What types of metrics measure customer satisfaction, and how to use them to your advantage? If you are a business owner, marketing employee, or customer support representative, you’ve probably wondered about these at least once.
In this article, we’ll help you get to the core of customer success metrics. By defining the key KPIs and learning the formulas of how to measure them, you’ll be more equipped to fine-tune your customer relationships and improve business performance.
What is customer satisfaction?
Satisfaction is defined by how happy customers are with a product or service. Its straightforward definition, however, is juxtaposed with the complexity of measuring customer satisfaction.
Customer satisfaction metrics refer to a set of formulas that are used to calculate the feelings of the customers towards your company. A combination of perceived quality, perceived value, and expectations of a customer, all of which could be formed even before the first purchase.
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Customer satisfaction is both cognitive and emotional.
Was the product well-made? Did the service fulfill my needs? Did I find the information I needed in a clear form?
How easy was the process? How friendly were the people I interacted with? Did encounter an issue that made it frustrating to continue?
Some business owners fail to recognize the need for consumer focus in their day-to-day work. To prove them wrong, we are going to look at some numbers.
Why is it important to measure your customers' loyalty?
“A satisfied customer is the best business strategy of all.” - Michael LeBoeuf.
First things first, the market for customer satisfaction is huge! Only in the US, the customer service metrics market has reached $2.9B by the end of 2021, and is expected to grow even more in the next years. Consequently, this shows both business interest and possible future investments.
Why is this industry so popular? Customer success is at the heart of any entrepreneurship, large or small. It combines both business goals and customer success KPIs to ensure growth and quality. A happy customer is the one that comes back, but also the one who recommends your business to friends, colleagues, and acquaintances.
Indeed, 65% of consumers think that a positive experience with a company has more influence on their choice than good advertising. According to the latest surveys by BrightLocal, the majority of people also rely on internet reviews for purchasing. Moreover, they are especially keen on trusting longer reviews describing a positive experience with the company.
Customer-focused companies tend to earn more, have happier employees, and, surely, happier buyers.
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What are the methods to measure customer satisfaction?
Wouldn't it be fascinating to ask your buyers about what is going on inside their minds, or have a possibility to examine their behaviors? This way, you’d know how to cater to their needs and likes. Luckily, customer experience metrics help you do just that!
Commonly, literature tends to distinguish two types of metrics. Their difference lies in the type of input from a customer. In the first one, customer experience is self-reported. In the second one, it’s a combination of big data and analytics.
Direct measurement, is when you ask customers what they think straightforwardly. Direct measurement is done through quantitative methods, such as digital consumer surveys or interaction with a customer on the phone.
Indirect measurement is for when you’re interested in a big-picture judgment and numbers. For instance, website engagement per each landing or quarterly revenue.
A relatively recent idea that arrives from the indirect measuring technique is predictive analytics. As a way to analyze customer satisfaction metrics, predictive analytics aims to forecast future consumer behavior based on the available data.
Most of the metrics today, however, are often a number of both or, at the very least, are reused and analyzed to produce clear and actionable satisfaction priorities.
7 metrics you need to track
So, what are these almighty metrics? In this part, we’ll discuss the 7 most common KPIs and their step-by-step calculations, provide you with success metrics examples and describe their possible uses for companies.
We’ve decided to include both qualitative and quantitative methods and those which are a combination of both since we want to give the fullest picture possible. Through having information, you can make the right decision about which of these metrics are suitable for your business goals.
Any challenges with metrics measuring ? We know how to deal with them.
1. Customer Service Satisfaction (CSS)
Customer service satisfaction is a post-purchase metric, in which you receive direct feedback from customers. Online surveys, pop-ups, or in-chat evaluations, all could be utilized for calculating this metric.
CSS is one of the most commonly used ways of how to measure customer success. It helps in finding the most asked questions and common issues. Additionally, also evaluate how successfully your customer service addressed them.
How to calculate Customer Service Satisfaction
Customer Service Satisfaction calculation is often almost entirely qualitative, therefore the specific measurements would depend on business needs. A PC repair company may want to know about which brands their customer use the most, so they can have the right details on hand. While an app development business will be more interested in the most common bugs aiming to fix them quickly.
Example: After a customer service encounter, you can send out a short questionnaire to a customer, detailing their experience and issue resolution.
2. Net Promoter Score (NPS)
Net Promoter Score measures the likelihood of customers recommending the product or service to somebody else. You’ve probably gotten one of these in the past weeks. We certainly did!
Ask your customers, “On a scale from 0 (not at all) to 10 (very likely), how likely are you to recommend us to your family or friends?” Following a sizeable amount of answers, comes the counting.
How to calculate NPS
The formula for NPS looks like this:
Total % of promoters – total % of detractors = net promoter score
Where promoters are customers who chose the top answers to the questionnaire (9 to 10). These are people who are excited about your product and will be your advocates if a possibility arises. Detractors are those who respond from 0 to 6. They are dissatisfied customers.
