What is Customer Satisfaction?
Why do customers repeatedly buy the same brand of a certain product? The reason is simply because they are happy with the product or service that they repeatedly get or receive from a particular business. For example, one shopping store, to build up their customer satisfaction, have a generous return policy. This policy allows the return of any product if customers are not happy with it, even if it’s already opened or consumed. The policy might sound very costly in the part of the business yet such schemes pay off for businesses in the long run. This well illustrates the importance of customer satisfaction for businesses. What is customer satisfaction then?
Customer satisfaction is the degree of satisfaction provided by the goods or services of a company as measured by the number of repeat customers. It measures how well the expectations of a customer concerning a product or service provided by your company have been met. It is an abstract concept influenced by factors such as the quality of the product or service being provided, the ambiance or location of the store and the price of the product or service.
The Importance of Customer Satisfaction
Why is customer satisfaction so important for businesses? Simply stated, customer satisfaction is important because it provides businesses with a metric that they can use to improve their businesses. Studies also show that customer satisfaction is a good indicator of the probability of a customer making another purchase in the future. Businesses may ask customers to rate them in a scale of 1-10. The ratings are explained as follows:
- 7 and above. Customer is satisfied. They will most likely make a repeat purchase. Those who rate 9 or 10 may become the business’ advocates.
- 6 and below. Customer is unhappy and dissatisfied. The business is at risk of losing these customers.
Satisfied customers will continue to buy your product and avail of your service. Loyal customers spend more long term and keeping them satisfied and happy is actually cheaper than acquiring a new customer. It is six times more expensive to acquire a new customer than to retain an existing one.
Customer satisfaction can also be a point of differentiation that affect new customers. How? Say for example there are two business offering you the same products. Would a recommendation from a friend somehow influence your decision in choosing a brand? Probably yes. So how can a business acquire good recommendation? It starts with good customer experience which in turn will provide businesses advocates. In fact, customer advocacy is an efficient type of marketing. There has been an estimate made by small businesses that 85% of their new business actually came from word of mouth.
How great is the impact of satisfied customers to a business? One study showed that a totally satisfied customer provides 2.6 times more revenue than a somewhat satisfied customer and generates 14 times more revenue than a somewhat dissatisfied customer.
These are only a few reasons why focusing on customer satisfaction is important. When customers are kept happy, satisfied and loyal to your product or service, your business will grow and build longer relationships with customers.