Tracking and measuring the satisfaction levels of your customers is critical for success. Poor customer satisfaction will result in lost customers and adversely affect your brand.
How to measure customer satisfaction
Customers become satisfied with all sorts of things. It typically boils down to meeting their expectations, or not. Unhappy customers are less likely to return and may spread negative word of mouth. Happy customers are the opposite. But happy customers go beyond merely being ‘satisfied’, and it’s getting here that’s where all companies want to be.
Charting a customer strategy requires organizations to find a place to start, and to finish. This is where customer satisfaction metrics come in. Customer satisfaction metrics are essential to finding a way to happier customers and the improved business performance they deliver.
The Most Important Customer Satisfaction Metrics
Customer satisfaction metrics, also called CX metrics or customer experience metrics, are numeric scores that give representative indications of customer experiences. Commonly used metrics for assessing customer satisfaction include Customer Satisfaction Score (CSAT), Net Promoter Score (NPS) and Customer Effort Score (CES). But there are other lesser-known but still valuable ones like Customer Acquisition Cost (CAC), Customer Lifetime Value (CLTV), Average Handling Time (AHT) and First Response Time (FRT).
Choosing the right customer satisfaction metrics for your business is very important. It comes down to what you want to know and how you can act on the data uncovered. There is no ‘one-size-fits-all’ customer satisfaction metric that provides everything needed by everyone.
Before thinking about metrics it’s a good idea to define exactly what you are aiming to achieve. Clear objectives will empower you to select the metric or metrics best suited to charting your progress toward attaining them.
Let’s take a look at some popular customer satisfaction metrics.
Customer Satisfaction Score (CSAT)
CSAT is widely used and respected as a method to quantify and accurately represent customer satisfaction. Generally, customers are asked to rate their levels of satisfaction on a scale from 1 to a predetermined maximum, typically 5 or 10. Sometimes a percentage scale (0 to 100) might be used, lower scores reflecting lower levels of customer satisfaction.
Another approach is to facilitate emojis instead of numbers as survey responses. Simple images, particularly of facial expressions, tend to be more engaging to survey respondents. They just click on the icon that most closely reflects their experience. This technique can greatly enhance survey response rates.
The universally standard CSAT question is:
The wording can be changed to match your business and the customer interaction. But the question format would remain simple, clear, non-ambiguous and very easy to answer. It is crucial to ask this question while the customer’s interaction with you is still fresh in their memory.
The benefits of using CSAT surveys include simplicity and the ability to compare CSAT scores with those achieved by others in the same industry.
Just remember that CSAT surveys only collect subjective opinions. One customer’s reported satisfaction level will be different from another, despite having had the exact same experience. Survey response rates can be affected by many factors including cultural norms and the fact that those with neutral or negative experiences are less likely to respond at all.
Net Promoter Score (NPS)
NPS was developed back in 2003 as a way to measure how well a business, or organisation, treats clients or customers. It specifically examines the likelihood that a customer or client will recommend a service, product or brand.
Net Promoter Score surveys ask just one key question:
On a scale of 0 to 10, where 0 is ‘not likely at all’ and 10 is ‘extremely likely’:
How likely is it that you would recommend [brand, product, service] to a friend or colleague?
Numeric responses are grouped together and classified as follows:
Promoters are respondents scoring 9 or 10. These people are loyal and enthusiastic about the brand, product or service.
Passives are those scoring 7 or 8. These are satisfied customers but not particularly enthusiastic and might be tempted by competitors.
Detractors are people scoring from 0 to 6. They may be saying negative things about their experience and therefore damaging your brand.
Net Promoter Score is calculated by considering only the promoters and detractors. Subtracting the percentage of detractors from the percentage of promoters provides the Net Promoter Score.
NPS = % Promoters – % Detractors
High NPS scores have been found to strongly correlate with repeat purchases, brand loyalty and word-of-mouth promotion.
The benefits of NPS include simplicity, ease of implementation and high response rates. Like CSAT, NPS scores can be compared with the scores of others in the same industry. By asking customers if they would consider promoting your business they are often prompted to do so.
On the negative side, NPS can paint an unrealistic or unrepresentative picture and the scores chosen by respondents can be skewed. For example, some people will tend to select a lower than perfect score as they believe ‘there is always room for improvement’. Some research has raised questions about the difference between people saying they will recommend a brand and actually doing it.
- Read more about NPS in our Ultimate guide to Net Promoter Score (NPS)
Customer Effort Score (CES)
CES is one of the more interesting customer satisfaction metrics. It aims to determine how much effort a customer feels they have needed to make in order to accomplish what they set out to. This is clearly a metric with customer service applications.
In their book, The Effortless Experience, authors Matthew Dixon, Nick Toman and Rick DeLisi argue that the best way to customer loyalty is simply ’making things easy’.
Their research found customer service interactions are nearly 4 times more likely to lead to disloyalty than loyalty. This is because so few interactions are genuinely low effort. They found that 96% of customers who invested high effort to resolve their issues are more disloyal, compared to just 9% of those in low effort interactions.
Rather than getting customers to gauge their satisfaction, CES is measured by asking how easy their interaction with your business was. A typical CES question might be:
Respondents are asked to select their answers from a numbered scale (e.g. 1 to 5), where 1 is ‘strongly disagree’ and the top score is ‘strongly agree’.
