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Customer Satisfaction

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20 Feb, 2019

Written by Ranjith Parasuraman, an IIT/IIM graduate with over 10 years experience in technology and customer focus


What is customer satisfaction (CSAT)?

Customer satisfaction is a measure of how well your company fulfils the needs of customers.

Why is customer satisfaction important?

Customer satisfaction has a big impact on the profit of your company. If your customers are satisfied, they become loyal to your company, resulting in an increase in profit. Broadly, customer satisfaction helps a company in the following ways :-

  • It guarantees future profit by helping retain customers.
  • It is better for business as it is cheaper to retain a customer than acquire new customers.
  • It helps a company grow by acquiring and retaining new customers.
  • It builds a company’s brand. Building a brand through customer satisfaction is cheaper compared to advertising.
  • It saves marketing costs. Satisfied customers will do marketing on a company’s behalf through word of mouth publicity. Word of mouth marketing has a high trust factor and is more effective than any other form of marketing.

What exactly is customer satisfaction?

There are two aspects of customer satisfaction - expectation and experience. Customers have an expectation when they buy your product/service. When they consume your product/service they experience your product/service. A customer is satisfied when his experience matches or exceeds his expectation.

Where do companies go wrong in ensuring customer satisfaction?

Companies go wrong both in setting expectations and delivering an experience.

Example (Mistake in setting expectation) -

A detergent company might exaggerate their product’s features by wrongly advertising that their product removes ink stains. When a customer buys the product and sees that it doesn’t remove ink stains, their experience of the product doesn’t match the expectation. The customer is not satisfied.

Example (Mistake in delivering experience) -

A hotel might be slow in responding to guests asking for fresh towels. When a guest experiences this delay, it doesn’t meet their expectation of the behaviour of a good hotel. The guest is not satisfied.

Why do companies make mistakes in customer satisfaction?

Some companies do not understand the importance of customer satisfaction. So they don’t see their actions as mistakes. These companies have a transactional mindset regarding the customer-company relationship. They think that their relationship with customers is purely economical. The customers give them monetary compensation for the product or service the company provides. They think that customer satisfaction is not their responsibility. They expect customers to adjust their needs according to what the company provides. Most of such companies are monopolies. Their customers are not satisfied by design.

Some companies understand the importance of customer satisfaction but fail to implement it. These companies have trouble understanding customer’s expectation or meeting it.

How to understand and meet customers’ expectations?

There is only one way to understand customer expectations - by talking to them. You can talk to customers by looking into their complaints and actively seeking feedback. Every company gets constant complaints from customers. Most just ignore it. Looking into customer complaints will give you valuable insight into the expectations of your customers. Another way to talk to customers is by seeking feedback. You can do this using feedback surveys or meeting customers in person. It is best to ask open-ended questions so that customers have no qualms in sharing all their expectations. For example, if your company runs a chain of hotels, ask your guest’s feedback about how to improve their experience in the hotel. Such questions can even be asked informally during checkout.

After you talk to customers, you will have a list of expectations from your customers. Then, it is just a matter of choosing the expectations to implement. You can choose using a simple cost-benefit analysis. You can choose to implement measures which gain maximum customer satisfaction at least cost.

Difficulties in estimating benefit of customer satisfaction measures It is not easy to estimate the benefits of meeting customer expectations. Such predictions are heavily subjective. For example, if you add additional customer support agents to decrease the wait time for customers, you will increase customer satisfaction. But, it will be difficult to predict how much additional profit this satisfaction will bring. This is where most companies lose their way. They don’t implement customer satisfaction measures because they are not sure if the implementation of these measures will be beneficial to the company. This is what separates customer friendly companies from others. Customer friendly companies implement customer satisfaction measures in spite of not having guarantees that it will increase the company’s profit. They do it because they think long term. These companies decide their business strategies by looking at a horizon of several years. They don’t look for immediate results. Because they think long term, they don’t worry about seeing an immediate impact from implementing customer satisfaction measures. But these measures do increase profit in the long term as the nature of customers is to be loyal to companies which give them satisfaction. Therefore, the key to customer satisfaction is long term thinking.

