.14 to 4.31 over the period. This means we are improving the training sessions and we are providing more value to our customers. If we keep up a good trend, we will probably notice less churn amongst our client base, which will positively impact revenues and the company’s bottom line.
However, as we already discussed above, looking at Average Ratings is not the best way to analyze customer satisfaction. It is much better to look at the CSAT score as a percentage of positive ratings (5’s and 4’s) from the total number of ratings. If we plot the metric on a similar chart, we get the following.
The overall satisfaction of our customers decreased in August 2021, as compared to July 2021. Although the Average Score is improving (which may be due to people switching from 1’s or 2’s up to 2’s and 3’s), fewer people found the experience satisfactory. It is essential to always look at the CSAT score as a percentage of positive out of all ratings. Now that we have this insight, we can analyze what happened during our August training sessions and identify potential issues that we need to avoid in the future. Looking at the score in the next two months, we might have already fixed what we did wrong in August. The exercise will still give us additional valuable information on what approach works best with our customers.
Customer Satisfaction surveys are a quick and effortless way to gather in-the-moment feedback. When we analyze and track our CSAT score, this can significantly help us to reduce and prevent customer churn. Lack of satisfaction is the number one reason why clients stop doing business with a company and switch to a competitor.
These surveys can help us address pain points in advance and ensure an overall satisfactory customer journey. In addition, improving the CSAT score reduces customer churn. It also has a direct positive impact on our company’s revenue and bottom line.
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FCCA, FMVA, Founder of Magnimetrics
Hi! I am a finance professional with 10+ years of experience in audit, controlling, reporting, financial analysis and modeling. I am excited to delve deep into specifics of various industries, where I can identify the best solutions for clients I work with.
In my spare time, I am into skiing, hiking and running. I am also active on Instagram and YouTube, where I try different ways to express my creative side.
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