Measuring Customer Satisfaction

Appinio Market Research

Introduction

Satisfied customers come back. They recommend products to others. Leave positive reviews, maybe buy more in the future. Satisfied customers are a decisive factor in the success of a company. But their needs are constantly increasing, competition is growing. A company needs to offer something to their customers in order to keep them satisfied.

It is therefore important to regularly check how customers feel about products or services. Because only those who know what attitude a customer has towards a company will be able to satisfy them in the future. The customer satisfaction survey is one of the classics of market research.

On this page, the market research experts from Appinio explain how customer satisfaction can be measured and what should be considered in a feedback study.

I. What is Customer Satisfaction?

In general, the term customer satisfaction describes how the services or products of a company are perceived by customers - i.e. their subjective perception of a product or brand. Customer satisfaction is one of the most important factors for the economic success of a company. Therefore, it should be checked regularly how satisfied consumers of a brand are. Only those who know the expectations of a target group and whether these expectations are being met can satisfy their customers and retain them in the long term. Accordingly, consumer satisfaction is an important prerequisite for customer loyalty.

There is no generally valid definition of the term "customer satisfaction". In the literature, it is often based on the confirmation/disconfirmation paradigm, a construct from social research. It states that customers have personal expectations of goods, and their satisfaction depends largely on whether these expectations are met. The C/D-paradigm consists of two components, the actual component and the target component. The target component reflects the expectations of a customer.

But what does a consumer expect from a product? How expensive should it be, what is the optimal quality and where should it come from? The target component contains all the characteristics of a product or service that customers expect from a supplier.

DThe consumer compares this target state with the actual state of a product - in other words, the current perception. This perception is made up of objective and subjective characteristics. The objective performance of a product are the easily measurable characteristics that are the same for all consumers, such as price, fuel consumption, or color. Subjective characteristics, on the other hand, are perceived differently by each customer, such as his experience with a product.

Customer satisfaction results from the comparison between the expectations and the perception of a customer. If the expectations of a customer (target) are higher than the performance (real value) of a company, then the customer is dissatisfied ("negative discount confirmation"). If the expectations of a customer correspond to his current perception of a product, then we speak of stabilizing customer satisfaction. The customer is most likely to be satisfied with the product's performance because it exactly meets his expectations.

This may sound good, but the actual goal of a company should be to exceed the expectations of its customers - the current perception of a product should exceed the expectations of consumers ("positive discount confirmation").

A company must always be one step ahead of its customers' needs. Then the probability is high that they are extremely satisfied - and satisfaction creates loyalty. Furthermore, satisfied customers are more likely to recommend a product or service to others. This is how new customers are won over.

If a customer's expectations of a product or service are not met, he is dissatisfied. If a customer's expectations are met, he is satisfied. If his expectations are even exceeded, then he is extraordinarily satisfied.

II. How to Measure Customer Satisfaction?

There are three different, common measures of customer satisfaction

Customer Satisfaction Score (CSAT)

How satisfied are you with product X / service X?

Net Promoter Score

How likely is it that you would recommend product X / service X to your friends, relatives or colleagues?

Customer Effort Score

How much effort did you have to put in so that your request was processed by Company X?

Customer Satisfaction Score (CSAT)

A simple metric to measure customer satisfaction is the "Customer Satisfaction Score" (CSAT). This is a measure of how satisfied consumers are with a product or service on a scale of 1 to 5 or 1 to 7. The average is calculated and the average satisfaction of all customers is obtained.

The CSAT gives a good overall impression of customer satisfaction, but researcher should take care when interpreting the results. Certain response tendencies, such as the tendency to extreme answers, can distort the results. Instead of numerical scales, symbolic scales can also be used to calculate the CSAT, for example with smileys: How satisfied are you with product X / service X ?

Net Promoter Score (NPS)

Another way to measure customer satisfaction and loyalty is the so-called "Net Promoter Score" (NPS). This method was developed by the companies Satmetrix Systems, Inc., Brain & Company and the economic strategist Frederick F. Reichheld ("The One Number You Need To Grow", Harvard Business Journal).

The Net Promoter Score is determined by interviewing customers. They are asked whether they would recommend a certain product or company to others. If they agree, this indicates that they are satisfied. Customers of a certain brand or buyers of a product are asked two different questions, one of which is: How likely is it that you would recommend company X, or product X / service X to your friends, relatives or colleagues?

The answer is given by customers on a scale from 0 to 10, where 10 means that it is highly likely that they would recommend the product.

