5 Important Indicators of Customer Satisfaction in 2021

Thejas Sridhar
December 22, 2020

5 Important Indicators of Customer Satisfaction in 2021

December 22, 2020
by Thejas Sridhar

Customer satisfaction is the singular, most important metric for any business. Unlike other subjective parameters specific to different brands, customer satisfaction is a uniform metric that needs constant measuring and course correction. When a dip in cx satisfaction score is spotted, it conclusively indicates that something is going wrong. While cx satisfaction is measured using different indicators by different organizations, the overall importance of the indicator stands uncontested. 

The indicators of customer satisfaction are diverse. Often, the diversity of metrics available pushes organizations to track, measure and juggle with much more key indicators of customer satisfaction than necessary resulting in a huge wastage of man-hours and resources. To cut through the clutter, in this blog we take a look at 5 important indicators of customer satisfaction in 2021 that will have the most impact on the business when kept in check. 

1) Customer satisfaction score (CSAT)

Customer satisfaction score is a straightforward way of asking a customer,  whether they were satisfied with the product and service delivered. It is generally measured using surveys at different customer touchpoints bringing to light areas that need improvement. The survey contains profound questions asking customers to rate different touchpoints on an ascending numerical scale (1 to 10, 1 to 5). The score is honest, perceived customer perception and is a key indicator that indirectly quantifies the effectiveness of all other parameters discussed in this blog. The growth or dip in any of the other parameters will have an impact on this score. The wellness of a business is directly proportional to its CSAT score.

2) Net Promoter Score (NPS)

Despite the various channels of marketing now available, the pinnacle value of word-of-mouth marketing or referrals stands uncontested. In fact, according to Nielsen, people are 4 times more likely to buy something when recommended by a friend. Net promoter score, a metric devised and popularized by Fred Reichheld, measures “How likely is it for your customers to refer your business to someone else ?”. The metric ranges between -100 and +100 and classifies customers into “Promoters” – very likely to recommend your brand, “Passive” – may sometimes recommend your brand, and “Detracts” – unlikely to recommend your brand. The NPS score is not a straightforward metric in the sense that it is also influenced by the perceived emotional connection customers have with your brand. NPS’ insights are better understood when combined with other parameters such as CSAT score.

3) Customer effort score (CES)

This indicator metric popularized in 2010 by Harvard Business Review is growing in significance today as the lion’s share of sales have moved online or are in the transition phase. The indicator measures how easy it was for your clients or customers to interact with your various touchpoints. CES is measured by pitting customer responses to a question such as “How easy was it to get a price quote from our team ?” against a numerical scale of 1 to 7 where 1 – indicates “Very Easy” and 7 indicates “Very Difficult”. The numerical CES score is obtained by dividing the numerical sum of all the responses by the total number of survey respondents. As long as your CES is less than 3, your business is doing a good job.
CES = Total sum of survey values / No. of survey responses

4) Average Deal size

If your brand offers a spectrum of offerings, it might be hard to keep a tab on the factors affecting return on investment (ROI) and whether customers are truly getting the value proposition promised. A good indirect measure is combining average deal size with customer acquisition rate (CAR). Average deal size the revenue your business makes per customer. It is numerically obtained by dividing the sum of revenue by the total no. of paying customers. CAR gives you a single point metric whereas the average deal size is also influenced by cross-sell and up-sell deals that happen when a customer chooses to buy more than one offering or to upgrade their offering. It is a wholesome indicator of customer satisfaction. If a customer has traversed through the entirety of the sales funnel and decides to honor another purchase you can be sure that the processes set at various customer touchpoints are working. Here too, the insights delivered by this metric are better understood when clubbed with CAR.

5) Customer Acquisition Rate (CAR)

Customer acquisition rate is defined as the total expense incurred to bring in a new customer. The metric is obtained by dividing the total investment (including marketing, sales, support, client visits, etc.) of an effort divided by the number of customers obtained from the effort. The metric can be computed both campaigns wise and in an overall manner. Generally for a company to stay afloat profitably, their CAR (customer acquisition rate) has to be substantially lower than their average deal size. Let’s break this down with an example. If the CAR for a company is $30 and the average deal size per customer is only $20 then for every new customer acquired, the company is making a net loss of $10. It is important to keep the CAR in sync with the average deal size and the pricing of the product. If CAR is constantly increasing, it could indicate several red flags such as a declining pool of prospects, an increase in marketing competition, a change in market dynamics, and prospects losing faith in your brand.

CAR = Total cost of investment to bring in a customer / No. of  customers obtained

Note: In a subscription-based model, the correlation between average deal size and CAR is trickier. In this case, revenue generated from a customer could be based on timely renewals of the service. Giving rise to another important metric, customer lifetime value.

All the above indicators of customer satisfaction or successful customer experiences aim to translate that into an inflow of revenue. A key indicator to measure the 360-degree success of efforts is the customer lifetime value (CLV). The total revenue a customer brings in throughout their association with your brand is called customer lifetime value. CLV is at least as important as CSAT scores if not more. Primarily because CLV has a direct impact on other metrics spoken about. For example, if CLV of a customer is $100, CAR is $20 and each of a company’s offering sells at $15, it means that although the company is burning $5 for the first sale their ecosystem’s value is so good that they have customers who buy a plethora of their offerings thereby delivering massive profits in the long run.

This list of indicators to measure cx satisfaction is by no means exhaustive and is only aimed at giving direction on what can be changed to help businesses deliver better value. If you are looking for more professional help to optimize your business you can contact our solution specialists here.

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