How to measure customer satisfaction
Did you know, poor customer service costs businesses $75 billion a year? Keeping customers happy literally pays for itself. Customer satisfaction refers to the measurement of how happy customers are with a company’s offerings.
There are multiple metrics businesses can use to measure it, including churn rate, net promoter score, and customer acquisition cost. In this article, we will review 10 metrics your business can use to measure customer satisfaction, and what you can do to improve them and foster customer loyalty.
10 essential customer satisfaction metrics to track in 2022
Looking at a single metric won’t give you a clear picture of what’s going on with your customer reputation. Only by measuring multiple metrics and analyzing them together can you get a more accurate representation of your standing with your target customers.
1. Net promoter score (NPS)
The net promoter score, or NPS score, examines how willing customers are to refer their friends and family to your business. It not only shows how many customers are satisfied but also demonstrates viral marketing potential, so you can better estimate growth.
Measuring NPS is as simple as asking one survey question:
“On a scale from 0 to 10, how likely are you to recommend our company to a friend or a colleague?” This single question can tell you a lot about your customers.
- Those who rate anywhere from 0 to 6 are known as detractors. These people are unlikely to become promoters. They may even be working against you by spreading negative comments about your business or product offerings.
- Passives are those who rate you at a 7 or an 8. These customers aren’t likely to recommend you, but they won’t necessarily discourage others from conducting business with you either.
- Promoters are those who rate you at a 9 or a 10. These customers are your loyal supporters that will actively refer others to you and promote your offerings via word of mouth and social media. They’re likely where most of your referrals come from.
It’s possible to run this survey multiple ways. You can ask customers in an email, at the end of a live chat, or on your website.
After you’ve collected the data you need to calculate your NPS. Simply subtract the share of detractors from the share of promoters.
The higher the better, but there are some nuances to consider. The NPS tends to vary widely between industries with department stores getting the highest scores. That means if you don’t get the highest figure, it could be a common trend for your industry.
While you should aim to get your score as high as possible, an NPS that falls within the range of 60 to 70 is okay. An NPS of 100 means that every single customer is highly willing to recommend your business, and that’s unlikely.
It’s worth mentioning that while the NPS will tell you if you’re not performing as well as you should be, it doesn’t give you any reason why. You can expand upon it by asking a follow-up question in your NPS survey. When you have a detractor or a passive customer, ask what you can do to improve. When you have a promoter, ask what they like about the product or service that made them rate so highly.
2. Customer service satisfaction (CSS)
CSS measures customer satisfaction with your service after a purchase is made. Measure this by asking for feedback from your customers every time they interact with your business. It’s easy to do via live chat, online surveys, forms, or pop-ups.
Use a standard rating scale in the surveys and ask a few questions if you want to. Keeping them standard makes it easier to spot patterns and trends over time so you can more easily identify areas of improvement and prioritize areas where you need to take action. The CSS doesn’t give you a full picture, but it does help you isolate the most asked questions and biggest concerns.
3. Customer effort score (CES)
The customer effort score helps determine how easy your products or services are to use. These surveys are targeted in decreasing effort and increasing loyalty. Depending on what you want to achieve with the study, you may or may not have follow-up questions.
As the effort required to use your product or service decreases, brand loyalty increases. You want to make your product or service as effortless to use as possible. This means making onboarding very easy, addressing pain points along the way, and providing customer support in real-time where possible.
Consider a retail clothing store. If a customer has to look for employee assistance constantly, that’s high effort. It negatively affects your CES. They may not return to the store again. To improve their experience, offering multiple ways for them to get help themselves, being proactive with customers, and anticipating their needs will help.
4. Customer satisfaction score (CSAT)
Your customer satisfaction score, or CSAT score, lets you know if your customers are happy or not. Using a rating scale to measure satisfaction, the CSAT survey asks customers to rate their satisfaction with the product/service.
You can use a scale of 1 to 10, 1 to 5, or 1 to 7. You calculate CSAT by dividing the number of happy customers by the total number of customers.
For the most accurate results, conduct your customer satisfaction survey at the point of customer interaction. You’ll get candid, genuine feedback, and high response rates. Waiting too long after the interaction decreases response rates.
5. Customer health score (CHS)
Customer health indicates whether a customer will stay with you or churn over time. This score, unlike the metrics we’ve discussed so far, identifies a customer’s behavior pattern over a period of time.
