Satisfied customers are happy customers: But what exactly does the term customer satisfaction mean? Many things in the company depend on this value. You’re practically shooting yourself in the foot if you aren’t 100% sure what customer satisfaction means, how you measure it, or what needs to be done in order to turn dissatisfied customers into satisfied ones. We’ll explain everything.
- Definition of customer satisfaction
- Why is customer satisfaction so important?
- How can customer satisfaction be determined?
- What can customer satisfaction metrics be used for?
- Increasing customer satisfaction
Definition of customer satisfaction
Customers are satisfied when positive expectations are met. If the expected is actually exceeded, then the satisfaction also increases. But if wishes and hopes are not fulfilled, the customer will inevitably end up dissatisfied. This is just as true in the entrepreneurial context as it is for any other circumstance in life. In a business relationship, however, the focus is always on customer satisfaction: it can determine whether an occasional buyer becomes a long-standing regular customer. To achieve this, the customer must have as many positive experiences as possible on their customer journey.
Customer satisfaction is about the connection between companies and people, and is therefore a part of psychological marketing. A company’s aim is to improve the customer’s experience and send them positive signals - before, during, and after they make their purchase. Various factors are important for this: On the one hand, good products and services at reasonable prices play a major role. On the other hand, consulting, support and the design of the web store have an influence on customer satisfaction.
In order to measure customer satisfaction, regular surveys are necessary. Only by conducting these surveys, can you know exactly how satisfied your customers are and also what you can do to improve.
Customer satisfaction can be explained by the so-called C/D paradigm (Confirmation/Disconfirmation). This involves comparing the how things should be (target situation) with how things actually are (actual situation). The target situation is determined by the wishes (including emotional ideas) of the customer. The actual situation is the actual state of the product, service, and company. The customer’s desired (target) performance level is compared with the actual performance level. Customer satisfaction results from the discrepancy:
- Actual < Target: If the expectations of the customers are not fulfilled, they will be dissatisfied. This is known as non-conformity.
- Actual = Target: In this case, the customer requirements correspond exactly to the condition of the product. Customer satisfaction can be assumed.
- Actual > Target: If the company exceeds the expectations of its customers, this is referred to as conformity. This can further increase customer satisfaction.
Why is customer satisfaction so important?
Every company strives for profit, i.e. wants to generate the highest possible turnover at the lowest possible cost. But this can never be possible without customers buying the products and using the services. Therefore it is important to satisfy customers with what you’re offering and to also continue pleasing them even after the initial purchase. This is where customer satisfaction comes into play. If the customer is satisfied with their purchase and the company, they will consider buying again.
Customer satisfaction is therefore very important for the company since this factor contributes to further effects. Satisfied customers are more likely to stick with the company on a long-term basis and therefore help with the company’s success. In addition, satisfied customers often pass on their positive experiences and become brand ambassadors.
If you do everything right and your customers are generally satisfied with you and your services, you can look forward to these effects.
- Customer loyalty: A satisfied customer will feel a certain degree of loyalty towards your company and will consider buying more of your products next time they want to buy - even trying out products from a different range.
- Customer retention: If a customer is permanently satisfied, they will stick with your company and continue to buy from you without considering any other companies on the market.
- Lower price sensitivity: A satisfied customer won’t just ditch the company even if prices increase slightly.
- Willingness to recommend: A high level of customer satisfaction ensures that customers recommend you and your products or services to friends and family.
If you manage to retain a customer in the long term, you will have more planning security on the one hand and lower costs for customer acquisition on the other. It is cheaper to keep an existing customer instead of trying to win new ones over.
An unsatisfied customer, on the other hand, can cause serious consequences. Not only will they not buy from you again, they might also pass on their negative experiences to other people and therefore cause a further loss in sales.
- Complaints: An unsatisfied customer may contact you with their disappointment and require a lot from you to make them change their mind.
- Going elsewhere: If the customer is really dissatisfied, they won’t consider your company again when making purchase decisions.
