Why customer satisfaction is so important
A benchmark that allows organizations to determine whether products and/or services meet customer expectations (or exceed them) is Customer satisfaction.
Customer satisfaction is important because it gives entrepreneurs and managers a metric they can use to manage and improve their organization.
In a study among almost 200 senior marketing managers, 71 percent answered that they consider a metric that measures customer satisfaction very useful for managing and monitoring their business.
The six main reasons why customer satisfaction is so important are:
- It is an important indicator of repeat purchasing intent and loyalty
- They offer a way to differentiate from competitors
- Customer turnover will be reduced
- It allows you to increase your customer lifetime value
- Negative word-of-mouth advertising is reduced
- Retain customers is cheaper than to attract new ones
1. It is an important indicator of repeat purchasing intent and loyalty
A satisfied customer is the best indicator of how likely it is for a customer to make a purchase in the future. Asking customers to rate their satisfaction on a scale from 1 to 10 is a great way to see whether they will become returning customers or even fans.
Every customer that gives you a score of 7 or higher can be considered a satisfied customer and you can expect them to return to buy more. Customers who give you a score of 9 or 10 are your potential fans, who you can use as ambassadors for your company.
Scores of 6 and below are seen as warnings that a customer is dissatisfied and runs the risk of leaving your company as a customer. These customers must be monitored and followed up on, so that you can find out why their satisfaction is so low.
See how satisfaction gives you a lot of insight into your customers?
That is why it is one of the most important metrics that companies use to measure repeat purchasing intent and customer loyalty.
2. It is a way to differentiate
In a competitive market where companies compete for customers, customer satisfaction is considered an important distinguishing factor. Companies that are successful in these harsh environments are the ones who make customer satisfaction an important part of their business strategy.
Imagine two companies offering the exact same product. What makes you choose one over the other?
If you have a recommendation for a company, would it affect your opinion? It probably would. So where does that recommendation come from? More than likely, it is due to a good customer experience. Companies who offer amazing customer experiences create environments with a high satisfaction and lots of fans.
So, not only can customer satisfaction tell you something about your current customers, it can also be a way to differentiate for new customers.
3. It reduces customer turnover
A worldwide customer satisfaction study by Accenture (2008) concluded that price is not the main reason for customer turnover; it is actually due to overall poor quality of the customer service.
Customer satisfaction is the metric you can use to reduce customer turnover. By measuring and tracking customer satisfaction, you can create new processes to improve the overall quality of the customer service.
I recommend that you focus on exceeding customer expectations and impressing your customers on every occasion. Do this for six months and measure customer satisfaction again. See whether your new initiatives had a positive or negative effect on satisfaction.
4. It increases the customer lifetime value
A study by InfoQuest showed that a ‘fully satisfied customer’ provides 2.6 times more revenue than a ‘somewhat satisfied customer’. Moreover, a ‘fully satisfied customer’ provides 14 times more revenue than a ‘somewhat dissatisfied customer’.
Satisfaction plays an important role in the amount of revenue a customer generates for your business.
Successful businesses understand the importance of customer lifetime value (CLV). If you increase the CLV, you also increase the return of your marketing budget.
Suppose your cost per acquisition is 500 USD and you have a CLV of 750 USD. That is a 50% ROI of your marketing efforts. Now suppose the CLV is 1,000 USD. That is an ROI of 100%!
Customer lifetime value is a beneficiary of high customer satisfaction and good customer relationship. What will you do to ensure that your customers keep returning and spend more?
5. It reduces negative word-of-mouth advertising
According to McKinsey, a dissatisfied customer tells 9 to 15 people about their experience. Worse yet, 13% of dissatisfied customers tell more than 20 people about their experiences.
That is a lot of negative word-of-mouth advertising.
How much will that affect your company and its reputation in your industry?
Customer satisfaction is closely linked to sales and repeat purchases. What is often forgotten is how customer satisfaction can negatively affect your company. Losing one customer because they are dissatisfied is bad, but losing 20 customers due to poor word-of-mouth advertising is even worse.
To eliminate bad word-of-mouth advertising, you constantly need to measure customer satisfaction. Keeping track of changes in satisfaction will determine whether customers are actually satisfied with your product or service.
6. It is cheaper to retain customers than to attract new ones
This is probably the most published fact in this area. It costs six to seven times more to attract new customers than to retain existing ones.
If this does not sound familiar to you, then there is little I can do to show why customer satisfaction is important.
Attracting customers costs a lot of money. You and your marketing team spend thousands of euros to get the attention of prospects, cherish them until they are leads, and ultimately convert them into customers.
Why do you spend so little or no money on customer retention?
Imagine if one sixth of your marketing budget would be spent on customer retention. How do you think it will help improve customer satisfaction and retain customers?
Here are a number of customer retention strategies to consider:
- Write blogs to inform customers
- Use e-mails to send special promotions
- Create customer satisfaction surveys to listen
- Amaze your customers by offering personalized experiences
Measure satisfaction to see how satisfied your customers are
Lee Resources International Inc. has concluded that for every customer complaint, there are 26 other dissatisfied customers who did not communicate about this.
That is an alarming statistic. Most companies think they are the best and do not have dissatisfied customers. The reality is that 96% of dissatisfied customers do not complain. In fact, a study from 1Financial Training Services showed that most simply those people leave the company and never return.
What do you do to measure customer satisfaction and identify dissatisfied customers?
Customer satisfaction plays an important part in your company. Not only is it the main indicator for measuring customer loyalty, identifying dissatisfied customers, reducing customer turnover, and increasing sales, but it is also an important way of differentiation that helps you attract new customers in competitive markets.
I hope that with this article, I have shown you why customer satisfaction is so important to the success of your business. A successful way of increasing customer satisfaction we use for our clients is the use of live chat.