CSAT vs. NPS: Understanding Customer Success Metrics

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csat-vs-nps
You may have heard, “You can’t manage what you can’t measure.” It certainly rings true when considering goals like improving efficiency or controlling labor costs. Quantitative metrics allow you to assign a number to the current state, compare it to the past, and track your company’s progress toward your goals.. However, not everything is easy to measure.

Take customer satisfaction. Even customers can struggle with quantifying how happy they are with your services. But collecting customer feedback and finding an effective way to measure customer satisfaction—often by unraveling the answer to the question of how to use CSAT or NPS—is vital to your brand’s success.

Customer Satisfaction Score (CSAT) and Net Promoter Score (NPS) are two of the most common tools businesses use to track how happy customers are. They measure how successfully companies deliver the delightful experiences that build loyalty. Both tools are effective at taking the abstract, i.e., feelings, perceptions, and happiness, and expressing them as a number. Managers can use those metrics to guide strategy improvements and employee training. And, as with any tool, you need to use CSAT and NPS correctly to get the most value from them.

  • Leaders tasked with improving customer satisfaction will benefit from a deeper dive into: Understanding the importance of customer satisfaction
  • The differences between CSAT vs. NPS
  • When and how to use those metrics
  • The technology that can help improve CSAT and NPS scores

 

Understanding Customer Satisfaction’s Impact on Your Business

The most successful businesses know customer satisfaction is more than a feel good, morale-boosting accomplishment. The more significant impact of customer satisfaction is that it is directly tied to customer loyalty, retention, customer lifetime value (LTV), and revenue.

In competitive markets, like software, banking, financial, and consumer services, people have various options for where to do business. In the past, it was a safe bet to provide the best offering or compete on price to build customer loyalty. However, according to PwC research, most consumers (73 percent) say their experience is a primary factor in purchasing decisions. Furthermore, it may take only one bad experience for a customer to take their business elsewhere.

Unfortunately, when customers go elsewhere for products or services, profits can begin to decline. It’s more costly to continually work to acquire new customers than to keep the customers you have. When you compare the costs of marketing, sales, and onboarding to the costs of providing service and support to existing customers, you’ll find focusing on retention makes good financial sense.

Furthermore, depending on your business model, retention may be critical to your survival. Software as a Service (SaaS) companies, for example, need to build monthly recurring revenue (MRR) to operate. They often don’t cover acquisition costs and see a profit for months after an initial sale. If they constantly lose customers to churn, they can experience a “leaky bucket effect” where they can’t replace customers fast enough to cover the acquisition costs.

Satisfied customers are less likely to churn and, therefore, more likely to enable a business to build recurring revenue. Moreover, they’re more likely to increase spend with your company and become “brand ambassadors. ” With their help, you can increase word-of-mouth marketing, positive reviews, and other user-generated content that can expand your reach and help your business grow.

Business leaders responding to a SuperOffice survey revealed that their top business priority through 2025 is enhancing customer experience. They also report that they plan to place more importance on the customer experience than even product development or pricing to stay ahead of the competition.

 

How to Measure Customer Satisfaction

With so much riding on customer satisfaction, you need a way to measure and track it. Some businesses rely solely on anecdotal information or open-ended customer satisfaction surveys. However, that information can be challenging to interpret.

Fortunately, analysts have found ways to capture sentiment and quantify it with customer satisfaction metrics. CSAT and NPS are two of the most popular measures of customer satisfaction.

What is the Customer Satisfaction Score (CSAT)?

CSAT is a simple but effective method of representing your customers’ happiness with one or more of the experiences you provide. CSAT surveys are typically based on a five-point scale that allows customers to rate their satisfaction. CSAT enables you to focus on an area of your business that you want to evaluate. For example, you could go as broad as an overall view of a recent experience or as specific as how satisfied a customer is with an interaction with a particular employee or process.

To calculate a CSAT score, businesses ask their customers straightforward questions, such as:

  • “How satisfied are you with our team member who helped you resolve your issue?”
  • “How would you rate the service you received at our brand office today?”
  • “How would you rate our new offering?”

