How to prove the ROI of customer satisfaction

Happy customers are the lifeblood of every business. Focusing on customer satisfaction will increase loyalty, drive more positive word-of-mouth referrals, and encourage higher spending from your best customers. Understanding, leveraging, and acting on Customer Satisfaction Score (CSAT) can help you get there.

Showcasing its impact or attributing CSAT improvements to revenue can be difficult. Here is how to optimize your CSAT score to gain the most return on investment (ROI).

The CSAT metric is a method for determining how many customers your business is serving successfully and how many are having a substandard experience. CSAT typically measures customer satisfaction with a particular product or service instead of measuring a customer's overall opinion of a business. 

CSAT is determined by surveying customers to collect feedback, and then using customer-provided ratings to calculate your overall CSAT metric. People respond to a single survey question. For example: 

“How would you rate your overall satisfaction with the product (or service) you received?” 

Respondents answer a scale with a rating (typically 1-5) assigned to each level of satisfaction: 

Here’s an example. Like the example above, let’s say you create a customer satisfaction survey asking customers to rate their experience with your business or service on a scale of 1 to 5. To calculate your company’s CSAT, take the number of satisfied customers (those who selected the top two choices in your scale, which is 4 and 5) and divide that number by the total number of survey responses. Then multiply by 100 to see the percentage of satisfied customers.

So, if you had 1500 customers respond to your survey and 600 rated their experience a 4 or 5, your formula might look like:

600/1500 (.4) x 100 = 40% satisfied customers.

Now that you have an actual metric to measure how well your company serves its customers, you can perform further calculations to determine the impact of initiatives to improve customer experience that you might be considering. 

For example, suppose you know that the lifetime value of a retained customer for your business is $4000 per month. In that case, you can easily determine that a 10% increase in your CSAT score (which in this example would be an extra 150 customers) is $600,000 in increased monthly revenue. 

Aside from bottom-line revenue measurements, using a CSAT score can inform other key business decisions, such as:

Related: How to measure the ROI of customer satisfaction

Beyond the theoretical or big-picture implications of the importance of CSAT, there are some clear outcomes that you can achieve by acting on the insights gleaned from measuring CSAT. Let’s explore a few.

NPS is a metric used to determine customer loyalty, satisfaction, and enthusiasm for a company. NPS is calculated by asking customers a single question: “On a scale from 0 to 10, how likely are you to recommend this product/company to a friend or colleague?” Net Promoter Score can measure the total impact of operational decisions, marketing initiatives, new investments, and more. 

Conversely, CSAT can be implemented to identify customer satisfaction with specific interactions. For instance, if customers are dissatisfied with a new payment collection method, CSAT surveys can uncover this issue by asking questions like, "How satisfied are you with our new payment process?" This pinpointed feedback highlights areas that need immediate attention. By consistently using CSAT feedback to improve specific touch points, you create a more positive overall customer experience--ultimately leading to a higher NPS.

Learn more: How to use NPS surveys to create the best customer experience

Retention and churn metrics determine how many customers a business has turned into recurring users or how many customers leave after a single use or a few months. 

Tailor CSAT questions to identify what’s driving retention or churn. For instance, an organization with a subscription-based model might ask:

CSAT surveys can remove the guesswork from questions around customer retention and churn. Instead, they provide you with specific information to tailor your products and services to address customer wants and emphasize existing brand strengths.

A CLV score is a dollar amount that shows the entire value a customer delivered to your business for their time using your platform, service, or product. 

Customer satisfaction surveys can help you increase NPS and retention metrics, leading to more customers who use your product or service for a longer duration. By using CSAT to improve retention, you can more easily grow the CLV of existing customers while investing in initiatives to increase the acquisition of new customers.

Using the industry benchmarks available, CSAT allows leaders to compare where they stand against their competition. This allows you to see where you need to catch up. 

Benchmark your CSAT against your industry, and, more importantly, those industries that have achieved more success with their scores. Customers today are not only comparing their experience with you against your direct competitors but also against every experience they have

Start looking at the gaps between your customer experiences and theirs. Another way to ask this question: What will happen if you don’t address this issue? 

Additionally, if your scores are way below the CSAT of another industry, ask yourself why that category achieves a higher rating. What is being done right? What could be imported to your operations or staff? What gaps or common pain points can you identify?

What is the best way to keep your best customers? In some cases, it’s to reward them. 

That’s hard to do when you haven’t identified the customers who think the highest about the experiences you are offering them. CSAT allows you to find those customers who are most likely to become advocates for your brand and also allows you to create better experiences just for them. 

Finding those advocates allows you to design meaningful customer advisory boards and co-create the experience with them. These are your most valuable customers, and they will return that loyalty by staying with you longer, spending more, and telling others about your brand.

Investing in this group of customers and their happiness can lead to higher customer lifetime values. Creating a partnership with customers can help them feel heard and cared for.

CSAT is a valuable metric that allows businesses to assess customer satisfaction and improve customer loyalty. CSAT is crucial in creating engaging customer experiences and fostering long-term customer relationships. 
By setting benchmarks, defining KPIs, and creating a continuous improvement plan, you can prove the positive impact of CSAT on your organization. Explore more survey options and discover how to put customers at the center of your business with SurveyMonkey.