Customer satisfaction

Written on 01 March, 2007 by Renee Hancock
Categories Small Business

Customer satisfaction can help your business achieve a sustainable competitive advantage. It’s about understanding the way a customer feels after purchasing a product or service and, in particular, whether or not that product or service met the customer’s expectations.

Customers primarily form their expectations through past purchasing experiences, word-of-mouth from family, friends and colleagues and information delivered through marketing activities, such as advertising or public relations. If the customer’s expectation isn’t met, they will be dissatisfied and it’s very likely they will tell others about their experience.

Why customer satisfaction is important

Don’t underestimate the value of customer satisfaction. It’s becoming an important area of competition.

A high level of satisfaction can deliver many benefits, including:

  • Loyalty: a highly satisfied customer is a loyal customer.
  • Repeat purchase: a highly satisfied customer buys more products.
  • Referrals: a highly satisfied customer tells their family and friends about the product or service.
  • Retention: a highly satisfied customer is less likely to switch brands.
  • Reduced costs: a highly satisfied customer costs less to serve than a new customer.
  • Premium prices: a highly satisfied customer is willing to pay more for the product or service.

‘Not happy Jan’

Monitoring customer satisfaction is important because we are much more likely to tell our friends and family about a bad experience with a product or service than a good experience. The introduction of blogs and websites such as has provided customers with an excellent platform to spread the bad word about a product or service to thousands of people. And there’s always the threat of negative publicity generated from current affairs programs or other media outlets. Don’t learn the lesson about customer satisfaction the hard way!

Customer satisfaction research

Satisfaction surveys are an important method for collecting information about how your customers think and feel about your brand, product or service.

A satisfaction survey can help you to understand the expectations of your customers, determine whether your customers believe you are meeting those expectations, identify new customer requirements or trends in the market and determine what areas of your business need investment.

A good customer satisfaction survey will also help you to understand the causes of dissatisfaction among your customers. Once you’ve identified these issues, you’ll be able to implement new practices to improve customer satisfaction.

Many businesses systematically measure customer satisfaction through independent surveys, feedback forms, mystery shopping and focus groups. Some third party surveys also compare the customer satisfaction of major competitors, which allows companies to benchmark themselves in their relevant sector.

Measuring customer satisfaction doesn’t have to be expensive. It can be as simple as preparing a short feedback form or conducting a brief telephone interview that asks the customer to rate the product or service on a number of criteria.

Indicators of customer satisfaction

An important indicator of customer satisfaction is the customer retention rate. To calculate your customer retention rate, you will need to capture data about the total number of customers and the number of customers switching brands. If you track this information over time, you’ll be able to see whether you are improving your customer retention and satisfaction.

Another tool that has been introduced in Australia is the Net Promoter Scores, which provide a new metric for measuring customer loyalty. The Net Promoter Scores ask one simple question about whether a customer would recommend a product or service to a friend or colleague. This question has been identified as the ultimate determinant of customer satisfaction or loyalty. Research in the UK and the US has found a clear correlation between the Net Promoter Scores and revenue growth, illustrating the importance of customer satisfaction to future growth potential. For more information about the Net Promoter Scores visit

Satisfaction affects the bottom line

Where there is high customer satisfaction, the customer retention rate will also be high and business results will follow. Gain an edge on your competition by focussing on what really matters.

About the Author:

Renee Hancock is a marketing and communications specialist, whose experience spans finance, government, education, not-for-profit, telecommunications and law. She has consulted for two of Australia’s most prestigious public relations agencies and now works in-house for a leading financial services organisation.

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