How to Prove the ROI of Customer Satisfaction (CSAT)

What if the return on your investment is even beyond what you were hoping?

Focusing on your customers will result in increased loyalty, more positive word-of-mouth referrals, and higher spend from your best customers. And understanding, leveraging and acting on CSAT scores can absolutely help you get there.

First things first.

It costs five times more to sell to a new customer than to sell to a happy one. (This is an accepted rule of thumb, but in some industries, it can be much higher!) Leveraging CSAT helps us see just how much that can mean.

Start with measuring your CSAT score as outlined by GetFeedback. Use other business knowledge to find the ROI of your CSAT initiatives. I’ve outlined an example here.

If your CSAT metric is 60%, that means 40% of your customers are at risk of defection. A simple way to consider ROI is to take the number of dissatisfied customers and multiply that by how much it would cost to sell to new customers.

For example, if you know it costs $2,000 to earn each new customer, then replacing 40 customers would mean $80,000 in expenses just to avoid customer churn. By keeping the customers you have happy, the expenses would be five times less than that, at $16,000.

Another way to consider this is to calculate what a few positive points in CSAT could mean to your bottom line. Moving from 60% satisfaction to 70% in this example would mean facing expenses of $60,000.

To determine the ROI for your business, it’s important to have a clear understanding of how much you are spending on earning and keeping your customers.

But your best customers will also spend more on your brand!

In one study, the strongest brand advocates spent 15% more than non-advocates. These advocates also visit the brand more often. Understanding this important segment of customers means creating experiences that continue to earn their loyalty and, in return, their money. Here’s another example on how to calculate ROI with this information.

Your satisfied customers spend 15% more with your brand. Knowing that 78% of your customers are happy and will spend more, what would it mean if your CSAT dropped to 75%?

Losing that 3% of customers who spend 15% more than other customers may mean millions of dollars in many industries. You must do the math to show why keeping customers satisfied, and measuring that consistently, is critical to successful outcomes for the overall business.

It’s up to customer-centric leaders to engage the right ways to measure, communicate and take action on it.

Here is how to optimize your CSAT score to gain the most value.

Understand and track your CSAT score

The first step toward any improvement is understanding where your customers are today. The very act of measuring customer satisfaction is a step toward progress.

Without tracking and understanding this important metric, it’s impossible to know if you are delivering the experience your customers are expecting from you. Tracking your CSAT score is a step in the direction of superior customer experiences. Seriously, don’t underestimate this!

Your CSAT scores will tell you an overall story of your customers. Are you offering them experiences that earn those higher feelings of satisfaction and delight or are the scores so incredibly consistent they don’t really enlighten you with how your customers are feeling? The more consistently you measure, the more you’ll gain.

Your employees will also start seeing what customers like and don’t like. This allows for more innovation and empowerment, leading to lower costs for service issues.

Benchmark your CSAT score against your industry

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 possibly, 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.

If you are in the Internet Service Providers category where the benchmark is 62%, ask yourself why the Video Streaming Service category achieves a 75% rating.

Start looking at the gaps between your customer experiences and theirs. Make it a goal to improve your CSAT ratings and watch the profitability follow suit.

Another way to ask this question: What will happen if you don’t address this issue?

Your customers are expecting you to react to their wishes. In the latest “State of the Connected Customer” research by Salesforce, 62% of customers now expect companies to adapt based on their actions and behaviors. This increases to 67% among millennials and members of Generation Z.

By not investing in your customer’s satisfaction, you are risking disappointing more than half of your customer base. What would it mean if half of your customer base defected to the competition, who was investing in satisfaction?

Identify and leverage your brand advocates

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 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.

By finding those advocates, you have the ability 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.

And brands from IKEA to DeWalt Tools have tapped into their most satisfied customer base to co-create products and services with them. DeWalt reportedly saved more than $6 million in research costs by tapping into their customers.

Recover unsatisfied customers

CSAT scores also help us identify where we absolutely must invest in the customer experience.

Using transactional CSAT or touchpoint CSAT along with understanding the overall journey, brands can identify moments when leveraging proactive methods could actually lead to higher loyalty.

Thanks to the service recovery paradox, it’s sometimes better to recover from a negative point in the customer journey to earn loyalty.

Have you ever experienced that as a customer? You call the hotel desk because you need towels, and they apologize by giving you a spa treatment. That earns your loyalty more than if you never had an issue!

Using CSAT can help you identify those parts in the journey that require a little extra attention before they are fully addressed and in some cases, corrected. CSAT allows us to capture those customers.

We know, for example, that a delay in service is likely to cause a lower CSAT score and decrease loyalty, increase negative word of mouth referrals and chip away at the trust in the brand.

Smart companies proactively design a moment to address the negative issue for the customer, like prompting a discount or coupon to address the negative experience.

We know that avoidable customer defection costs U.S. businesses $136 billion a year.

Keeping customers satisfied is more than just a nice to have. It’s how we stay in business.

Prove the ROI of CSAT with consistency

Find the business outcomes that are most important to your business, and look for ways to tie CSAT to those outcomes. This works best when you have planned that way, but sometimes it takes consistently watching what metrics are related to others.

The best thing to do is to consistently track CSAT and have processes to use the feedback appropriately. After consistently doing this, you will begin to see the patterns that emerge. Does your CSAT score go up when your team is trained appropriately? Does that influence your renewal rates? Consistency is absolutely the key here and just reporting on numbers will not make believers out of anyone.

CSAT is a powerful, simple way to get everyone in the organization on board with the progress you are making with customers. Tie the results of improving CSAT with business outcomes to save money or avoid expenses and help your brand succeed in ways beyond a perfect score.

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Read more:

• Customer Success and ROI: How to Track Revenue