You determine your CHS with a variety of aspects, including:
- Willingness to answer your surveys
- The number of times they’ve interacted with your customer support team
- How much money they’ve spent with your brand
- How long they’ve used your product
- Product type – free vs. paid license
These aren’t the only parameters you can use. The ones you choose may vary based on how important your organization considers them. What matters is that you use the factors to segment your customers into weak, at risk, or healthy. Unhappy customers are either weak or at risk, as a result of negative experiences.
6. Customer churn rate (CCR)
Your churn rate is the percentage of clients you’ve lost over a period of time. It costs up to 25x more to attain a new customer than to retain an existing one, so keep a close eye on this one.
Choose a period of time to calculate the churn rate for.
Subtract the number of customers you have at the end of the period, from the number of customers you have at the beginning of the period.
Divide that number by the customers at the start of the period.
If you wanted to look at the last quarter, for instance:
You had 20,000 customers at the start of the quarter, and 19,000 customers at the end of the quarter.
You would divide 1,000 by 20,000 to arrive at a churn rate of 5%.
It’s up to you to determine why people are leaving and then take action to address those issues.
7. Customer acquisition cost (CAC)
The CAC is a measurement of the average cost your business spends to obtain a new customer. You calculate it by adding all the money you spend on promotions, marketing, and advertising over a period of time, and then divide that by the number of new customers within that same period.
For example, if you spent $1,000 last month on marketing, advertising, and promotions, and brought in 20 new customers, then your CAC is $50. Depending on your industry and other metrics like customer lifetime value, covered below, this number could be good—or it could use improvement.
It’s a good idea to run CAC for each channel you use to bring in new customers, so you can focus more of your efforts on the channels with low CAC and high customer lifetime value. If it only costs you $1 to bring in a new customer, that’s great. Unless, of course, that customer doesn’t stick around.
8. Customer lifetime value (CLTV)
Customer lifetime value, referred to as either CLTV or LTV, refers to the amount of money a customer spends with you from the moment they become a customer until they stop doing business with you.
Calculate your LTV by first calculating the average purchase value for all your customers.
Add the total purchases for your group over your chosen period. Divide the amount by the total number of customers in the group.
Now, calculate the purchase frequency rate. This measures how often each customer makes a purchase, which varies widely from one industry to another.
Think about it like this: a coffee shop may see the same customers multiple times a week, but a car dealership is likely to see the same customer once every few years.
Use the time period that makes the most sense for your industry.
With that information in hand, calculate the average customers’ value. The average purchase value and the average time where repeat purchases happen help to determine the average customer value over a period of time.
Next, determine the average customer lifespan. How long does the average customer remain an active patron?
You’re finally ready to calculate your LTV.
Multiply the average customer lifespan (in years) by the average customer value per year.
For instance, if your most loyal customer spends an average of $5 with you, with an average purchase frequency of 2x a week, that means they’re spending $10/week with you, or $520 a year. If you expect that customer to remain with you for 20 years, your average CLTV is ($520 x 20) $10,400.
When you combine the CLTV with CAC, you can determine your overall lifetime ROI. If you segment CAC for each of your acquisition channels, you can determine which methods are most profitable and direct more of your budget to those areas.
9. Customer request volume (CRV)
This measures how much your customers are asking of you. It looks at how many customer support requests your team is receiving over any period of time.
Monitoring this metric ensures your customer service team is adequately staffed and able to provide enough attention to each request.
As you monitor CRV, consider how seasonal peaks, times of day, cultural, and geographic differences may influence patterns.
Keeping an eye on this over time can help you uncover areas that need more attention. If you notice a surge in requests right after rolling out a product or service update, that may indicate that something isn’t working the way it’s intended to.
10. First response time (FRT)
The first response time, or FRT, is the length of time it takes for a customer to get their first response from an agent. Even if the first point of contact doesn’t resolve an issue, the faster an agent can get to a customer, the better. Generally, the longer a person has to wait to get in touch with someone to help, the lower their overall satisfaction.
That said, the ideal FRT varies depending on the communication channel. It’s more acceptable for a longer response time via email or social media than it would be for live chat.
Improve your customer service KPIs with ChatSupport
Live chat offers another touchpoint to measure customer satisfaction levels and the overall experience. With ChatSupport’s metrics, you can easily track CES survey responses and general customer feedback, FRT, CRV, and more, to make sure customers are very satisfied with what you’re offering.
Sign up for free today to see how ChatSupport can help improve your customer experience.
Like this article? Spread the word.