Businesses usually poll customers digitally, giving respondents the convenience of clicking a box on a web form from “1” for very unsatisfied or a very poor rating to “5 for very satisfied or a very good rating. It’s best to collect data for a CSAT immediately after an interaction or transaction, while the experience is fresh in customers’ memories and their feelings are strongest.

Once surveys are completed, you can find your CSAT by dividing the number of people who responded with a 4 or 5 (satisfied or very satisfied) by the total number of responses.

Sample calculation:

  • A business surveys 500 customers.
  • 310 respond that they’d rate the service they receive as a 4 or 5.
  • CSAT calculation: 310/500 x 100 = 62%

You can track that percentage and work with your team to strive for the perfect score of 100%. This will ensure your business is maximizing customer satisfaction and all the benefits that come along with it. On the other hand, if the CSAT is lower than 75%, it means more than one-quarter of respondents are less than satisfied with some aspect of your business. By asking deliberate questions, you can use the CSAT to pinpoint issues so you can refine processes, retrain employees or take other steps to boost customer satisfaction.

CSAT surveys are quick and straightforward, which can motivate more people to respond. Remember, however, that your loyal customers are probably the most likely to participate. People who are less enthusiastic about your offerings may ignore the request for feedback. As a result, scores may tend to be deceptively high.

Also, if you receive consistently low scores, it’s vital to get to the root causes and correct them. If your most loyal customers are communicating that there’s a problem with customer experience, it probably means you have many more customers who feel the same way. It may be helpful to give your customers the opportunity to elaborate on their answers in a text field, which can help you address issues with the service you provide from their point of view.

CSAT, like any key performance indicator (KPI) that you track for your business, isn’t a one-time exercise. Continually allowing customers to provide feedback and monitoring trends will help you manage your business in a way that produces satisfied customers.

What is Net Promoter Score (NPS)?

Although calculating a Net Promoter ScoreĀ® may seem similar to a CSAT, you’ll see that they provide different insights when you evaluate CSAT vs. NPS. While surveys that collect data for a CSAT can ask a range of questions, NPS surveys focus on one question: “How likely are you to recommend us to a friend, colleague, or family member?”

The score’s developers found that the answer to this single question is an excellent gauge of customer satisfaction. Additionally, it can remove some of the bias that may exist with CSAT surveys if questions aren’t worded correctly.

To collect customer feedback to calculate an NPS, a company asks customers to rate their likelihood of recommending your business on a scale from one to 10.

  • Customers who respond 9 or 10 are considered “promoters,” people who are so satisfied with your company that they’d want people close to them to work with you.
  • Customers who respond with a 6 or lower are considered “detractors,” or people whose satisfaction level isn’t high enough for them to make a recommendation.
  • Respondents who respond with a 7 or 8 are considered “passive” and are ignored during score calculations.

To find your score, you subtract the percentage of detractors from the percentage of promoters.

Sample calculation:

  • A business surveys 500 customers.
  • 310 are promoters and 105 are detractors
  • 310/500 x 100 = 62% promoters and 105/500 x100 = 21% detractors
  • NPS = 62%-21% = 41

Because of how the NPS is calculated, scores can range from -100 (when no one would recommend your company) to +100 (when everyone would). Therefore, a score of zero means you have just as many promoters as detractors, and positive numbers, especially those above 50, are good.

Analysts that have studied NPS across industries have found that benchmarks vary for businesses in different markets. Therefore, you can compare your score to other businesses in your industry as well as track your score over time.

Additionally, you can segment customers by how they respond. By communicating to your team about which customers are promoters, passive, or detractors, you can help them personalize interactions to improve experiences—and see scores rise in the future.

 

CSAT vs. NPS: Which is More Important?

Before choosing customer satisfaction metrics for your business, you need to take a step back. The customer success metric shouldn’t guide your decision. Your business goals should.

Start with areas of your business where you need more visibility regarding customer satisfaction. Then decide the best metrics to use to assess them and track progress as you make changes. For example, you may suspect that long waits—from when a customer submits a ticket or requests until an issue is resolved—could negatively impact experiences. However, you may not have data to back up that assumption.

Calculating a CSAT for customer service can provide a baseline for customer satisfaction with your support team. It can also give you a way to gauge it as you change processes or deploy solutions that help your team address issues more quickly and efficiently.

