Customer satisfaction

What customer satisfaction is, how you can influence it, and how it's measured.

Satisfied customers are crucial to the success of any company, and they help generate new business at little to no extra cost. It costs about five times as much to acquire new customers as it does to keep existing customers committed to your products or services. Plus, regular customers account for more than two thirds of a company's total revenue. So, we're not exaggerating when we say that keeping customers satisfied is half the battle when it comes to business success. Customer satisfaction is also a good indicator of what state a company's quality management is in and whether customer retention measures are working effectively.

What effect does customer satisfaction have on my business?

In times of financial crisis, market stagnation and stiff competition, customer satisfaction becomes ever more crucial to business success. Satisfied customers are among the most important assets of any business, and the higher a customer's satisfaction, the more valuable he or she is to a company:

  1. Satisfied customers are more likely to make repeat purchases and cross-buy, which results in increased revenue and lower sales costs.
  2. Satisfied customers also frequently make product and service recommendations, which lowers the cost of acquiring new customers (e.g. through advertising).
  3. And finally, the more satisfied a customer is, the more willing he or she is to pay higher prices for products and services.

However, customer satisfaction isn't just about boosting revenue and reducing costs. Dissatisfied customers can be extremely damaging to a company, and not simply because they result in lost revenue or lower repeat purchase or recommendation rates. In fact, studies have shown that dissatisfied customers sometimes stick with a company or service provider for years, continuing to purchase products and services they're unhappy with out of convenience or laziness.

But over time, it is precisely this situation which can be much more fatal to companies than customers who jump ship immediately. The reason for this is that dissatisfied customers are much more vocal about their experiences than their satisfied counterparts. And the longer their dissatisfaction continues, the longer these negative "PR campaigns" will go on. The resulting damage is two-fold: a lack of recommendations in favor of a company's products or services and the loss of potential customers who are scared away by the negative experiences of others. Not least because this can damage a company's public image and negatively impact revenue. The power and reach of negative feedback should not be underestimated. With the growing popularity of customer review platforms, dissatisfied customers have the power to sway the opinions of an ever growing audience of potential customers.

What is customer satisfaction?

Obviously, customer satisfaction isn't an end in itself — it's a means to an end. A high level of customer satisfaction increases your customers' commitment to your products or services and improves customer relations. Your customers are much more valuable to your company when they're satisfied. So, how is customer satisfaction achieved? To put it simply: customers are satisfied when their expectations are met.

Customer satisfaction happens when your customers feel positively about your products or services. The customer compares their experience of a product or service (its actual performance) with their expectations of it (target performance). If their expectations aren't met, the customer will very likely be dissatisfied. The level of dissatisfaction depends on how stark the contrast between expectation and actual experience is. By contrast, if the product or service meets the customer's expectations, the result is satisfaction. In this case, actual performance and target performance are on par with each other.

But this simple form of customer satisfaction (actual performance = target performance) isn't enough for lasting and valuable customer retention. High levels of satisfaction, indeed enthusiasm for a product or service, require that the customers' experience exceed their expectations. Only then will the customers be willing to make repeat purchases or recommend a service provider to others.

How do you influence customer satisfaction?

So, if customer satisfaction results from the relationship of the customer's expectations to the product or service's actual performance, how do you go about influencing these factors? In other words, how do you influence customer satisfaction?

A customer's experience of a product or service (its actual performance) encompasses the entirety of the product or service's ability to provide utility and satisfy the customer's needs. The factors which predominantly influence utility and need satisfaction are the quality of the actual product (craftsmanship, materials, packaging, ease of use, functionality, etc.) or service (consultation, implementation, costs/benefits, etc.). However, the customer's experience is also affected by the quality of customer service and how a company and its employees conduct themselves - for example, when it comes to warranty cases. The customer's experience of a product or service's actual performance is not limited to a short period of time directly following their purchase; rather, it is reflective of the entire duration of use.

A customer's experience of a product or service is not contained in a vacuum. Their performance expectations form the standard against which their experiences are measured. Performance expectations differ from person to person, so the requirements for customer satisfaction can only be objectively defined and generalized to a certain extent. There do exist, however, certain common factors which are relevant to most customers' satisfaction.

Basic needs such as punctuality, reliability, and honesty are also important. These minimum requirements go without saying for the vast majority of customers. If they're lacking, there's no foundation upon which to even build customer satisfaction.

