Customer satisfaction is a marketing term that measures how products or services supplied by a company meet or surpass a customer’s expectation. Customer satisfaction is important because it provides marketers and business owners with metrics that they can use to manage and improve their businesses.
Here are the top six reasons why customer satisfaction is so important:
- It’s a leading indicator of consumer repurchase intentions and loyalty
Customer satisfaction is the best indicator of how likely a customer will make a purchase in the future. Asking customers to rate their satisfaction on a scale of 1-10 is a good way to see if they will become repeat customers or even advocates.
Any customers that give you a rating of 7 and above, can be considered satisfied, and you can safely expect them to come back and make repeat purchases. Customers who give you a rating of 9 or 10 are your potential customer advocates who you can leverage to become evangelists for your company.
Scores of 6 and below are warning signs that a customer is unhappy and at risk of leaving. These customers need to be put on a customer watch list and followed up so you can determine why their satisfaction is low.
- It’s a point of differentiation
In a competitive marketplace where businesses compete for customers; customer satisfaction is seen as a key differentiator. Businesses who succeed in these cut-throat environments are the ones that make customer satisfaction a key element of their business strategy.
Picture two businesses that offer the exact same product. What will make you choose one over the other?
If you had a recommendation for one business would that sway your opinion? Probably. So how does that recommendation originally start? More than likely it’s on the back of a good customer experience. Companies who offer amazing customer experiences create environments where satisfaction is high and customer advocates are plenty.
- It reduces customer churn
Research found that price is not the main reason for customer churn; it is actually due to the overall poor quality of customer service.
Customer satisfaction is the metric you can use to reduce customer churn. By measuring and tracking customer satisfaction you can put new processes in place to increase the overall quality of your customer service.
You should put an emphasis on exceeding customer expectations and ‘wowing’ customers at every opportunity. Do that for six months, than measure customer satisfaction again. See whether your new initiatives have had a positive or negative impact on satisfaction.
- It increases customer lifetime value
Study found that a ‘totally satisfied customer’ contributes 2.6 times more revenue than a ‘somewhat satisfied customer’. Furthermore, a ‘totally satisfied customer’ contributes 14 times more revenue than a ‘somewhat dissatisfied customer’.
Satisfaction plays a significant role in how much revenue a customer generates for your business. Successful businesses understand the importance of customer lifetime value. If you increase customer lifetime value, you increase the returns on your marketing dollar. Customer lifetime value is a beneficiary of high customer satisfaction and good customer retention.
- It reduces negative word of mouth
Research found that an unhappy customer tells between 9-15 people about their experience. In fact, 13% of unhappy customers tell over 20 people about their experience. That’s a lot of negative word of mouth.
How much will that affect your business and its reputation in your industry? Customer satisfaction is tightly linked to revenue and repeat purchases. What often gets forgotten is how customer satisfaction negatively impacts your business. It’s one thing to lose a customer because they were unhappy. It’s another thing completely to lose 20 customers because of some bad word of mouth.
To eliminate bad word of mouth you need to measure customer satisfaction on an ongoing basis. Tracking changes in satisfaction will help you identify if customers are actually happy with your product or service.
- It’s cheaper to retain customers than acquire new ones
This is probably the most publicized customer satisfaction statistic out there. It costs six to seven times more to acquire new customers than it does to retain existing customers.
If that statistic does not strike accord then there’s not much else I can do to demonstrate why customer satisfaction is important. Customers cost a lot of money to acquire. You and your marketing team spend thousands of dollars getting the attention of prospects, nurturing them into leads and closing them into sales.
Customer satisfaction plays an important role within your business. Not only is it the leading indicator to measure customer loyalty, identify unhappy customers, reduce churn and increase revenue; it is also a key point of differentiation that helps you to attract new customers in competitive business environments.