What Is Customer Satisfaction and Why Is It Important?

What Is Customer Satisfaction and Why Is It Important?
Customer satisfaction
Suprej Venkat Jul 25, 2022

What Is Customer Satisfaction and Why Is It Important?

Most SaaS businesses understand the importance of their existing customers. These customers are responsible for your recurring revenue and are the lifeblood of the business. Naturally, paying attention to the health of these customer relationships is crucial for building a sustainable business model.

If you want to attain good customer retention and loyalty, you must identify whether your customers are satisfied with your products and services. If customers are satisfied, they are more likely to become recurring customers of your brand. They are happier with the service that your business is able to deliver and more likely to recommend your brand to others.

When customers aren’t satisfied, this leads to customer churn. Profits take a nose-dive and your business struggles to stay afloat. If your business isn’t fulfilling your customers’ basic expectations then your churn rate is likely to spin out of control.

In this article, we’re going to look at the definition of customer satisfaction, why it’s important, and customer retention strategies you can use to ensure customer satisfaction remains high.

What is customer satisfaction?

Customer satisfaction is a measure of how well your business is meeting your customers’ expectations, and how happy customers are with your business overall when evaluating its products, services, or particular experiences with the company.

It’s an indication of how healthy the relationship is between your business and the customer, and can be a predictor of how likely the customer is to purchase again. It’s important to be able to correctly diagnose what “satisfied” customers mean to you since it’s more than just customers who are continuing to pay their subscription. You have no idea whether or not these seemingly loyal customers are likely to churn in the near future.

That’s why businesses take it upon themselves to measure customer satisfaction using tools like CSAT surveys. CSAT surveys ask the question: “How satisfied are you with [product name]” with the option to rate their answer on a scale from “very unsatisfied” to “very satisfied”.

Importance of customer satisfaction

For SaaS companies in particular who operate on a subscription model, customers are deciding every month or every year whether to keep doing business with your company. Customer satisfaction is a measure of whether customers are likely to renew.

Customer satisfaction is important because it helps you identify when customers are happy with your brand or not. If you don’t take pains to measure customer satisfaction, you won’t know when customers are at risk of churn or those who might spread negative reviews about your business.

Customer satisfaction is a key metric to keep track of for customer success and customer support teams. You’ll be able to understand whether your business has been able to deliver satisfactory service and meet the needs of your customers.

Benefits of customer satisfaction

It improves customer retention

A 5% increase in customer retention can increase profits by 25% to 95%. Customer satisfaction drives customer retention because it means customers continue to obtain value from your product. Without customer retention, you won’t be able to spend more of your budget on vital operations like customer support, which keeps your customers happy and ensures they understand how to use your product.

It increases customer lifetime value

Satisfied customers spend more with your business in the long-term. Customer lifetime value increases when your customers want to keep using your products and become open to cross-sells and upsells. It’s easier to sell to your existing customers than it is to sell to new customers (60-70% to an existing customer versus 5-20% for a new prospect). Customers who generate recurring revenue are more valuable to your business and make you more appealing to your investors.

It earns word-of-mouth referrals

You’re more likely to get positive referrals from your customers if they are satisfied with your service. They’ll recommend your brand to family, colleagues and friends and this will help with customer acquisition. Referrals from your customers are a virtually cost-free way to obtain new customers and positively impact your brand’s reputation.

customer satisfaction

It drives customer loyalty

Customers are more loyal to your business when they feel satisfied with your product and service. They are less likely to be lured away by competitors and more forgiving of any lapses in service. It’s critically important to earn loyal customers for your business who will help you survive during the tough times.

How to achieve customer satisfaction

Use these customer satisfaction strategies to ensure your customers remain satisfied.

Gather customer feedback

To stay on top of your customers’ feelings and opinions you need to regularly gather their feedback. Sending out customer success surveys is a great way to communicate with your customers, throughout the customer journey. Customer Satisfaction Score (CSAT) can help you find out whether customers are satisfied with the product or after a particular interaction with customer support.

Don’t forget that you need to act on customer feedback to ensure it is valuable. Your customers may provide critical product insights that allow you to improve your software and create a better user experience for your customers.

Acting on customer feedback means that your product and service stays in line with the needs of your customers and evolves in a direction that keeps customers around.

Using customer success platforms like Churn360 you can automate these surveys based on your customers usage and specific events.

Offer a superior product and service

When you have the best product on the market, customers will be satisfied because it meets their needs. When you combine a superior product with the best customer service, customers have no reason to look anywhere else.

The quality of your product is not static, but can always be better to stay in line with your customers’ expectations. You should pass all customer product feedback onto your product team so they can keep developing the product successfully.

Let’s not forget that there will always be competitors out there to rival your product, and to top the level of customer support you can provide. Pay attention to key customer support metrics like first response time and first contact resolution to keep improving the standard of help you offer your customers.

Implement self-service

Shall we face it – customers don’t want to contact your support team for help. They would rather resolve small problems on their own using self-service resources such as a customer support knowledge base or community forum.

When customers have access to self-service, they can benefit from instant help which means they don’t have to wait around for an answer from support. Self-service also has other benefits, such as the ability to scale your support team without increasing your headcount.

Customers who benefit from self-service are empowered to solve common problems with your product and move on with their day. You can’t miss this vital strategy for improving the customer experience.

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Improve the onboarding experience

When customers see an improved onboarding experience with your SaaS product they are more satisfied with the experience as a whole. Instead of taking a lengthy amount of time to learn your product, they excel with your product immediately.

Using checklists helps drive your customers towards an activation point where they experience satisfaction with your product. Checklists guide your customers through key actions with your software and ensure that it becomes indispensable to their workflows.

You can use software like Churn360 to ensure that customers are completing onboarding checklists and finding value with your software. Churn360 empowers customer success specialists to stay on top of high volumes of new customers by following them through the customer journey.

Scores that determine customer satisfaction

Customer satisfaction score (CSAT)

Customer satisfaction score is a direct measure of the satisfaction that a customer has with your product or service. It is calculated by asking your customers: “How satisfied were you with your experience today?” CSAT measures a specific moment in time after your customer has interacted with your support team.

You can use this metric to assess whether your customer support agents have been successful and use it to improve their performance. Satisfied customers are more likely to keep using your product and stay committed to your brand in the future.

Net promoter score (NPS)

Net promoter score measures how loyal customers are to your customers or brand by asking them a single question: “How likely are you to recommend [product] to a colleague or friend?” Customers answer the question on a scale of 1 to 10 which divides them into detractors, passives, or promoters.

Customer satisfaction feeds directly into customer loyalty so this metric shows how committed customers are to your product, service or brand. When you identify your promoters, you can ask them for reviews or testimonials to help promote your product.

Customer effort score (CES)

Customer effort score measures how difficult it is for customers to complete an interaction with your brand. It asks the customer: “To what extent do you agree with the following statement: [product] is easy to use”.

You can send this survey out to customers after they complete a particular task with your software or after a certain interaction with your support team. It’s critical for your product to be easy to use for customers or they’ll soon be searching for an alternative to satisfy their needs.

Wrapping up

Customers who turn to your SaaS product to meet a need have ever-changing expectations of your service. Paying attention to customer satisfaction is a sure-fire way to retain customers and reduce churn, ensuring that customers keep paying for their subscription and that your business is a success.

Customer satisfaction leads to more loyal customers in the long-term who are protected from the temptations offered by your competitors. Loyal customers are motivated to spread positive word-of-mouth about your brand which helps attract new customers and improve customer acquisition.

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