What is customer satisfaction?

What is customer satisfaction?

Written by on August 21, 2018

Quickly decoding one customer satisfaction definition at a time

Have you found the meaning of life yet? Now, hold on before you slip into an existential spiral. Even biologists have trouble agreeing on a definition. Then there’s also the fact that there is more to living than breathing, pumping blood, or metabolism — relationships, money, happiness, firefighting at work, politics, cat videos, pizza… All these make crafting a singular definition for life somewhat tough. Defining customer satisfaction is no different. One customer satisfaction definition may be different from the next one, and these definitions co-exist with multiple ways to create satisfaction, and a number of metrics to measure it. Here’s a handy compilation that’ll help you understand their nuances.

The most widely acclaimed customer satisfaction definition (and what it implies)

Let’s start with the top-ranking definition on the internet today. In his book Marketing Metrics, Paul Farris defines customer satisfaction as ‘the number of customers, or percentage of total customers, whose reported experience with a firm, its products, or its services exceeds specified satisfaction goals’. In fact, this definition is endorsed by the Marketing Accountability Standards Board as the standard definition of customer satisfaction.

More importantly, Farris’ definition comes with two implications. First, it makes it clear that customer satisfaction is not just an abstract concept. You can a put a number on it. Second, it talks about specified satisfaction goals. It’s up to us to define what these satisfaction goals are and hence, they are going to vary from product to product or service to service, and both product and service if you are a SaaS company.

Most importantly, the book also says that customer satisfaction is a leading indicator of consumer purchase intentions and loyalty. Leading indicators are measurable factors that precede an event or lead to a result. In this case, they precede and build up to increasing buying intentions and product loyalty. But is that all?

Customer satisfaction defined by Philip Kotler

Philip Kotler defines customer satisfaction as a ‘person’s feeling of pleasure or disappointment which resulted from comparing a product’s perceived performance or outcome against his/her expectations’. Although Kotler uses abstract terms like pleasure and disappointment, the definition is by no means ambiguous.

Customer satisfaction = f(perceived performance, buyer’s expectations)

Here, customer satisfaction is a function of perceived performance and expectations. Perceived performance is the consumer’s belief about the product or service experience. Buyer’s expectations, on the other hand, are influenced by:

  • Performance of the product in the recent past
  • Word of mouth, recommendations or testimonials
  • Reviews
  • What competitors say about the product or service
  • What its own marketers promise

According to this definition, the satisfaction goals are established by the customers themselves before they set out to make a purchase. This is also why they start looking for more information at this point — reviews, comparisons, alternatives, etc. Your website, content marketing efforts, and presence on other review sites make a difference at this point. So do customer stories and testimonials.

Once the customer selects the product or service, they’ll start evaluating the actual experience against the expected one. This is where a trial period and a well thought out onboarding process make a difference for high ticket products and especially for low ticket products with low stickiness.

AK Rai would like to add to that definition

While Rai agrees that customer satisfaction depends on perceived performance and expectations, he lays down a more detailed customer satisfaction formula:

Customer satisfaction = Customer perception of the service received – Customer expectation from the service

Zeithaml and Bitner have a model for it

The customer satisfaction definitions we saw so far do not factor in some key parameters — like price, for instance. So, Zeithaml and Bitner went ahead and developed a customer satisfaction model that not only includes price but also personal factors.

The customer satisfaction model by Zeithaml and Bitner

Quality and price are pretty much in control of the product companies or service providers. But how does one take stock of situational and personal factors? This is where building user personas come in handy, both for B2B and B2C players.

User personas and situational factors

User personas help us understand our customers better and also generalize them just enough to segment them based on different parameters, including personal and situational factors. In a B2C scenario this can be done using user interviews, surveys or focus group discussion. B2B companies are more likely to have some data already at hand thanks to signup pages or other data collection methods on their websites. A basic exercise in lead enrichment and lead analysis can help you understand patterns in situational factors and individual attributes of a business/company that makes them more likely to be a satisfied customer.

Wait, but why is customer satisfaction important?

We’ve gone through three different takes on what customer satisfaction is. But why do businesses need to emphasize on it? It does seem like an intuitive things for businesses to do, but there’s more to it. We’ve already seen that customer satisfaction is a leading indicator to purchase intentions and customer loyalty. Customer loyalty is also a lagging indicator to customer retention, and here are 5 compelling reasons why customer retention matters.

  • As quoted by HBR, acquiring a new customer is anywhere from 5x to 25x more expensive than retaining an existing one.
  • According to Gartner, your loyal customers who form the 20% of your customer base drive an additional 80% of business.
  • As per MarTech, existing customers are 3x to 10x more likely to spend than a cold lead.
  • According to Fred Reichheld, inventor of the net promoter score, a 5% increase in customer retention results in a 25% to 95% increase in profits.
  • Compared to a new person evaluating it, price consciousness also decreases the longer a customer stays with a product.
  • All this applies to your website visitors as well. Repeat visitors spend more time per page and are more likely to leave a review too.

Satisfied customers contribute to customer retention and reducing churn. It leads to less spends or more budget to spend on other activities. It brings in more revenue and also word of mouth. And the pursuit for keeping our customers satisfied will enable us to continually improve upon our support functions, call center interactions, our communications and the product itself. It will also help us set the stage for the next task – winning customer loyalty. As customer service expert Shep Hyken has to say, “There is a big difference between satisfied customers and loyal customers. Satisfactory is a rating. Loyalty is an emotion.” Interestingly, Shep says this in a blog post titled ‘Why Customer Satisfaction is a Myth’. Well.

Illustrations by Nidhi Shah

 

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