In customer service, measuring satisfaction with the service you provide is a key component of improvement and customer development. It’s not enough to resolve a query – you have to find out how customers felt about the level of service you provided in your SaaS business.
On paper, it might be that you managed to close a ticket but you have no idea how customers actually felt about your customer service. For example, you may have provided a a bug fix for your customer, but was the fix timely and was the customer satisfied at the end of it?
That’s where customer satisfaction metrics come in. This is the way to measure customer satisfaction. Sending a short survey to customers to find out how they felt about your service is the best way to measure customer satisfaction, but there are a number of ways you can do it.
What is customer satisfaction?
Customer satisfaction is the extent to which a customer feels satisfied with the products or services they have received from your business. It shows how happy they are with your business and how likely they are to purchase again.
Satisfied customers means your business has met its targets for customer service. It’s all about measuring the satisfaction of your existing customers. Customers are happy, and more likely to recommend your business to others. Customer satisfaction is a predictor of business growth, as customer satisfaction improves customer retention and customer advocacy.
“I discovered that in order to succeed with a product you must truly get to know your customers and build something for them.” ~ Marc Benioff, co-founder – Salesforce
Customer satisfaction underpins the success of your business, as it means your customer service team is providing exceptional service leading to happy customers. There are a number of surveys you can send out to measure customer satisfaction that only take a few seconds to complete.
What is a customer satisfaction metric?
Customer satisfaction metrics measure how happy customers are with the service they have received from your company. They are crucial data points that can be collected using surveys, and can include examples such as Customer Effort Score (CES) or Net Promoter Score (NPS).
These metrics reveal insights into the customer’s relationship with your brand, since they ask a specific question and customers must rate their satisfaction along a scale. Other measures of satisfaction after the fact are Customer Churn, which tracks customers that are leaving your business for various reasons.
A customer satisfaction metric is a simple data point that identifies the happiness levels of customers with your service or product. They measure customer satisfaction based on just a simple premise.
Why do you need to measure customer satisfaction?
Engage customers by collecting feedback
Open channels of communication with your customers shows that your business cares about their feedback. Sending simple surveys to measure customer satisfaction allows customers to share their feelings with your business by actively pursuing their feedback. Customers appreciate that your business takes the time to find out whether they are happy with your products and services and are more inclined to purchase again.
Forecast revenue and growth
Measuring customer satisfaction means you can identify which customers are likely to become repeat customers since scores like the NPS are intended to track this metric. Happy customers are much more likely to purchase again and provide a steady stream of customers for your business, increasing revenue and causing your business to grow.
Identify brand ambassadors
Customers who are likely to recommend your brand can be discovered through customer satisfaction metrics. Happy customers are much more likely to refer your brand to others and benefit your business with word-of-mouth advocacy. You can identify these customers through measuring satisfaction and take steps to reward them as well as encouraging recommendations.
Customer satisfaction metrics
Customer Satisfaction Score
Customer satisfaction score directly measures satisfaction with your product or service. It asks a simple question: “Overall, how satisfied or dissatisfied are you with our company?” and then asks customers to rate their answer on a five point scale.
It’s one of the most simple surveys you can send to measure customer satisfaction, and gives you an overall feeling for how customers feel about your business at that particular point in time.
A score of one is the worst rating and a score of five is the best rating. There are multiple ways that you can present this survey but a simple, visual Likert scale can be the best way to do it, ranging from Very Unsatisfied to Very Satisfied.
Then, when you have collected enough answers, you use a formula to calculate customer satisfaction score:
CSAT = number of positive responses / total number of respondents surveyed x 100.
Achieving 100% CSAT score is usually the goal of most companies but even any score of 50% and above should be considered positive.
Net Promoter Score
Net Promoter Score, or NPS, is a popular customer satisfaction metric that allows you to identify customers who are most likely to recommend your business to others. It uses a particular question to gather feedback from customers who have used your product or service, and asks customers to answer on a scale of 0-10.
This question is: “How likely are you to recommend our business/product/service to others on a scale of 0-10?”
