Here are the top six reasons why customer satisfaction is so important:
It’s a leading indicator of consumer repurchase intentions and loyalty
It’s a point of differentiation
It reduces customer churn
It increases customer lifetime value
It reduces negative word of mouth
It’s cheaper to retain customers than acquire new ones
1. It’s a leading indicator of consumer repurchase intentions and loyalty
Customer satisfaction is the best indicator of how likely a customer will make a purchase in the future. Asking customers to rate their satisfaction on a scale of 1-10 is a good way to see if they will become repeat customers or even advocates.
Any customers that give you a rating of ...view middle of the document...
Companies who offer amazing customer experiences create environments where satisfaction is high and customer advocates are plenty.
This is an example of where customer satisfaction goes full circle. Not only can customer satisfaction help you keep a finger on the pulse of your existing customers, it can also act as a point of differentiation for new customers.
3. It reduces customer churn
An Accenture global customer satisfaction report (2008) found that price is not the main reason for customer churn; it is actually due to the overall poor quality of customer service.
Customer satisfaction is the metric you can use to reduce customer churn. By measuring and tracking customer satisfaction you can put new processes in place to increase the overall quality of your customer service.
I recommend you put an emphasis on exceeding customer expectations and ‘wowing’ customers at every opportunity. Do that for six months, than measure customer satisfaction again. See whether your new initiatives have had a positive or negative impact on satisfaction.
Related: 15 tactics to reduce customer churn
4. It increases customer lifetime value
A study by InfoQuest found that a ‘totally satisfied customer’ contributes 2.6 times more revenue than a ‘somewhat satisfied customer’. Furthermore, a ‘totally satisfied customer’ contributes 14 times more revenue than a ‘somewhat dissatisfied customer’.
Satisfaction plays a significant role in how much revenue a customer generates for your business.
Successful businesses understand the importance of customer lifetime value (CLV). If you increase CLV, you increase the returns on your marketing dollar.
For example, you might have a cost per acquisition of $500 dollars and a CLV of $750. That’s a 50% ROI from the marketing efforts. Now imagine if CLV was $1,000. That’s a 100% ROI!
Customer lifetime value is a beneficiary of high customer satisfaction and good customer retention. What are you doing to keep customers coming back and spending more?
Learn more about customer lifetime value:
Customer Lifetime Value For Beginners (4 Step Guide)
5 Strategies To Increase Customer Lifetime Value
5. It reduces negative word of mouth
McKinsey found that an unhappy customer tells between 9-15 people about their experience. In fact, 13% of unhappy customers tell over 20 people about their experience.
That’s a lot of negative word of mouth.
How much will that affect your business and its reputation in your industry?
Customer satisfaction is tightly linked to revenue and repeat purchases. What often gets forgotten is how customer...