- Negative propaganda: Negative experiences are passed on. Unsatisfied customers are increasingly using the internet to discourage other people from buying from you.
In order to prevent an unsatisfied customer from becoming an angry customer, careful complaint management is important. The employees responsible must be trained to deal with the (perhaps even unjustified) criticism of the customers.
How can customer satisfaction be determined?
In order to check customer satisfaction, regular and extensive surveys need to be carried out. Surveys can be carried out by mail, in store, or online. After evaluating the surveys, you have a good overview of the customer satisfaction situation. However, in order to be able to work extensively on customer satisfaction, clear key figures should be determined that enable long-term analysis.
Customer Satisfaction Score (CSAT)
The CSAT value reflects the overall satisfaction. In a survey with standardized questions, customers are asked to rate their satisfaction on certain factors - for example, from 1 (very dissatisfied) to 5 (very satisfied). In order to calculate the customer satisfaction score, only the two highest values (4 or 5) are utilized, i.e. the answers from satisfied customers. The sum of these answers is divided by the number of completed questionnaires and then multiplied by 100. The result indicates what percentage of your customers are satisfied with the services received.
Net Promoter Score (NPS)
To measure customer loyalty, which is strongly related to customer satisfaction, use the net promoter score. The customer is asked a single question: How likely are you to recommend this company to a friend? The customer can rate the probability from 0 (very unlikely) to 10 (very likely). The scale is divided internally: All participants who chose 9 or 10 are considered promoters - brand ambassadors. Customers who chose 7 or 8 are considered indifferent and all of the others are considered detractors (critics).
To calculate the NPS, the percentage of all detractors is subtracted from that of the promoters. The result can therefore also be negative, which is a bad sign for your company.
In addition to these two standardized indicators, individual indicators can also be considered. The number of complaints received, for example, is an interesting factor. In this context, also pay attention to how your brand is being portrayed on social media. If there are lots of positive statements about your company, products, or services, you can assume there’s a high customer satisfaction. Some form of satisfaction can also be seen with sales. If you notice many repeat purchases, i.e. sales made by existing customers, you can also expect satisfied customers.
What can customer satisfaction metrics be used for?
When you collect customer satisfaction data, you need to evaluate it. Therefore, it is also important to conduct customer surveys regularly and comparably. This makes it possible to work out whether customer satisfaction is decreasing over a long period of time, and whether the measures being taken are actually working or making things worse.
Customer surveys can also be used to uncover concrete problems. This gives customers the opportunity to name the reason for their dissatisfaction. If you notice that the same problems are being mentioned again and again, you can start here. Let employees from the relevant department know so they can work together to develop joint solution strategies and finally deliver a better product.
Surveys on customer satisfaction can be integrated into quality management. You can have it certified according to ISO 9001.
Increasing customer satisfaction
First of all, as already mentioned, you have to carry out regular surveys. Without communicating with your customers, you cannot know what they expect from you and your services. You then work out which steps to take next from the results. Customers often show their dissatisfaction when contacting the company, for example, via the support hotline or during sales talks in the store. Here employee training courses help to strike the right note, even in difficult situations. Establishing an effective complaints management system also helps to increase customer satisfaction.
Incidentally, in marketing research, it is often debated whether it makes more sense to merely fulfil expectations or even exceed them. Getting the most out of your product in order to satisfy the customers’ wishes that they didn't even know they had sounds like a great competitive advantage. However, you have to ask yourself if the extra effort and cost is worth it. In order to exceed expectations, additional effort is necessary, but this might not make sense if the result ends up being only slightly better than the simply just fulfilling expectations.
Expectations also arise in part from your own promises. If you advertise a certain service and cannot (always) deliver it, customer satisfaction will decrease. This means either that you have to adapt your service promise or that you have to put more energy into the process in order to meet the expectations you generated yourself.
Ultimately, however, you improve customer satisfaction by improving the quality of your products and services. If you take the needs of your customers into account, you can count on long-term success.
The Kano model can also help with customer satisfaction . This is used even before market launch in order to adapt the product as well as possible to the wishes and needs of future customers.