A rating of 0 is not at all likely to recommend your company, and a score of 10 is extremely likely. You then classify all the numbers in between into particular categories to discover how likely customers are to recommend you.
- Detractors (0-6) – these are unhappy customers who can damage your brand through negative word-of-mouth
- Passives (7-8) – these customers have no strong feelings either way and may shop with your competitors
- Promoters (9-10) – these are the customers who feel loyal and may generate word-of-mouth advocacy
You calculate NPS through a simple formula:
NPS = % promoters – % of detractors
Then, you present your NPS as an integer between 0 and 100. So if you had 50% promoters – 20% detractors, you’d end up with an NPS of 30. In this instance, the formula ignores the passives because they don’t reflect overall loyalty.
“Businesses talk a lot about customer loyalty. It makes sense: A person you can count on to buy from you again and again is more valuable than one who disappears after the first transaction.” ~ Mikkel Svane, co-founder – Zendesk
Customer Effort Score
Customer Effort Score, or CES, measures how easy or difficult customers find it to interact with your business and thus is a measure of satisfaction. You can use it to understand how easy it was for a customer to get a particular issue solved. Customers are more satisfied when you remove roadblocks from the customer experience and make it easy to get in touch with your business.
Customers with a low-effort experience are much more likely to remain loyal to your business than those with a high-effort experience. That’s what makes CES so important in measuring customer satisfaction and loyalty.
To run the CES survey, you ask your customers the following question:
“To what extent do you agree or disagree with the following statement? The company made it easy for me to handle my issues.”
You calculate CES with the following formula:
CES = sum of all customer effort score / total number of responses
The more effortful a customer’s score is, the worse the case for your business. Ideally your business will be getting sevens from most of your customers which will add up to a high customer effort score.
Customer Churn Rate
In SaaS, Customer Churn Rate is the percentage of customers leaving your business over a given period of time. Also known as customer attrition, this metric gives you valuable insights into customer satisfaction because churning customers are, by definition, not satisfied. Businesses aim for as low a churn rate as possible.
You calculate churn with the following formula:
Churn = users at beginning of period – users at end of period / users at beginning period
This formula will give you a customer churn rate as a percentage, such as 50%. You can monitor your churn rate to find out how many customers are leaving your business and take steps to improve your service.
Reviews
Online customer reviews can tell you which customers are satisfied as it is subjective feedback from customers about how they felt using your product. Software comparison sites like G2 can give you in-depth insight into how customers experience using your software. You usually get a score out of five and then qualitative data on what customers think about the software to help you measure customer satisfaction.
Regularly checking your reviews and replying to customers is a key part of customer engagement. Customers are delighted when they feel heard by your company, which increases their satisfaction level even more.
Volume of complaints
You can measure customer satisfaction on the number of complaints you receive about your software. The more complaints you receive, the less satisfied your customers are because they have had problems using your product. Analyzing your complaints for common trends will give you an insight into the issues customers are experiencing and allow you to correct them.
You should be using complaint management software to manage your complaints, with escalation and prioritization workflows, AI and routing. No matter how many complaints you receive, complaint management software allows you to stay on top of your complaints and decide how to best handle your unhappy customers. If you get no complaints, don’t get complacent – customers could simply be churning without telling you why.
Volume of repeat business, or Customer Retention Rate
Satisfied customers will keep coming back to your business, so tracking repeat business is a key metric to measure for customer satisfaction. You need to find out how many customers you had at the beginning of the period and how many you had at the end.
A high customer retention rate indicates satisfied customers who are happy to keep paying for your software. For 56% of SaaS companies, retention was lower in 2022 than the year before.
Use this formula:
Customer Retention Rate = (Customers at the End of the Period) – (New Customers Acquired) / Customers at the Start of the Period
Conclusion
Measuring customer satisfaction is critical for SaaS businesses that want to keep their churn rate low and increase customer lifetime value. Gaining insight into how your customers feel allows you to take preventative action in case customers are unhappy with some aspect of your service.
Customer satisfaction is related to other factors in customer service like customer loyalty and customer effort. By working with a combination of metrics, you can paint a true picture of customer satisfaction and how customers feel about your business.
