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What is customer satisfaction and why is it important? How do you achieve customer satisfaction? Your customer satisfaction questions, answered.

The claim that it costs five to eight times as much to get new customers than to hold on to old ones is key to understanding the drive toward benchmarking and tracking customer satisfaction. Measuring customer satisfaction may be a new concept to companies that have been focused almost exclusively on income statements and balance sheets. Customer retention is the collection of activities a business uses to increase the number of repeat customers and to increase the profitability of each existing customer. Customer retention strategies enable you to both provide and extract more value from your existing customer base.

Published February 19, 2016
Last updated October 15, 2020

In the Instacart and video-streaming world, customers have higher expectations than ever when it comes to the speed of business services. The difference between two-day and two-week shipping, or between instant chat options and a phone number for dispute resolutions, can be the difference between winning a customer for life and losing them for good.

It doesn’t matter if your business is small or large. Modern consumers are likely to compare your business's support and customer experience to the biggest and best competitors. To compete with mass retailers, you have to deliver like Amazon, but with all the charm of Etsy.

A deeper understanding of customer satisfaction is invaluable to the long-term success of your business. In this guide, we'll cover:

What is customer satisfaction?

Customer satisfaction is a measure of how a company's products and services meet customers' expectations.

Businesses can measure customer satisfaction via ratings from a customer satisfaction survey (CSAT survey). They can also conduct customer satisfaction research by tracking customer retention and lifetime value and speaking to customers directly.

Why is customer satisfaction important?

Customer satisfaction is important because it gives you happy customers, which isn't surprising.

But research also shows satisfied customers lead to better business health beyond a customer service department, such as improved customer retention, lifetime value, and brand reputation.

Here are a few benefits of high customer satisfaction.

1. It drives positive word-of-mouth marketing

You've probably heard that an unhappy customer tells many more people about their negative experiences than a happy customer does.

Social media makes this more true than ever before, with over 70 percent of adults in the United States using social media to connect and share their experiences. Today, a customer can easily share feedback with millions of people with a single click, making your interaction with them even more critical.

You’re more likely to receive positive word-of-mouth feedback if you prioritize high customer satisfaction with top-of-the-line service. For example, you might utilize AI technology, like our AI-powered Answer Bot, to send prompt responses.

Our 2020 Zendesk Customer Service Trends Report found that 89 percent of participants said that quick responses to initial inquiries are important when deciding which company to buy from.

Our trends report also found that AI conversational agents will handle 20 percent of all customer service interactions by 2022.

2. It's a key indicator of your support team's performance

More than one metric makes up a comprehensive and accurate CSAT score. You have to collect information from different aspects of the business to have an accurate idea of how satisfied your customers are. Based on multiple factors, customer satisfaction rates are often a good indicator of overall company performance.

Customer satisfaction data can be collected from different areas, such as:

The speed of service from the support team
The level of efficiency when solving problems
The ease of use regarding the customer service platform

This information reflects how satisfied customers are with your service and which areas they are dissatisfied with.

Our built-in analytics function is a great way to observe how well your support team serves customers historically and in real-time. With the help of AI, teams can also predict customer satisfaction during a conversation, before a customer takes a survey.

3. It increases customer loyalty

A satisfied customer is often on their way to becoming (or already is) a repeat customer, and is less likely to churn. In fact, the Zendesk Customer Experience Trends Report found that 57 percent of consumers agree that excellent customer service is a factor in their brand loyalty. Loyal customers are a business's greatest asset because it is far more cost-effective to keep an existing customer than to attract a new customer.

How do you know if your customer service is driving customer loyalty?

There are two different ways to answer this question. The first is to ask customers questions directly such as:

'Would you speak to your friend about our brand?'
'How often do you speak to your friends about our brand?'

These questions can help shed some light on their likelihood to be your brand ambassadors.

The second method is to observe customer behavior. For example, you can track repeat purchases with loyalty programs and referral posts for your business on social media. Reading conversations in your community forum can also give you insight into how customers feel about their experience with your product or service.

Businesses also use Net Promoter Score (NPS) surveys to distinguish their customers as promoters, detractors, or passives.

Customer satisfaction vs. customer loyalty

Customer satisfaction and customer loyalty are intimately linked, but there is a difference between the two.

Customer satisfaction is a metric that measures how satisfied a customer was with a support interaction or purchase. Customer loyalty is more of a behavior than an attitude. Customer loyalty is when customers reward a company with repeat business over time. It means that the company is successful at creating an experience that resonates with people, since those customers are actively deciding to return again and again.

Ensuring high customer satisfaction is a key strategy for building customer loyalty.

How do you achieve customer satisfaction?

The benefits of focusing on customer satisfaction are clear, but how can you improve customer satisfaction?

Here are 3 ways to achieve customer satisfaction.

1. Become obsessed with customer feedback

One of the most important ways to increase customer satisfaction is to become obsessed with customer feedback. Commit to learning about your customer's pain points and then alleviating them in ways that set you apart from your competitors.

A great way to do this is to use Zendesk's feedback feature, which includes analytics for agents’ performances and customer surveys, to study your customers' complaints and compliments regarding your services.

If you manage to win over a customer's heart in a manner that's irreplaceable elsewhere (like throwing in a free pickup for car servicing), it's more likely they'll return, even if they're offered a lower cost at a competitor's business.

It requires an initial investment, but lowering your churn rate will likely pay off in the long run.

Read our blog on customer satisfaction surveys to learn the top questions to ask customers for better feedback.

2. Create a sense of familiarity

People like seeing familiar faces.

In a physical store, having employees who know the customer's name and preferences differentiates that business from competitors. And when it comes to online interactions, our Customer Experience Report shows that 76 percent of polled customers expect a personalized experience when they visit a company site.

Being front and center in a customer's Google searches and social media feeds and being easily accessible for customer questions via your customers' channels of choice creates a feeling of familiarity.

Offering support via messaging apps, like WhatsApp, Twitter DMS, and SMS, in particular, allow businesses to create personalized experiences because they're the same channels customers use to interact with friends and family.

3. Make customer satisfaction a company-wide focus

The best way to succeed in improving overall satisfaction is to put time and effort into a strategy that has employees putting customers first. Using a tool like the balanced scorecard is a great first step.

An example of the Har

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