Or, as part of an initiative to see double-digit growth in the coming year, you may want to gauge customer loyalty and better understand your customers’ perception of your brand. NPS can give you a number you can use to see how you stack up against industry benchmarks or your competitors and to track customer satisfaction as you adapt processes over time.

Also, remember it’s not necessary to choose between CSAT vs. NPS. Businesses that effectively enhance experiences and increase satisfaction often use both metrics. Using both helps them understand their customers better and see how effective new processes or approaches to engagement can be. By using both CSAT and NPS, your business can gain insights into your team’s performance and customer satisfaction with every touchpoint on a customer’s journey.

 

Use Every Tool in Your Customer Success Tool Chest

When you reach a crossroads, such as releasing a new product or feature or adjusting your pricing plan, it’s always best to base decisions on data. CSAT and NPS will show if you need to do more to achieve customer satisfaction. But you will need more information to understand which steps to take to get your business back on track. A comprehensive customer satisfaction strategy will include other metrics you can use to inform your decisions.

One metric you can monitor in addition to CSAT and NPS is the Customer Effort Score (CES). This metric surveys customers to find out how difficult tasks or engagements are for them. For example, you can ask how easy it was for a customer to find the information they needed in your knowledge base. Or a bank may ask how much difficulty customers had completing a loan application. Using a rating scale and calculations similar to CSAT, you can develop a picture of how easy and convenient customers think it is to do business with your company.

A CES can also provide you with specific, actionable information about the customer experiences you provide: If something is too difficult for your customers, you can make improving that process a priority.

In addition to using scores and metrics that analysts have developed, you can also create metrics unique to your business. Using data on your customers and from your applications, you can create a “customer health score.” This will allow you to build a profile of customers that are most likely to be successful and satisfied with your services. You can base the health score on factors such as:

How often customers use your products or services
How often customers engage with your team
How much customers spend
How they respond to CSAT or NPS surveys

Likewise, you can identify customers at risk of churn, providing you a chance to intervene and save the account.

A word of caution, however. When deciding which metrics to use, consider the resources you can dedicate to collecting data and tracking customer satisfaction. Focusing on customer satisfaction metrics could easily monopolize an employee or team’s time. So it’s essential to clearly define the data you need, the best way to acquire it, and whether you can automate parts of the process.

Also, consider your team’s skills and experience with surveys, data collection, and analysis, and provide them with the proper support. Overall, look for the most practical and cost-effective way to acquire the information you need and produce the greatest ROI.

 

Understand CSAT and NPS to Drive Better Results

Customer success metrics like CSAT and NPS help you develop a clearer picture of how satisfied customers are with your offerings, services, and engagements with your business overall. The metrics you choose to measure customer satisfaction can keep your business on track by maximizing retention, decreasing churn, increasing lifetime value, and boosting business growth.

The most successful and competitive businesses realize that gauging and monitoring customer satisfaction doesn’t boil down to the question of CSAT vs. NPS. Instead, you need to develop a strategy that includes tracking multiple metrics as necessary to keep a finger on the pulse of your customer’s sentiment toward your business. When scores are high, you can be confident that your team is delivering experiences that delight customers and build loyalty.

But customer satisfaction can be elusive. Consumer behaviors and preferences change, and businesses must adapt to retain their loyalty. Technology can help improve your CSAT score and, ultimately, customer experiences.

Solvvy provides businesses across various industries with a powerful conversational artificial intelligence (AI) platform for intelligent customer service and support. Solvvy’s natural language processing (NLP) model can understand customers, detect sentiment, and respond with personalized answers on any channel, day or night.

Additionally, Solvvy can hand off customers to agents when needed, for smoother, faster assistance. The agents receive all the info and context they need to continue the conversation right where it left off. Those efficient, effective interactions can go a long way toward improving experiences and increasing customer satisfaction.

Solvvy’s conversational AI platform allows you to collect and see data about the support process more efficiently, automate surveys, and better understand customer preferences. It’s easy to deploy and requires minimal maintenance, so your team can focus on delivering outstanding customer experiences.
To learn more about customer support strategies that can keep your customer satisfaction metrics high, including CSAT and NPS, download our ebook, Happy Customers.