Customer Satisfaction as a Key Business Metric


Organizations must understand the role of customer satisfaction for creating new customers and retaining the existing ones by increasing their loyalty for the brand. These loyal customers not only provide you with consistent business but also with a lot of referrals.

According to Bain & Company, “a customer is four times more likely to buy from one of your competitors if their problem is service related versus price or product related.” In order to achieve short term goals organizations usually forget about the long term benefits which can be attained by keeping customers satisfied. Studies have found that the level of customer’s satisfaction has a positive effect on profitability. “A totally satisfied customer contributes 2.6 times as much revenue to a company as a somewhat satisfied customer.”

The rate of customer retention is going down for every industry because the quality of service provided is not upto the benchmark. In today’s crafty world, customers have lots of options when it comes to choosing a product or a service. Customer retention statistics is difficult to obtain but the most important aspect is to understand the need of good customer satisfaction and what can be done for maintaining a high level of service. Here are 5 reasons that will help you in understanding the need of customer satisfaction for business metric:

  • It indicates customers Loyalty towards a brand: Loyalty is considered as a strong commitment to purchase from the same brand in future. The perceived value from the product and the service affects customers judgement about their loyalty with the product or the service. The significance of customer loyalty is closely related to the company’s continued survival and strong future growth. Studies show that “On an average, it takes up to three years for a customer to become loyal to your business.”  Organizations must focus on maintaining the satisfaction level of customers in order to enhance the brand experience. It is also important to know how loyalty towards a specific brand can be reinforced.

  • It acts as a point of differentiation and helps in staying ahead of competition: Surviving a cut throat competition is difficult for organizations. But what acts as a key differentiator for companies who successfully survive the competitive aura? Is it just about the look and feel of the product/service being provided? Organizations that consider customer satisfaction as a key element of their business strategy have always stayed ahead of their competition. It should be understood that customers are very deliberate in measuring the level of service that a brand provides. Studies have shown that “89% of consumers have stopped doing business with a company after experiencing poor customer service.” Customer expectations change dramatically with economic conditions. So, finding about the choice and preference of the customer thereby revising the sales and marketing strategy accordingly is one of the wise step that organizations must take to create great customer experience. This gives a good reason to the customers to come back rather than going to a competitor.

  • It improves Customer’s Lifetime value: Customer lifetime value(CLV) is a prediction of all the value a business will derive from their entire relationship with a customer. The amount of satisfaction that your products and services provide to your customer is directly proportional to the longevity of customer’s stay with your organization. Thus, the sustainable relationship ensures you of getting the return on investment for the effort (time, money and risk) it took to win a customer. Instead of thinking about how you can acquire a lot of customers, think about how CLV can help you in optimizing your acquisition spending for maximum value.

  • It helps in spreading good Word of Mouth: Word-of-mouth advertising takes place when a customer talks about your product or services with someone else. Positive feedback about your company can lead to more profits and successes. whereas, negative word of mouth can act as a death knell for the company. Maintaining a high level of customer satisfaction can help you prevent the bad talks about your business. Negative word of mouth can also lead to decreased traffic, damage of reputation, loss of opportunities, and negative profits.

  • It helps in retaining customers: Acquiring new clients is more expensive than retaining the existing ones.  With rising customer acquisition cost, businesses need to take proactive measures in maintaining good terms with their existing customers. Studies have found that “acquiring new customers can cost as much as 5-7 times more than simply retaining existing customers.” Retention is closely related to satisfaction. Satisfaction helps you in getting repeat customers and earning brand advocates, thereby earning more customers down the way. Therefore, companies should focus on their customer retention strategies and include this in their key metrics as well.

Related: Root causes of Bad Customer Service