CES is not a subjective assessment of customer satisfaction, but remember it is still subjective. That shouldn’t detract from what people define as high or low effort. Again it’s about expectations.
Customer Acquisition Cost (CAC)
CAC measures how much, on average, it costs your business to acquire a new customer. It can be calculated by totalling the amount spent on sales, marketing, promotion and advertising, over a given period, and dividing this by the number of new customers acquired during that time.
Your marketing, advertising and promotional costs should be considered an investment. That’s important when considering CAC alongside other metrics like CLTV (see next section). Together they help determine the return on investment (ROI) in customer acquisition. CAC is also a measure of objective fact, rather than subjective opinion.
CAC comparisons can be particularly useful when examining customer acquisition tactics across various marketing channels.
Customer Lifetime Value (CLTV)
CLTV (or simply LTV) is generally the revenue your business derives from a customer over a given period. This period might typically be the anticipated lifespan of the customer relationship.
To calculate CLTV:
- Determine the average purchase value for all customers.
- This can be achieved by totally the purchase values for a group of customers, over a given time period, and then divide by the number of customers.
- Calculate the purchase frequency rate.
- This is a measure of how often each customer makes another purchase. This can vary enormously between industries. For example, a coffee shop might sell coffee to a customer many times in one week but a new automobile showroom might only see some customers once every few years. Selecting the most appropriate time period over which to assess purchase frequency is obviously important.
- Calculate the average customers value.
- Knowing the average purchase value and the average time over which repeat purchases are made we can determine the average customer value over a given time period
- Determine the average customer lifespan.
- Here we’re not considering how long a customer will live but how long a customer remains a customer of your business.
- Calculate your Customer Lifetime Value (CLTV).
- CLTV can then be derived by multiplying the average customer lifespan (in years) by the average customer value per year.
Here’s an example:
- Average customer spend per purchase = $10
- Average purchase frequency = Every two weeks
- Average customer value per year = $10 x 26 = $260 (since repeat purchases made every two weeks).
- Average customer lifespan = 20 years (determined from business experience and expectations).
- CLTV = 20 x $260 = $5200
By combining CLTV with Customer Acquisition Cost (CAC) it’s possible to determine the overall, lifetime return on investment. By segmenting Customer Acquisition Cost, based upon acquisition channels, it is readily possible to determine which customer acquisition paths are the most profitable.
Customer Request Volume (CRV)
When supporting customers it’s important to have a good appreciation of how much they are asking of you. CRV measures the customer support requests your team are receiving over a given time. Use it to ensure your team isn’t overloaded and unable to deliver a quality service. It can help you plan appropriate resources for your customer service operations. It could even inform how you structure and offer SLAs.
When assessing the volume of customer service requests, be careful to consider factors such as seasonal peaks in demand and general activity. Times of day and geographic and cultural differences can sometimes influence patterns too.
Monitoring CRV over time can also provide a valuable indication of issues which require detailed investigation. For example, a sudden surge in customer service requests could relate to a novel product or service defect.
Average Number of Replies (per request/case)
This metric tells you how efficiently you are dealing with customer requests. It’s calculated by dividing the total number of customer replies on resolved issues by the number of resolved issues.
Ideally, this number should be as low as possible. In keeping with the logic behind the CES metric, you want to minimize the effort required from the customer. Most customers consider first contact resolution (FCR) to be highly important, but this isn’t always possible with a complex query. Even so, you’ll want to target the average number of replies per request below 2.
Higher readings on this metric can indicate that agents are unable to solve your customers’ problems without difficulty. This is likely to be an irritant for customers, and may explain why CSAT or NPS scores are poor. It may indicate that requests are not being dealt with by the most appropriate people, and that additional agent training is needed.
Resolution Rate is a score out of 100 that measures whether issues are being resolved within target timescales. It records how many issues were dealt with inside the target time limit, divided by the total number of support requests (in the same overall period).
A 100% resolution rate indicates that all issues are being satisfactorily addressed within an acceptable time frame.
First Response Time (FRT)
Customers like to receive quick responses to their requests, even if the initial response doesn’t solve their problem. People do not like being kept waiting for a reply. Measuring and monitoring your FRT is therefore valuable customer service and satisfaction best practice. Keep in mind that acceptable FRTs vary across different channels such as live chat, email and social media.
First Contact Resolution Rate (FCR)
In customer service, the FCR rate represents the percentage of issues that are resolved satisfactorily on the very first customer interaction. As noted above, most customers consider FCR to be indicative of a positive experience.
The sticking point with FCR is knowing with certainty when it has or hasn’t happened. Not all issues are resolved on the first contact. In fact, in some sectors, FCRs may be the minority of cases.
There are two principal ways to ascertain exactly when an issue has been satisfactorily resolved. The first is to ask the customer, via an immediate, follow-up customer satisfaction survey, if their issue was resolved satisfactorily on the initial contact with the service desk. Alternatively, service agents might indicate via the service desk whether an FCR occurred.
Average Handling Time (AHT)
AHT (or just ‘handle time’) is a call center metric that represents the average length of time spent by customers per contact.
AHT can be a great indicator of where additional agent training may be beneficial. It also shows how much time and patience you are asking of your customers. Make sure, when calculating AHT, that you include the time spent by customers on hold. Other metrics can record how long agents spend literally speaking and listening to customers. AHT should be a frank, objective assessment of how much time customers invest dealing with you, on average.
AHT can be a great indicator of where additional service agent training would be beneficial.
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