What is customer satisfaction (CSAT)?

Customer satisfaction is one of the most important considerations for any business. After all, a healthy business relies on happy customers – and if your customers aren’t happy, they probably won’t stick around.

Customer satisfaction ratings are a crucial metric for understanding how well you’re meeting your customers’ needs. By measuring customer satisfaction using some key performance indicators, you can track how happy your customers are with your business, product or service, and the experience you’re offering – and quickly identify where and how you can make improvements.

In this article, we’ll cover everything you need to know about customer satisfaction: what it is, why it matters, how to measure it, and what it looks like in action.

Find out how Intercom can boost your customer satisfaction metrics

What does customer satisfaction mean?

Customer satisfaction (CSAT) is a measurement that reveals how happy your customers are with your business: from your product or service to the experience you provide throughout the customer journey. In this way, customer satisfaction is intrinsically linked to customer experience (because better experiences = happier customers).

“Customer satisfaction (CSAT) is a measurement that reveals how happy your customers are with your business: from your product or service to the experience you provide throughout the customer journey”

Because customer happiness should be at the center of every business, customer satisfaction is an important metric to monitor. Low customer satisfaction ratings can lead to churn and revenue loss, while high customer satisfaction ratings are linked to retention, loyalty, improved customer acquisition, and increased profits.

There are lots of ways to measure customer satisfaction. Many businesses use a customer satisfaction (or CSAT) score, which they gather using a customer satisfaction survey or via other voice of the customer research.

What is a customer satisfaction survey?

A customer satisfaction survey is a questionnaire that you send to customers to understand how happy they are with your product, service, or other element of your business. The responses to this survey can help you to understand your customers’ needs and identify ways to optimize the customer experience.

“​​Nowadays, however, many businesses are turning to in-app surveys to help them capture customer feedback in the moment”

There are many ways to run a customer satisfaction survey and measure your CSAT score. Surveys can vary from in-depth to lightweight: from asking customers to rate an interaction from 0-10, sending them direct feedback questions, or even letting them choose the emoji that best represents their experience.

In addition to using different methodologies, customer satisfaction surveys can also take a number of different formats across multiple channels. In the past, these customer satisfaction surveys were often emailed to the customer after a transaction or interaction. Nowadays, however, many businesses are turning to in-app surveys to help them capture customer feedback in the moment. Unlike email surveys, which are sent at a later time – by which customers may have forgotten the experience entirely – in-app surveys allow you to get feedback while things are still fresh in the customer’s mind. (More on that later.)

The importance of customer satisfaction

From product design to marketing to sales to customer support – there’s no team in your business that shouldn’t be focused on customer satisfaction. Moments that grow customer satisfaction can (and should!) happen at every touchpoint of a customer’s journey: from how easy it is to navigate your website, to how much they enjoy using your product, to how quickly they can get in touch with customer service to resolve an issue, it all contributes to a customer’s impression of you.

If you’re not measuring customer satisfaction across all of these different touchpoints, however, you’re missing out on vital opportunities to understand – and improve – your business’s performance. Here are three benefits of a high customer satisfaction rating that highlight why it’s such an important metric to track.

1. Reduce churn and improve retention

Poor experiences can negatively impact customer satisfaction in ways that are hard – and costly – for your business to recover from. More than 60% of customers say they would walk away from a brand they love after just one bad experience.

“By analyzing customer satisfaction scores and spotting areas that need improvement, you can optimize the customer experience to fix problems before customers leave”

Clearly, low customer satisfaction is directly linked to churn. And churn has an outsized financial impact: in fact, Bain & Company suggests that increasing customer retention rates by just 5% can increase profits by between 25% and 95%.

But how do you keep customers from churning and encourage them to stay? To boost customer retention, you need to boost customer satisfaction. By analyzing customer satisfaction scores and spotting areas that need improvement, you can optimize the customer experience to fix problems before customers leave – and before it starts to impact your bottom line.

2. Boost loyalty for long-term success

Better customer experiences drive business outcomes that go above and beyond improved retention. The XM Institute has found that positive customer experiences are intrinsically linked to customer loyalty. They discovered that improved customer experience leads to additional purchases and more recommendations, as well as increased trust. In turn, this can help customers to forgive a company if there is a bad experience, thereby reducing the chance of future churn.

What’s more, the same study explored the effects of what it calls the “three elements of a customer’s experience” – success, effort, and emotion – on loyalty behaviors. It found that improving emotion has the biggest benefit, leading to an improvement in key loyalty behaviors such as purchasing more, recommending, forgiving, and trusting.

