“How is my business doing?”
This is a pressing question which every leader wants answers to because they give the leaders insights into the health of the business.
The best indicator of a business’ performance, apart from revenue, is how customers perceive it. This is why businesses try measuring customer satisfaction surveys through questionnaires and phone calls.
The problems with depending heavily on this approach are as follows:
- Most numbers of customers don’t respond to initiatives of measuring customer satisfaction. Only the ones that are very happy or unhappy with the service will do so, which comprise less than 10 percent of the volume reached out to. As a result, companies could make broader decisions based on a tiny subset of data.
- Leaders might assume that everything is fine since their personal relations with customers are good. But being too close makes them miss red flags which indicate that the customer is turning unhappy and might switch to a competitor.
- Companies could ask vague questions in their customer satisfaction questionnaires and get answers that satisfy their egos. But it doesn’t give specific insights into why customers are happy or unhappy, and companies are caught napping when customers quietly switch to a competitor.
This is not to downplay the importance of customer satisfaction surveys. They are important. But companies should avoid relying too heavily on these surveys. Otherwise, by the time they realize their mistakes in data analysis, it’s too late.
Here are five tangible metrics that your company can use to measure customer satisfaction and gauge your business health.
1. Repeat Purchases
If customers face a problem with your product, they may complain if the problem is of high concern for them. If they find a quicker alternative to their problem, they might not even complain.
You could solve your customers’ problems if you know about it, but you might not know whether they’re satisfied if they don’t respond to questionnaires or phone calls.
At such times, a simple way to check whether customers are happy with your resolution is whether they’ve purchased again from you or renewed their subscriptions. This is especially useful for e-commerce and subscription-based companies.
After you close a customer complaint ticket, track how long it takes for the customer purchases from you again. If it’s longer than the average frequency, follow up with them. You will enhance your customer’s experience by showing that you care.
2. Customer Wallet Share
Customers rarely make all their purchases from a single source. However, the quantity of their purchases is directly proportional to their trust level of the source.
An increase in customer spending on your products or services indicates that they’re highly satisfied with what you sell. Conversely, a reduction in spending means customers could be weighing other options or may have already found some.
For instance, when our CRM software customers purchase more licenses or more software from us, we get more share of their wallet because they’re satisfied with our existing product.
Track the results of your attempts to upsell/cross-sell to existing customers. A positive response indicates a positive customer satisfaction level.
3. Contribution to Turnover
Pareto’s Law states that 80% of results come from 20% causes. Similarly, around 80% of your revenue comes from 20% of your customers. (If you analyze your invoices, you’ll find a similar pattern.)
When customers become part of this 20%, it means you provide them with more than just a product that is easily available in the market.
Track how much quarterly revenue your important customers contribute to your overall turnover. An increase in revenue contribution is a positive sign. Stagnation or decrease should lead you to examine where you’re lacking in delivering value.
4. Number of Referrals Given
Highly satisfied customers don’t just open their wallets to you. They also generate a good number of referrals for you. Since you help such customers achieve their goals, they want to return the favor by helping you achieve yours.
It’s common knowledge that referrals are the most effective source of business. So, the more customers refer people in their circles to you, the higher their satisfaction level with your business.
Ask customers for referrals and record them. Also, when you get new inbound customers, ask them how they heard about you. Make generating referrals an integral part of your customer acquisition strategy not just for more business but also because it indicates that you’re keeping customers happy.
5. CSAT Scores
As I said, this post is not to downplay the importance of CSAT. Measuring CSAT is important. But numbers are useless by themselves. In order to make your CSAT surveys effective, you must know what the numbers mean.
Identify which aspects will give you information on how you can enhance customer experience is important to make the activity effective. Ask customers specific questions about your product and open the floor for feedback.
Then analyze the responses in your software, identify patterns and work on them to enhance the customer experience. Thus, you’ll give your business a direction based on data instead of playing the guessing game.
The popular saying goes, “don’t put all your eggs in a single basket.” Similarly, don’t rely on a single metric to track how your business is doing.
Use a combination of two or three (or all) of the above metrics so that you can stay ahead of the curve.