Your score could range from -100 to 100.
Example: Let’s say that about 60% of all respondents are your promoters, 10% are detractors, while the other 30% fall somewhere in between. Applying these numbers to the formula above, your NPS score would be 50.
3. Customer Satisfaction Score (CSAT)
Customer Satisfaction Score (CSAT) is a metric, which defines the performance of your customer service. Customers may express their opinion on a scale from 1 to 10, similarly to NPS, with a simple “Yes” or “No” or with a percentage.
How to calculate CSAT
CSAT formula is quite simple:
CSAT = (positive responses / total number of responses) * 100
The output is a satisfaction rate in percent. Effectively analyzing this feedback and applying customer wishes to your business can lead to rapid CSAT improvement, as well as to higher customer approval.
Example: If you got 3000 responses from your chatbot, and 2490 of them are positive, your customer satisfaction score would be 83%. Good job!
4. Customer Health Score (CHS)
Customer Health Score is a KPI customer satisfaction metric used to determine customers at risk in order to retain them and satisfy their unique needs. CHS is one of the more recent practices for measuring customer success. It is specifically used for SaaS products, and numerous qualitative and quantitative methods can be used to determine the numbers.
How to calculate CHS
Generally, Customer Health Score formula is defined as:
Customer Health Score = Action score 1 + Action score 2 + Action score 3
In it, each interaction (Action) with your service is given a score and summed up in order to determine customer health level. The closer your customer is to a pre-determined ideal score, the more ‘healthy’ they are. ‘Sick’ consumers are those who are about to leave your platform and require some special treatment.
There is no standardization of the metrics due to how much would it change according to the industry, company size, business model, even customer profiles.
Example: CHS is among the key customer success metrics SaaS companies should be tracking. Actions could be the frequency of product usage, a number of subscription renewals, upsell purchases, etc.
Let’s say you have about 50 of such measurable actions, and assign score -1, 0, or 1 to each, where 1 corresponds to your preferred benchmark, 0 means somewhere in between, and -1 means below the acceptable mark. Of course, this is an oversimplification, but it helps in understanding the concept better.
In this case, your Customer Health Score could be defined from -50 to 50 (lowest to highest). If a Customer is using the app less, does not check notifications, or message users via your app, he might want to quit soon. Your CHS will show it in advance and will allow you to act swiftly.
5. Online ratings/reviews
It’s no surprise that online reviews play a significant role in brand recognition. The higher your reviews on Yelp are, the more likely people will visit your book café. The more positive reviews your business has on Clutch, the more top clients you’ll be able to land.
Digital buyers make at least a fifth of the global population, and statistics show that anywhere from 40% to 90% of buyers check online reviews before deciding. Today, online ratings are one of the key KPIs. Customer success in your business will depend on its mastering.
How to calculate Online reviews
Most of the time, online reviews are quantified by using a weighted average:
Average Rating = (5 * 5-star Ratings Number + 4 * 4-star Ratings Number + 3 * 3-star…) / Total Number of Ratings
Example: Let’s say you received the total of 14 ratings on Google Maps.
***** - 4 ratings, **** - 6 ratings, *** - 2 ratings, ** - 0 ratings, * - 2 ratings.
A weighted sum, in this case, would be 52, divided by the total number of 14 ratings. Which gives you a 3.7 average score.
What does it tell you? Well, depends on how you look at it. On the one hand, there’s a possibility for improvement through analyzing the reviews or providing customers with direct responses to their questions and concerns. On the other, your service has made an impact, since they decided to leave a review at all.
6. Customer Churn Rate (CCR)
Churn rate is a scary metric for many businesses. It measures the percentage of customers that stop doing business with you per a defined period. It’s an especially important metric for companies with a subscription-based model, as the number of stable customers is tied directly to their revenues.
CCR is often opposed to a growth rate and compared to growth as a means to understand whether the company is expanding or losing customers overall in a certain period of time.
Additionally, determining the churn rate can pinpoint the possible issues if a company measures it consistently. For instance, if after releasing a website redesign the churn rate spikes, you may want to look into possible correlations between the two.
How to calculate CCR
The formula for CCR is applied like this:
Customer Churn Rate = (Lost Customers ÷ Total Customers at the Start of Time Period) x 100
The output of this formula is a percentage, that’s why the number is multiplied by 100.
Example: Let’s assume you had 10810 subscribers at the beginning of the last quarter. By the end of it, 2700 of the accounts close because the subscription agreement ran out, or because of poor customer service.
1700 / 10801 * 100 = 15.73%
Based on the industry, a different churn rate percentage is normal per month/quarter/year.
7. Customer satisfaction at the tip of your fingers
Listening to their buyers is one of the best decisions a company could make. Satisfaction ratings, their customizable metrics, and tools could enable a powerful change towards more productive and successful business development.
Customer success manager KPI setting is a thing to do if you have not started it yet.
By prioritizing consumer success, your business may not only gain a competitive advantage but also find a place for improvement in its current processes.