Customer satisfaction (CSAT) is a measure of how products and/or services meet customer expectation. Organizations ask their customers whether their product and/or service have met expectations using a rating scale to measure.
It is essential in today’s experience economy for businesses to effectively manage customer satisfaction. CSAT is now a key differentiator and increasingly becoming a key element of an organizations’ business strategy and a key performance indicator (KPI).
The CSAT can help organizations focus their employees on the importance of fulfilling customers’ expectations. Furthermore, when these ratings dip, they warn of problems that can affect sales and profitability. These metrics quantify an important dynamic. When a brand has loyal customers, it gains positive word-of-mouth marketing, which is both free and highly effective.
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Customer Effort Score (CES) focuses on organizational changes in customer service by removing obstacle and making it easier for customers to meet their goals. In 2008, the US Corporate Executive Board (CEB) challenged the notion that companies must ‘delight’ customers and argued instead that what customers really want is to simply be given a satisfactory solution to their service issue. After conducting structured interviews with customer service leaders and a study of more than 75,000 customers, US Corporate Executive Board (CEB) uncovered three findings:
- Exceeding expectations during service interactions has negligible impact on customer loyalty.
- Service organizations create loyal customers primarily by reducing customer effort – i.e. helping them solve their problems quickly and easily – not by delighting them in service interactions.
- In the customer service environment, Customer Satisfaction (CSAT) is a weak predictor of customer loyalty. Net Promoter Score (NPS) is slightly better. Customer Effort Score (CES), however, tops the charts with the highest predictive power.
The research claimed that excessive levels of customer service (such as offering free products or services) will only make customers slightly more loyal to the brand and to achieve customer loyalty, rather than exceeding expectations organizations must reduce the effort that customers exert to get their problem solved. Put simply, companies must remove obstacles.
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Net Promoter Score (NPS) is a customer loyalty metric developed by (and a registered trademark of) Fred Reichheld, Bain & Company, and Satmetrix. It was introduced by Reichheld in his 2003 Harvard Business Review article “One Number You Need to Grow.” NPS is based on the fundamental perspective that every company’s customers can be divided into three categories: Promoters, Passives, and Detractors. By asking one simple question — “How likely is it that you would recommend [your product or service] to a colleague?” — you can track these groups and get a clear measure of our product’s performance through your customers’ eyes. NPS has its own rating scale and measures.
Knowing your NPS score is only the beginning. It is the action plan that you build around the score that determines your organization’s success in converting more customers to advocates.
As discussed in a previous blog post, a May 2013 study conducted by the Temkin Group found that:
- Promoters are almost six times as likely to forgive
- Promoters are more than five times as likely to repurchase
- Promoters are more than twice as likely to recommend a company
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So what does this mean to you and your organization? Which metric should you use when?
Customer Satisfaction (CSAT) – is a great way to measure and manage basic customer expectation. Are you meeting your customers’ expectation? Is your customers’ satisfaction going up or down over time? Where is your experience successful or needs improvement? Which customer profile or personas are satisfied? Use CSAT as a KPI to measure and manage to your business strategy.
Customer Effort Score (CES) – is a great way to measure and manage your organization’s customer service operational efficiencies. CES helps your organization identify areas of your service operations to removing obstacle and making it easier for customers to meet their goals. Use CES to measure and manage customer service operations.
Net Promoter Score (NPS) – is a great way to measure and manage customer advocacy for your brand. As we have discussed in previous blogs, beyond customer satisfaction and loyalty is advocacy. NPS is your metric to measure and manage brand advocacy.