At the moment of reading this post, do you know if your customers are satisfied with your product? If yes, how do you know? And can you accurately put a value on this sentiment?
Customer satisfaction is one of the cornerstones of a successful company. It will ensure not only a steady growth but also decreased churn and growth of all your most important metrics. Companies that track their customer success have a major advantage over those that don’t - they know how they’re doing and what they need to fix.
One of the most common ways to measure customer satisfaction is an NPS score. However, it has quite a few limitations - which we’ll discuss in a minute. So, what’s a better alternative? Let’s find out.
What is the Net Promoter Score (NPS)?
Net Promoter Score or NPS is a measurement of how satisfied your customers are with your product. To calculate your NPS, you ask your customers how likely they are to recommend your company or product to a friend or colleague. As simple as that.
Based on the score they give you, customers are sorted in one of three buckets:
Promoters are your company’s ambassadors - the ones who are the most likely to speak about your company and recommend you to others even without you asking for it.
Passives are exactly what the name states - not too likely to promote you but at the same time, they won’t harm your brand very much either. This is a huge opportunity for any business because they’re close to becoming promoters.
Detractors require your immediate attention because they won’t recommend you and the chances of them hurting your brand with negative reviews online are pretty high.
You can calculate your NPS score by taking your number of promoters and subtracting the detractors from that. As a result, you’ll get a number that’s somewhere in a range from -100 to 100.
So, what’s a good NPS score? It will depend on your industry, but aiming for a number above 50 would be good. If you’re below 20, you should be concerned as there is significant room for improvement.
NPS is a super easy and popular way to determine how happy your customers are with your product, but it should not be the only way you measure customer satisfaction. Here’s why.
The limitations of the NPS score
Although easy to calculate and measure against your competitors and industry benchmarks, NPS is far from perfect. Most companies use NPS in combination with other customer success metrics because it has significant shortcomings.
It’s not specific enough
An NPS score will merely tell you if your customers are willing to recommend you or not, which is just one piece of the puzzle. You’ll still have to figure out why someone wants or does not want to recommend you to their peers with further surveys and questionnaires.
It doesn’t account for the importance of each customer
If you have 100 customers who did an NPS survey and the results are overwhelmingly positive, you should feel pretty good about your success, right? The problem is, you could have 90 promoters who are one-time customers and 10 detractors who are long-term customers that spend more money. Whose opinion do you trust more?
NPS won’t give you directions on what to do
Getting your NPS score will merely tell you how your customers perceive you. You won’t get an actionable plan on what needs fixing and how it needs to be addressed.
It’s easy to rig
Depending on when you ask, a customer will give you a different NPS score. Sometimes this is for the better, sometimes it’s for the worst. If you ask someone when they sign up for a SaaS product and right after they achieve something for their business, they’ll probably give you two different NPS scores.
The answer is not in completely disregarding NPS as a customer success metric. It’s actually using NPS in combination with other tools and KPIs.
What are the right KPIs to measure customer satisfaction?
As many marketers will say using their favorite answer - it depends. There are lots of KPIs to measure customer satisfaction and none of them can be considered the best or the most useful. Which ones you will use and benefit from the most depends on many factors, including the type of your business and audience and what you sell.
With this in mind, there are some customer satisfaction KPIs that any business can track to keep a pulse on their customer experience.
Customer Satisfaction Score (CSAT) (The most popular KPI)
CSAT is one of the most popular KPIs for customer satisfaction in a variety of industries. It boils down to asking customers how satisfied they are with your product or service on a scale from 1 to 5, ranging from completely unsatisfied to very satisfied.
Just like an NPS survey, a CSAT survey can be placed anywhere in the customer journey, after a variety of touchpoints. Also just like NPS, the results are not conclusive as customers give you an answer after a specific interaction.
However, as satisfaction is not the same as promoting a brand, you can and should use NPS in combination with CSAT - one does not exclude the other.