But actually generating customer satisfaction demands that other performance requirements also be fulfilled. These differ from customer to customer. The most common factors that influence a customer's expectations with regard to a product or service's performance are:

  • Advertising promises/product promises
  • Sales pitches and consultation sessions
  • Product design
  • Packaging
  • Product and service type
  • Previous experiences with the same or similar products or services
  • The company or product's public image
  • Pricing (policy)
  • Recommendations from friends and acquaintances
  • Online ratings, reports, customer recommendations, and reviews
  • Personal needs
  • Emotional state and mood

If the customer's performance requirements are not fulfilled, the result is a dissatisfied customer. And if the requirements are fulfilled, the customer will be moderately satisfied. The product or service will be viewed favorably, but will not be seen as being exceptional, and can therefore be substituted with another product or service. However, if the customer's expectations are exceeded, satisfaction and retention will grow.

Extra services and gifts are the icing on the cake for satisfied customers. Such attractive extras are not expected by the customer, so they do not negatively impact customer satisfaction if a company or service provider lacks them. But if they're provided, it will create customer enthusiasm, and a company or service provider will be able to position itself favorably over the competition. Reminder: customers are often not willing to make repeat purchases or recommend products and services until the threshold of customer enthusiasm has been crossed.

A customer's value increases accordingly with his or her level of satisfaction — and there's always room for improvement. So, it's important to be able to find out how you can improve from the point of view of the customer, what your strengths and weaknesses are, and what growth potentials are waiting to be tapped into.
If you're not in constant communication with your customers, you'll be quickly left out of the market conversation.
Horst Skoludek/former spokesman of the board at the Carl Zeiss Foundation

How is customer satisfaction measured?

So, how do you find out if customers are satisfied with your products or services? By measuring and analyzing customer satisfaction. There are various methods for doing this, and the specific methods employed by any given company or service provider will depend on the amount of time, money, and personal resources invested. The industry a company is in, the size of the company, and the type of business also play a decisive role in how customer satisfaction is measured. If, for example, a company employs its own customer service team, they will be able to incorporate incoming complaints, questions, feedback, and requests into their customer satisfaction analysis and their customer complaint management system. One-man operations normally don't have this option.

A tried-and-true and very popular method for measuring customer satisfaction is an open-ended survey. With this method, customers are asked either in person, over the phone, or in writing to provide feedback regarding their level of satisfaction. Both analogue (e.g. paper questionnaires) and digital surveys (e.g. email, online surveys) can be used. The aim of the survey, as well as its author, are disclosed. There are market research institutes and other external service providers that can create these kinds of surveys for you, but you can also just as easily measure customer satisfaction on your own.

Each option brings with it a unique set of advantages and disadvantages. Entrusting your survey to a market research institute is a convenient way to get high-quality customer satisfaction data, but this is a much more cost-intensive approach than doing it on your own. For this reason, many small and medium-sized businesses, service providers, and freelancers opt to measure customer satisfaction themselves, or they decide to simply do without.

If you're interested in creating and publishing your own customer survey, it's important to realize first the amount of personal time and energy required to do so. A high-quality survey with targeted questions isn't something you can simply pull out of your sleeve — it requires precise planning. Surveys intended to measure customer satisfaction need to fulfil certain (research-backed) criteria and have clear aims in order for the results to be valid and meaningful. Especially when it comes to developing your own questionnaires, there are certain pitfalls which need to be kept in mind in order to avoid generating biased — and hence unusable — information with suggestive or non-productive questions. Besides this, there are also organizational and technical aspects which need to be taken into consideration. If you want to issue an online survey, for example, you need to decide which software you will use to create the survey and how you will integrate it into your website. The amount of time required to analyze the results of your survey should not be underestimated either. There are plenty of things that need to be taken into account. Companies that have never conducted customer surveys before first need to gain experience by going through a process of trial and error — or shelling out a lot of money for someone else to do it for them.

ProvenExpert.com offers a third option for those who'd rather not pay premium prices to have a market research institute conduct surveys for them, as well as for those who simply lack the know-how to create their own survey and get the results they need: competency-based online surveys. This approach utilizes customizable digital questionnaires and templates that require no experience or specialized knowledge to create. With ProvenExpert, creating and publishing surveys to collect sound customer satisfaction data is both easy and affordable.

Why it's important to continuously monitor customer satisfaction.

Customer satisfaction is in constant fluctuation. It's not enough to measure satisfaction levels once and then assume that your measurements are accurate forever. Changes in customer satisfaction levels aren't necessarily always the fault of the company itself, but it's important nonetheless to know what the causes are in order to steer things back on course.

For this reason, customers — including regulars — should be frequently asked to provide feedback on their level of satisfaction. Monitoring customer satisfaction like this not only serves to identify the causes of dissatisfaction, but to also identify them as early on as possible. In this sense, customer satisfaction analysis also works as a preventative measure to allow businesses to guarantee quality products and services.

Customer surveys also allow companies to better understand their customers' desires, to make continuous improvements to products and services, and to implement customer-focused product development.
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