Examples of long term thinking for customer satisfaction

Amazon reviews

Amazon is famous for being customer-centric. In the early days, it differentiated itself from other e-commerce companies in the way it treated customer reviews. It didn’t worry about getting negative reviews for the products it stocked. Negative reviews reduced sales, but they also prevented customers from buying bad products and having a bad experience. So, negative reviews gave satisfaction to customers. It contributed to customers becoming loyal to Amazon. Not many companies will encourage negative reviews as it will create losses in the short term due to unsold inventory. But Amazon thought long term. The company knew that the cost of unsold inventory is less compared to the satisfaction customers experience by only buying good products on Amazon.

Amazon review
An Amazon review

Citibank credit card transaction dispute

Citibank sends a link to dispute a credit card transaction in the text message it sends to its customers. This makes it easy for its customers to raise a dispute as compared to calling customer support. This measure increases the number of dispute requests and increases costs for the company. But in the long run, it will create satisfaction for customers as they will like the ease of resolving a dispute. Satisfaction will eventually result in customer loyalty and increased profits.

Citibank text
Citibank text

Adopting a long term approach for customer satisfaction also means moving away from marketing practices which use short term thinking. Avoiding these mistakes will also improve customer satisfaction.

Examples of short term marketing practices which lead to customer dissatisfaction

  • Misleading advertisements
  • Marketing offers which come with strings attached. E.g. A shop will put a banner outside communicating “50% OFF”. But once a customer enters the shop he will realize that the offer is only for select products.
  • Selling substandard products on a discount to clear inventory

One quick way to improve customer satisfaction is by improving your company’s handling of customer complaints. Customers are sensitive to company behaviour when handling complaints. A proper resolution of the complaint will tremendously satisfy a customer.

Tips for handing customer complaints to improve customer satisfaction

  • Respond to complaints quickly. If you are late to respond, customers will think that your company doesn’t care about customers.
  • Automate resolution of common complaints so that it is resolved fast. For example, if you are an online retail company, allow customers to cancel orders on the website before they are shipped.
  • Don’t make customers jump through hoops to file a complaint. For example, don’t have too many fields in a complaint form.
  • Have common sense. Don’t secure processes which don’t require security. For example, if you are a credit card company, don’t ask a customer to verify their identity when they call to dispute a transaction.
  • When responding to complaints via email, communicate like a human being, not a faceless company. For example, instead of “We will look into your complaint and get back to you.” say “Hey we are looking into this. Will get back to you asap”
  • Don’t punish customers who make trivial mistakes. For example, if a customer forgot to use a coupon code by the expiry date, don’t hold it against him. Give him a day’s extension if he asks for it.

How to measure customer satisfaction?

Periodically send a customer satisfaction survey asking customers if they liked the experience of being your customer. Let them answer yes or no. The percentage of customers who said yes will be your customer satisfaction (CSAT) score. Whenever you implement measures to improve customer satisfaction you should survey your customers again. You should see an increase in their satisfaction.

Tips for improving customer satisfaction for luxury hotels

  • Remember every minute preferences of guests. For example, if a guest likes to have tea after dinner, remember it. When the same guest visits the hotel again, * proactively offer tea after dinner.
  • Proactively attend to guests’ needs. For example, during housekeeping you find that a guest’s deodorant is empty, keep a fresh bottle of the same brand in their room.
  • Be compassionate with guests’ troubles in every situation. For example, if a guest is reaching the hotel at midnight after a long international flight, don’t bother him with check-in formalities. Take him directly to the room. The check-in formalities can be done the next morning.

Tips for improving customer satisfaction for internet businesses

  • Make sure your websites and apps are responsive. A fast website/app is absolutely essential to customer satisfaction.
  • Proactively offer human support. Do not hide behind chatbots or FAQs in an attempt to reduce customer queries. Human contact is essential for customer satisfaction.
  • Do not use “no-reply” email accounts when sending emails to customers. Instead, use your support email address. Customers should feel like you look forward to interacting with them.