And the best way to create positive emotions? By creating a tailored, personalized customer experience that satisfies customers.

3. Increase revenue and bottom-line growth

With all of these factors in mind, it’s not surprising that customer satisfaction is one of the key indicators of business success.

“Of companies who say they deliver ‘significantly above average’ experiences, 89% report better revenue growth than competitors in the previous year”

One study found that of companies who say they deliver “significantly above average” experiences – in other words, the kind of experiences that drive customer satisfaction – 89% report better revenue growth than competitors in the previous year, while nine in 10 report better profitability than competitors in the same period.

Not only that, but companies at the top of their industries in key customer satisfaction rankings (like Net Promoter Score) for three or more years grow revenues 2.5 times as fast as their industry peers and deliver two to five times the shareholder returns.

Key metrics for measuring customer satisfaction

For anyone still asking “Is customer satisfaction important?”, it’s clear that the answer is a resounding yes. So how can you start to measure, track, and ultimately improve customer satisfaction?

There are lots of customer satisfaction metrics out there. Some have become industry standards, such as CSAT and Net Promoter Score. Others may be less widely tracked as part of a customer satisfaction program, but are nonetheless useful indicators of customer happiness.

Here are four key customer satisfaction metrics to consider.

CSAT score

CSAT is the classic customer satisfaction score. It’s usually calculated by sending a survey to the customer asking them how satisfied they are with the service they received. For example, these surveys are often used in customer service to help support teams understand if they successfully resolved a customer’s issue.

“CSAT is a valuable metric to measure because it gives a snapshot of customer sentiment, and you can use it at various moments of the customer journey”

There are many ways of calculating CSAT, but the usual approach asks customers to rate their satisfaction experience on a scale from “very unsatisfied” to “very satisfied’. The number of satisfied customers is divided by the number of total responses, and this figure is multiplied by 100 to give the percentage of satisfied customers or CSAT.

CSAT is a valuable metric to measure because it gives a snapshot of customer sentiment, and you can use it at various moments of the customer journey, from onboarding to support. However, it’s important to note that when it comes to understanding your support team’s performance, CSAT only gives you half the picture. As Martin Kõiva, CEO of Klaus, points out, sometimes customers leave negative ratings for issues unrelated to how well your support team handled the issue or the level of customer service they received: “Not all issues can be solved immediately and some of your users’ requests can never be solved by your team at all.”

So while CSAT is a useful indicator of customer satisfaction overall, when it comes to team performance, it’s important to incorporate other metrics to help you get a clear overview.

Net Promoter Score (NPS)

Net Promoter Score (commonly known as simply NPS) is a simple survey consisting of one basic question: on a scale of zero to 10, how likely are you to recommend this brand to someone else?

Many companies use the Net Promoter Score metric, which makes it easier to compare your score to industry benchmarks and understand how you’re stacking up against the competition. However, it can also hide complexity: what’s considered a “good” NPS can vary a lot by industry, and it can be hard to pinpoint why users gave the ratings they did without following up for more information.

“On a scale of zero to 10, how likely are you to recommend this brand to someone else?”

Based on the responses to your NPS survey, you can classify customers into three groups:

• Respondents who select 0–5 are classified as detractors.
• Respondents who select 6–8 are classified as passives.
• Respondents who select 9 or 10 are classified as promoters.

To get your Net Promoter Score, subtract the percentage of detractors from the percentage of promoters. For example, if you surveyed 100 people and 70 were promoters, 10 were detractors, and 20 were passives, then your NPS would be 60.

Customer effort score (CES)

A 2010 study documented in Harvard Business Review found that when it comes to customer support’s effect on customer loyalty, delighting customers actually has less of an impact than simply reducing a customer’s effort.

That’s where customer effort score (CES) comes in. Your customer effort score is calculated by asking customers how easy they feel it is to do business with you.

“By making it easier for customers to do business with you, you can reduce their effort, minimize frustrations, and improve satisfaction”

A common way to gauge your customer effort score is to ask customers to rate how easy or difficult they found their experience. Some questions you could ask include:

• How easy was it for you to find the product you were looking for?
• How easy was it to find the answer to your question?
• How easy was it for you to contact customer support?

Then, you can calculate your customer effort score by dividing the total sum of the ratings by the total number of responses, to see where your average falls.

By making it easier for customers to do business with you – and use your website, browse your e-commerce shop, contact your support team, and more – you can save their time, minimize frustrations, and improve customer satisfaction.

Customer churn

Customer churn can be one of the biggest – and bluntest – indicators of customer satisfaction.

