What is Customer Satisfaction and Why is it Important?

What is Customer Satisfaction?

Customer satisfaction is an analysis of your customer base. It tries to answer the question: does the customer base like what the company is doing? Research shows that a high level of customer satisfaction leads to greater customer retention, a higher lifetime value, and a stronger brand reputation. Low customer satisfaction scores are important, too.

The relationship between satisfaction and loyalty influences your profits. The more a customer is satisfied, the more loyal they become towards the brand. Customer satisfaction is a critical component of success for any business. Satisfied customers are more likely to be loyal and return, while unhappy ones are more likely to leave and never come back. It stands to reason that a loyal customer leads to an increase in both sales and profitability.

Customer satisfaction and retention go hand-in-hand. Happy customers stick around; unhappy customers leave. Positive interactions develop loyalty and that allegiance translates into an increase in sales. A study published in Harvard Business Review found that positive experiences generate 140% more customer spending with a company over time. Businesses can use customer satisfaction feedback to target their most satisfied customers with loyalty benefits (airline or other award programs), while using negative feedback as an impetus for beneficial change.

Moreover, customer feedback can provide valuable information that can help guide product and service decisions. For example, if a company is considering adding a new feature to its product, customer feedback can help determine whether or not that feature is something that customers would want.

With this being said, it is vital for a company to measure customer satisfaction. Measuring customer satisfaction helps businesses identify problems, nurture customer relationships, and finds potential brand advocates.

Measuring customer satisfaction:

·        can help find out what your customers like, and maybe even discover what they don't like, and what leads to dissatisfaction. A proper understanding of your customers' satisfaction will help you identify their specific needs, better than any market study.

·        allows businesses to track satisfied customers. Satisfied and loyal customers are capable of attracting new customers through positive word-of-mouth. On the other hand, unhappy customers can hurt a company's image and lead to lost business.

·        is one of the best ways to determine whether current efforts to improve it are working. For instance, if a company implements a new customer service initiative, it can track customer satisfaction before and after the change to see if there is an improvement.

Why is it Important?

Measuring customer satisfaction is important to:

1.      Gain a better understanding of your customers' needs and expectations

measuring customer satisfaction will help you gain a better understanding of your customers and their expectations. A company's success lies in its ability to offer products and services that fill customer demand.

2.      Reduce direct and indirect costs related to customer dissatisfaction

Customer dissatisfaction is one of the top dangers for any company. A high level of customer dissatisfaction leads to lost customers in the short and medium terms.

3.      Respond to the challenges of customer acquisition

There are two ways to increase your revenues. The first is to acquire new customers, the idea being ‘more customers = more revenue’. The problem is that acquiring new customers is getting more and more expensive.

The second way to increase your revenues is to focus on customer retention and loyalty rather than acquisition. In other words, make sure that your customers buy more, and more often, rather than focusing solely on growing your customer base. It's a much more economical solution: working to keep a customer, costs less than finding a new one.

4.      Boosting your company's brand image and reputation

Your brand image is the perception that consumers (i.e., your potential customers) have of your company.

5.      Improve the effectiveness of your steps for contact improvement

The healthy growth of your company and its revenues depends on your ability to constantly improve your products and services.

ALBA Consultants can measure and analyze customer satisfaction and loyalty for your company by using a customer success metric that measures customer satisfaction and loyalty. This metric, called "Net Promoter Score ("NPS")", was developed in 2003 by Bain & Company. NPS has become the go-to customer success framework used by two-thirds of the Fortune 1000 companies.

Net Promoter Score is a key metric that can help increase customer retention and build stronger relationships with your customers. The data collected from this score can be used to prevent problems before they arise and ensure your customers remain satisfied with your brand.