Customer Effort Score (CES)
The CES score is a simple number that you get by asking customers how difficult it is (how much effort they have to put in) to do something with your product or service. For example, sign up for a paid account, add a new seat to their account, create a template or something else.
CES is incredibly useful if you’re asking it throughout the customer journey at different touchpoints. That way, you’ll easily find bottlenecks that cause your customers to churn. Speaking of which…
Also known as the silent killer of every SaaS business, churn is the number of customers who leave you in a certain time period. Naturally, you want your churn to be as low as possible, with as few customers leaving you as possible. Troubles arise when your churn is higher than your number of new customers.
You want to aim for a churn rate of less than 1% per month or less than 7% on an annual level. You don’t need to worry about tracking customer churn because there are plenty of apps that do it for you. If you see your churn climbing up, it’s a serious sign that something needs your immediate attention.
Customer Retention Rate
This fairly simple metric represents the portion of customers you can retain through time. To calculate it, simply compare the number of customers you have at the beginning of a certain time period (month, quarter) and the number of customers at the end of that period.
It’s fairly similar to churn and while it is by no means a great way to get qualitative feedback, it’s a good signal for the health of a subscription-based business.
If you’re into measuring customer satisfaction in a more old-school way, SERVQUAL is the way to go. Invented in the 1980s, it stands for service quality and its aim is to determine precisely that - the quality of services provided to your customers.
Essentially, SERVQUAL is a questionnaire that usually has 22 questions determining the quality of your services and customer expectations. Unlike previously mentioned methods, it’s not so well suited for modern (SaaS) uses and takes quite a bit more time to set up, analyze and act upon.
Product engagement score (PES)
This is a metric that is highly relevant to SaaS businesses and one that can give you a fairly accurate idea of how your product is perceived by your target audience. To calculate your product engagement score, you need to consider three factors:
Adoption is the number of customers using a certain aspect of your product. Stickiness represents the number of customers who return to your product daily, weekly or monthly to perform a certain action. Growth is the value that represents new customers using your product.
We won’t get into too many details, but PES is a great way to determine the health of your SaaS business. It might take a little bit more work to calculate but it will also give you a more accurate vision of what you need to do right now to retain existing customers and get new ones.
First Response Time (FRT)
This is one of the most common call center metrics but it can also be used for a variety of other customer interactions. First response time is literally the time it takes for a customer to reach a live person. The shorter the FRT, the better.
There’s no universal value for a good first response time as it will depend on the channel the customer is using. For example, a live chat customer will expect someone to respond within minutes, while a ticket submitted through a help desk shouldn’t take more than a day to get a response.
How to improve customer satisfaction
If you’ve tested your customer satisfaction using one of the methods above and the results are not great, don’t worry. Not all is lost and there are some great ways to work on your customer satisfaction today.
Ask for feedback
Every chance that you get, be proactive about asking your customers for feedback. Throughout the customer journey, find ways to ask customers about their opinions and make sure to let them know that their opinions are appreciated.
Engage with your customers
When you collect feedback, act upon it. Reply to your comments, feature requests, bug reports, and all customer interactions that come to you. A few seconds spent replying to a tweet may turn a detractor into a promoter.
Take a customer-centric approach
There is no business without customers. Each feature that you build and the direction you take with your product should be guided by qualitative and quantitative feedback from your customers.
Monitor feedback from different channels
Feedback comes in all shapes and forms and not just through the “official” channels. Make sure to monitor your feature requests, social media handles, emails, and all customer-facing touchpoints. You can aggregate all that feedback in one place - or simply use a feedback board in FeedBear.
NPS is a fantastic method to put a number on the customer satisfaction for your business. However, it’s best used in combination with other relevant metrics. Even if your NPS score is low, there are great tools such as FeedBear that let you communicate better with your customers and become a customer-centric company in just a few steps. Sign up for a free trial of FeedBear today to see how we can help!