Customer satisfaction is an important driver of revenue growth. According to a McKinsey & Company study, companies with high levels of customer satisfaction outperformed their competitors in terms of revenue growth by more than 2.5 times. This is because customer satisfaction results in customer retention, loyalty and advocacy. In this article, we will review the most important customer satisfaction KPIs, you should be tracking as a small business.
Why is Customer Satisfaction Important
Customer satisfaction is central to the success of all businesses operating in a competitive market. In fact, according to a survey by HubSpot, 93% of customers are likely to make repeat purchases with companies that offer excellent customer service. Furthermore, satisfied customers are more likely to suggest the product to others, and give favourable reviews and comments.
Dissatisfied clients, on the other hand, can harm a company’s brand which will directly impact their income and survival. So, it’s important to be proactive in how you track customer satisfaction over time. Tracking customer feedback and using the data you collect to improve your product will contribute to your business success.
Customer Satisfaction KPIs
Customer Satisfaction KPIs (Key Performance Indicators) are measurements used to assess how well a company meets the expectations and needs of its consumers. These KPIs might vary based on the business and industry, however, here are some customer satisfaction KPIs that are common to most industries.
Net Promoter Score (NPS)
You might have noticed net promoter surveys pop up whenever you use some mobile applications. This metric measures the likelihood of customers recommending a product to others; using a scale of 0 to 10. Customers with a score of 9 or 10 are termed promoters, whereas those with a score of 0 to 6 are considered detractors.
Customers with a score of 7-8 are called passives because although they are satisfied with your service, they are unenthusiastic, making them susceptible to competing products. The NPS score is calculated by subtracting the percentage of detractors from the percentage of promoters. You can set up an onsite survey by embedding a form at the bottom of your webpage using Mailchimp.
You can use NPS data to compare customer satisfaction across multiple sales channels.
Customer Satisfaction Score (CSAT)
Similar to NPS surveys, you may sometimes come across on-site surveys asking how satisfied you are with a product or service. Companies collect data on customer satisfaction over time. Customers are polled to gauge their level of satisfaction with the product or service they received.
Customer Effort Score (CES)
This metric assesses how simple it is to do business with a company. Customers are asked to rate the ease with which they used a product or service or resolved a problem they had while interacting with the company. Tools like Medallia and Qualtrics allow you to automate the feedback collection process
Customer Retention Rate (CRR)
This metric calculates the percentage of customers who return to the company after a certain length of time. It is the percentage of customers who continue to use your product or service within a specified period. To calculate the CRR, select a time period that is appropriate for your evaluation; this can be anything from 30 days to a year, and then use the following formula:
Customer Retention Rate = (Customers at the End of the Period) – (New Customers Acquired) / Customers at the Start of the Period
Customer Lifetime Value (CLTV)
This KPI calculates the total value that a client delivers to the company over the length of their relationship. It assists firms in comprehending the long-term consequences of their client acquisition and retention initiatives. The formula for customer lifetime value is:
Customer Lifetime Value = (Customer Value* x Average Customer Lifespan). where, the customer Value = (Average Purchase Value x Average Number of Purchases)
Customer Complaint Resolution Time
This metric tracks how long it takes the company to resolve customer complaints. It is an important indicator that reflects the organization’s responsiveness and customer-centricity. This is usually tracked by opening and closing tickets against each complaint received.
Customer Churn Rate
This indicator calculates the percentage of customers who stop doing business with a company over a set period of time. A high turnover rate may suggest problems with the company’s products, services, or customer service. use the following formula to calculate your annual churn rate.
Annual Churn Rate = (Number of Customers at Start of Year – Number of Customers at End of Year) / Number of Customers at Start of Year
Website Traffic
This measures the number of people who visit a company’s website. A rise in website traffic might indicate the effectiveness of a company’s marketing and customer engagement initiatives. Analytics tools such as Google Analytics can provide useful insights into website traffic, user behaviour, and engagement levels for businesses. Businesses can find portions of their website that are popular with clients and places that need work by analysing this data.
You can also track your online reputation using customer reviews and ratings on sites like Google, Yelp, and social media. These reviews and ratings can also provide useful information about client satisfaction levels and indicate areas for improvement.
How to Start Tracking Customer Satisfaction as a Small Business Owner
Define Your KPIs
You should clearly define the customer satisfaction metrics you want to track and link them to your broader business goals. These KPIs should be specific, quantitative, and business-relevant. For example, you may wish to track your customer’s lifetime value because it is also an indicator of how effective your sales and marketing strategy is, and how valuable your products are.
Set Goals for Customer Satisfaction
You should set goals for each KPI in order to track success and discover areas for development. Goals should be attainable and reasonable. For example, your goal could be to increase your company’s website traffic by a certain number within a specified period.
Monitor Metrics Regularly
You should monitor your customer satisfaction KPIs on a regular basis in order to spot patterns and address issues as soon as possible. Depending on the KPI, metrics should be monitored daily, weekly, monthly, or quarterly. For example, if you are tracking NPS scores month-by-month, you might discover a drastic fall in your score due to certain events such as an unexpected website downtime that customers experienced that month.
Your NPS, CSAT and CES can be tracked month-by-month whereas it might be more insightful to calculate customer lifetime value at the end of each financial year.
Train Employees
Train your employees on how to provide exceptional customer service and respond to client complaints and feedback. Employees should be given the authority to handle problems and deliver personalized solutions to consumers. Customer service representatives must be knowledgeable about the goods, services, and procedures offered by your business. Additionally, they must be amiable towards clients (even challenging ones) and be prepared to go above and beyond to help them.
Lastly, Customer satisfaction is a key factor in revenue growth. Customers are more inclined to return to businesses with good customer service and recommend your product to others. Tracking consumer feedback and using the information gathered to improve your product will help your business succeed.
