What Is Customer Satisfaction?

Customer satisfaction is extremely important for customer retention. This explains how.

Satisfaction vs. expectations Customer satisfaction (or CSAT) is a rather simple concept. It is a metric used by marketing teams to assess how the products and services provided by a company fare compared to their customers' expectations. Marketing Metrics, the standard reference on marketing performance, defines it as "the number of customers, or percentage of total customers, whose reported experience with a firm, its products, or its services (ratings) exceeds specified satisfaction goals."

Customer satisfaction is an important KPI


Customer satisfaction is a key performance indicator for businesses: according to Marketing Metrics, 71 % of senior marketing managers find it very useful in managing and monitoring their businesses." Companies thus resort to polls, customer surveys and focus groups, where they usually ask customers to rate their satisfaction. Another important metric is the willingness to recommend the business to others:

According to the American Express 2017 Customer Service Barometer, Americans will tell 15 people about a bad service experience, and only 11 about a good one.

Customer satisfaction is strongly linked to customer retention


Why does customer satisfaction matter so much? Because customer retention is much more valuable than acquisition. According to the Harvard Business Review, "it is anywhere from 5 to 25 times more expensive to acquire a new customer than it is to keep a current one." And keeping customers has a lot to do with their satisfaction: Newvoicemedia.com finds that half of the customers will never do business with a company again after a negative experience. As such, customer satisfaction is a good predictive tool:

"Although sales or market share can indicate how well a firm is performing currently, satisfaction is perhaps the best indicator of how likely it is that the firm's customers will make further purchases in the future," says Marketing Metrics.

For companies, keeping a close eye on their customers' satisfaction works as a feedback loop that can help them constantly improve their products and services -- and keep their customers in the long run.

 

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