“An increase in customer churn is often a symptom of an underlying problem that’s leaving customers unsatisfied”

Churn happens when a customer stops buying your product or service. It’s rare that a satisfied customer just stops doing business with you without a reason. As a result, an increase in customer churn is often a symptom of an underlying problem that’s leaving customers unsatisfied: whether that’s with your product, your customer support, the experience you provide, your fit with your target audience, or your competitiveness compared to other options on the market.

To calculate your customer churn rate, divide the number of customers who churned by the number of customers you had at the beginning of the period. (You can do this by quarter, by year, or by any other time period that makes sense for your business.) Multiply this figure by 100 to get your customer churn rate.

Customer satisfaction tools and software

There are lots of helpful tools out there to help you measure customer satisfaction.

While there’s still a place for the old reliable email surveys, forward-thinking industry leaders are turning to in-context customer surveys to help them get more relevant insights. By sending customer satisfaction surveys at the right time and in the right place – while the user is still engaged and thinking about your business, whether that’s on web, mobile, or in your app – you can get more responses and capture rich first-party data that helps you to better understand how your customers are feeling. Then, you can drill down into the results and analyze them by segment, to get even more insights.

Of course, we think that the best customer satisfaction tools don’t just let you understand customer satisfaction, but actively help you to improve it, too. With Intercom, you can automatically trigger customer journeys based on survey responses, to help you make the most of every opportunity to grow your customer relationships.

See it in action

Examples of customer satisfaction

So what does customer satisfaction actually look like? Here are some customer satisfaction examples from industry leaders.

1. Coda uses in-product surveys to measure and act on Net Promoter Scores

Software company Coda uses Intercom Surveys during onboarding and to measure NPS. If they spot that someone is having a negative experience or is a detractor, they can immediately act on that information and get someone from customer success or support to reach out and turn the experience around. The result? A CSAT score of over 95%.

2. Pitch reduces customer effort and improves efficiency with major results

“When customers get stuck, of course there’s a risk of churn,” says Verena Kuhn, Head of Community Support at software company Pitch. “We want to unblock them as fast as possible, and sometimes the fastest way of doing that is to enable them to find answers themselves.”

By creating a robust help center and using bots and automation to surface answers at the right moments, the number of people reaching out to Verena’s team has dropped from one in five to one in 12. Making it easy for customers to self-serve and reducing customer effort has had a positive impact on the customer experience: Verena’s team has a CSAT score that consistently sits at 100%.

3. Rebag unifies its online and in-store shopping experiences to optimize every stage of the customer journey

E-commerce platform and retailer Rebag wanted to create a seamless, memorable customer experience whether people were shopping in person or online. By using Intercom side-by-side with other core systems, they’ve been able to sync first-party data across tools to create more personalized experiences wherever and whenever customers are shopping. As a result of these efforts, they’ve seen improved engagement and retention rates, and have boosted their customer satisfaction – they’ve increased their NPS by an impressive 15 points.

4. Qonto collaborates cross-functionally to understand and champion the voice of the customer

All-in-one finance management solution Qonto encourages all of their teams to dig into their customer support software to analyze customer interactions and stay close to customer feedback. Listening to – and acting on – these insights allows Qonto to improve the customer experience, plan their product roadmap based on customer needs, and remain truly customer-centric. This outlook, coupled with their impressively low median first-response time of under two minutes for support queries, is probably why their CSAT currently sits at 95%.

Customer satisfaction is fundamental to business growth

By understanding your customers’ needs and preferences, asking them the right questions, and tracking some useful customer satisfaction metrics, you can boost customer satisfaction at every stage of the customer journey. Ready to get started? See how we can help.

Looking for more ways to boost your customer satisfaction scores? Dive into the Intercom Customer Service Trends Report for 2023.

Customer satisfaction FAQs

What is meant by customer satisfaction?

Customer satisfaction is a measurement of how happy your customers are with your products, services, and interactions with your business.

Why is customer satisfaction important?

Customer satisfaction is important because it directly correlates to business success. Because of its impact on everything from retention to loyalty to revenue, a high customer satisfaction rating is necessary for a profitable, healthy business.

How do you measure customer satisfaction?

There are lots of different ways to measure customer satisfaction, from CSAT surveys to Net Promoter Scores to emoji ratings. The most important thing is to ask customers directly – ideally in the moment, when the experience is still fresh in their mind, and while they’re still engaged with your business.

How can you improve customer satisfaction?

In order to improve customer satisfaction, you have to first understand why customers are not currently satisfied. By gathering feedback using surveys and listening to your customers’ needs, you can identify ways to address their issues, optimize the customer experience, and deliver better customer experiences that lead to long-term customer satisfaction.