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Customer Satisfaction

The degree to which products or services provided by a company meets a customer’s expectation

What is Customer Satisfaction?

Customer satisfaction is the degree to which products or services provided by a company meet a customer’s expectation. In other words, customer satisfaction is how satisfied a customer is after doing business with a company. Customer satisfaction not only involves how happy a customer is with their transactions with a business but also their overall experience with the company.

 

Customer Satisfaction

 

Methods of Measuring Customer Satisfaction

Below are several ways in which a company can measure customer satisfaction:

  1. The Customer Satisfaction Score (CSAT)
  2. The Net Promoter Score (NPS)
  3. The Customer Effort Score (CES)

 

The Customer Satisfaction Score

The Customer Satisfaction Score (CSAT) is a key performance indicator of customer satisfaction. The goal of the CSAT is to determine how satisfied customers are with the services, goods, business, or team. Customers are asked about their level of happiness regarding one or more aspects of the business. The answers taken from a CSAT are expressed as a percentage between 0 to 100% – a higher percentage indicates higher satisfaction.

Questions asked on the customer satisfaction score includes:

  • How would you rate your experience with our service representatives?
  • How well trained are service representatives?
  • How satisfied are you with the product/service?

 

The CSAT scale typically consists of:

  • Very unsatisfied (0%)
  • Unsatisfied (20%)
  • Neutral (60%)
  • Satisfied (80%)
  • Very satisfied (100%)

 

The Net Promoter Score

The Net Promoter Score (NPS) measures how likely the customer will act as a brand ambassador and promote the products/services/company. The NPS places customers into three categories – promoters, passives, or detractors.

  • Promoters are customers who are enthusiastic about the products/services and are likely to recommend them to friends and families.
  • Passives are those who are satisfied with the products/services but are unlikely to recommend them to friends or family members. Passives do not have brand loyalty and can easily be converted by competitors.
  • Detractors are customers who are unsatisfied with the products/services and may damage the company’s brand image and growth through bad word-of-mouth.

 

The net promoter score usually consists of one question:

  • How likely are you to recommend this good/service to your friends and family members?

 

The NPS scale typically falls between 0 to 10, with:

  • 9-10 being promoters
  • 7-8 being passives
  • 0-6 being detractors

 

The importance of customer satisfaction

 

The Customer Effort Score

The Customer Effort Score (CES) measures how much work a customer must do to buy from the company. In other words, the CES measures the effort exerted by a customer to attain the goods/services. If customers have to go through a lot of work to purchase from the company, they will likely take their business elsewhere.

 

Questions asked on the customer effort score includes:

  • The company made my purchase easy.
  • The service representatives handled my issue in a timely manner.
  • How easy was it to get the help you wanted?

 

The CES scale typically consists of:

  • Strongly disagree
  • Disagree
  • Somewhat disagree
  • Neutral
  • Somewhat agree
  • Agree
  • Strongly agree

 

Example of Customer Satisfaction

Jonathan is the marketing manager of a phone producing company – Calling Friends Incorporated (CFI). Recently, the company launched a new product and tasked Jonathan with conducting customer satisfaction reports.

Jonathan created a customer satisfaction survey and collected information from 500 of these customer surveys. The questions asked in the survey were as follows:

  • How satisfied are you with the product?
  • How would you rate your experience with our sales representatives?
  • The company made my purchase easy
  • How easily were the issues regarding your product handled?
  • How likely are you to recommend this product to others?

 

In addition, Jonathan used a 1-10 scale for each question with 1 representing “very unsatisfied” and/or “strongly disagree” and 10 being “very satisfied” and/or “strongly agree.”

 

The customer satisfaction surveys are summarized in the following diagram:

 

Customer Satisfaction Diagram

 

Taking the average scores of responses from question categories CSAT, CES, and NPM, we can see that this product has a:

  • CSAT score of 88.61%
  • CES score of 45.06%
  • NPM score of 63.14%

 

Jonathan can see that the customer satisfaction score is very high with regards to the product and customer service provided. However, the customer effort score is extremely low – 45.06%. This indicates that customers must go out of their way to purchase the product from the company. Therefore, customer loyalty would be quite low, as indicated by our NPM score of 63.14%.

Customers are unlikely to recommend this product to friends. Although the product and services provided by the company are good, the effort that customers must exert to get the product is high, resulting in a low CES and NPM score. Jonathan concludes that the company should look at ways to make the purchase process easier.

 

Related Readings

Thank you for reading CFI’s guide to customer satisfaction. CFI is a global provider of financial modeling courses and certification. To continue your development as a world-class financial analyst, these additional resources will be helpful:

  • Consumer Surplus Formula
  • Market Economy
  • Network Effect
  • Law of Supply

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