Respondents who give a 9 or 10 are referred to as "promoters". This customer group is very satisfied with a product. Those who choose a 7 or 8 are called "indifferents", they are still undecided. Those customers who answer with 0 to 6 are called "Detractors" - it it is unlikely that they recommend a product to others. The Net Promoter Score is then calculated as follows:

Number of promoters / number of all respondents * 100 = Relative number of promoters

Number of detractors / Number of all respondents * 100 = Relative number of detractors

Relative number of promoters - Relative number of detractors = Net Promoter Score

The NPS varies between -100% and +100%. The more positive the NPS, the more satisfied customers a company has. Frederick F. Reichheld has proven in a study for which he examined more than 30 industries that the Net Promoter Score correlates significantly with the growth of a company.

In addition to the first question, a satisfaction survey usually asks a further question:

What is the reason for the answer you have just given?

This means that you would like to know from the customers why they would recommend a product or why not. This question is called "Voice of Customer" (VOC). Here the customer has the opportunity to write down the reasons for their dissatisfaction. Companies can use the answers to learn more about their customers.

Calculating the NPS is easy and quick. The evaluation is simple and can be easily interpreted. Therefore, the NPS is very suitable to be included in a customer satisfaction survey, for example in a standardized questionnaire. Determining NPS and VOC is usually the beginning of a long process in a company. It can be used to find causes for dissatisfaction in order to align future strategies accordingly.

Customer Effort Score (CES)

Compared to the two metrics described above, the "Customer Effort Score" does not measure how satisfied customers are with a product or service, but how much effort they have to put in to get a product or service related request answered by a company. It is therefore about the customer experience. You just ask them one question:

How much effort did you feel you had to put in to get your request processed by Company X?

The possible answers range from 1 (very low effort) to 5 (very high effort).

The Customer Effort Score (CES)was presented in 2010 by Matthew Dixon, Karen Freeman and Nicholas Toman as a metric for customer satisfaction in the Harvard Business Review. In a study with more than 75,000 participants, they found that service customers who received a quick, simple solution to their problems with a product from a company were much more likely to become customers of that company again.

Of those survey participants who indicated that they felt their expenses were very low, 94 percent later said that they would buy from that company again and 88 percent of them said that they would even be willing to pay a higher price. This makes the CES a meaningful predictor of customer loyalty. It can be included in a customer satisfaction questionnaire together with the NPS or CSAT.

The measurement of customer satisfaction can also be part of brand tracking.

III. In four Steps to a Customer Satisfaction Analysis

Step 1: Define your target group

Before starting a customer satisfaction analysis, the target group must be defined precisely. Who are my customers? Do I want to get feedback from everyone, or only from certain subgroups? For example, a stationery manufacturer might only want to survey schoolchildren, a canteen only customers who eat vegetarian food and a shoe company might only want to know the opinion of customers who exercise on a regular basis. In digital market research, these customers can be identified by using screening questions. When selecting the target group, it should also be determined how many customers are to be interviewed. It is definitely impossible to interview all customers. Therefore, only one sample of people is recruited for a study.

Step 2: Design of the Questionnaire

Once it is clear who is to be interviewed, the appropriate questionnaire for a satisfaction survey can be designed. There are a few things to consider when proceeding. Information about how a good questionnaire is designed can be found in our survey guide. The questions are selected with regard to what a company wishes to know from its customers. These include, for example, the questions described above about the Customer Satisfaction Score (CSAT), Net Promoter Score (NPS) or Customer Effect Score (CES). The bottom part of this page contains examples of other questions that can be included in a customer satisfaction questionnaire.

Before a study is conducted, it should be determined how long the survey should take and by when the results should be available. Before the questionnaire is handed out to customers, it should be tested several times to find out whether it meets certain quality criteria. In this way it is possible to find out how long participants need to complete the survey or if there are any uncertainties.

Step 3: Evaluate the data

The evaluation of a customer satisfaction survey is based on a descriptive analysis. Mean values and frequencies are calculated and the distribution of the answers is described by means of variance and standard deviation. When analyzing the data, it is also possible to split respondents into groups again. For example, one could only look at the answers of women and compare them with the answers that men gave.

Step 4: Drawing conclusions

Once the results and their analysis and evaluation of a customer satisfaction analysis are available, conclusions can be drawn. What does the result of the analysis mean for the company? Are customers satisfied, or even extremely dissatisfied? Based on the given data, advice can be given on how these customers might be satisfied in the future. However, it is equally important to take a closer look at the dissatisfied customers - they should be seen as a learning factor. Finally, data from the satisfaction analysis form the basis of future corporate strategies and marketing campaigns.

The satisfaction of consumers should be measured on a regular basis, for example in the context of brand tracking studies. In this way, different values, which were collected at different times, can be compared with each other. Furthermore, satisfaction tracking can be used to check the effectiveness of measures used in order to increase satisfaction.

IV. Good Reasons for a Customer Satisfaction Analysis

Satisfied customers will come back. And maybe they will even purchase more.
Satisfied customers are likely to be willing to pay a slightly higher price.
Satisfied customers talk to others about their good experiences and recommend a product or service to others.
You can learn from dissatisfied customers: What bothers them might be your chance to do better in the future.