Customer Satisfaction and Retention: What You Need to Know [Guide]

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customer satisfaction and retention

Before customers can be loyal to a brand, they need to be happy with the products that the brand offers. They need to be satisfied customers. So, what is the link between customer loyalty and customer satisfaction?

And if you can achieve one or the other, how do you measure that? How do you measure customer satisfaction? How do you measure customer loyalty?

When customers decide that your online or physical store is one they want to keep coming back to, it’s usually because they’re happy. But customer happiness or satisfaction isn’t the same as customer loyalty.

Satisfied customers have the power and incentive to become loyal customers and bring you more business through referrals.

It’s therefore important for any e-commerce business to measure customer satisfaction and understand the relationship between customer satisfaction and retention. Because unhappy customers won’t think twice about not visiting you again.

In this article, we’re going to explore what customer satisfaction is, why it’s important, and how to measure it. We’ll also look at how customer satisfaction relates to loyalty and retention and the differences between these two concepts.

We’ll also explore how customer engagement differs from satisfaction, how to make customers happy, build loyalty, and more.

What is customer satisfaction?

Customer satisfaction (CSAT) is a measure that indicates how much a customer enjoys dealing with and/or buying from a business. It measures how well your products, services, and overall customer experience (CX) are received by customers and if they meet customer expectations.

Zendesk notes that customer satisfaction “reflects your business’ health by showing how well your products or services resonate with buyers.”

A business with a high customer satisfaction rate will be a booming one with many repeat and loyal customers.

Meanwhile, a business with unsatisfied customers is likely to see many requests for refunds, a high product return rate, and overall dwindling business.

satisfaction levels from very satisfied or excellent to very poor or dissatisfied
Emotional response and customer satisfaction levels via Freepik.

To measure customer satisfaction, you’ll need to use surveys and have your customers respond to them.

Since customer satisfaction focuses on the customer experience, it takes into account several aspects of that experience.

These aspects include:

  • Product availability
  • The buying process
  • The post-purchase experience
  • Your customer support team’s response rate, friendliness, and helpfulness

Customer satisfaction and NPS

The Net Promoter Score (NPS) is a measure of customer satisfaction and happiness. It can measure customer experience and “predict business growth.”

To measure satisfaction, the NPS uses a scale of 0 to 10 for several survey questions. The respondents to these questions are divided into 3 groups: Promoters, Passives, and Detractors.

‘Promoters’ are those who score between 9 and 10. They are a company’s “loyal enthusiasts who will keep buying and refer others, fueling growth,” the NPS website explains.

Meanwhile, ‘Passives’ are customers who score 7 to 8. They’re seen as “satisfied but unenthusiastic customers.” Your competitors can easily draw these customers away with tempting offers.

Finally, the ‘Detractors’ are those who score between 0 and 6. Detractors aren’t just unhappy customers, they’re customers who may hurt your brand and “impede growth through negative word-of-mouth.”

To calculate your Net Promoter Score, you’ll need to subtract the percentage of Detractors from the percentage of Promoters. The result can range from -100 to 100.

If your NPS is -100, then this means all your customers are Detractors and you need to act quickly to build and increase customer loyalty.

Meanwhile, if your business gets an NPS of 100, it means every customer is a ‘Promoter.’ It also means your business boasts many loyal customers who can refer you and help you grow your business.

Customer satisfaction vs Customer loyalty: What’s the difference?

Now that we’ve covered the basics of customer satisfaction, let’s see how it differs from customer loyalty and retention.

As mentioned, customer satisfaction is about making customers happy with their experience with you. This experience can be an in-store, online, or omnichannel experience.

Meanwhile, customer loyalty involves getting customers to repeatedly buy from you. It means having customers who think of you first when they need a product.

Customer loyalty means building a long-term relationship with your customers that’s about trust and happiness.

It’s unlikely customers will be loyal to your brand.

The best way to build customer loyalty is to use a customer loyalty and rewards program. While there are different types of loyalty programs, the intention is the same: transform customers into loyal followers who keep coming back to your store.

So, what’s the difference between customer satisfaction and customer loyalty?

Customer satisfaction is the first step in making customers happy. Once customers are happy, you can entice them with loyalty points and rewards to transform them into return customers.

And the good thing about loyalty programs is that their results are measurable. By reviewing several metrics, you can easily measure the success of your loyalty program.

Why is customer satisfaction important?

By now, you can probably guess that customer satisfaction is important. But why?

1) Satisfied customers can be returning customers

When customers like a brand’s products AND their experience with that brand, they become more inclined to return to that store when they need that product again.

Offering wonderful products is the first step in making customers happy. However, if you don’t offer a good customer support experience, you’re hurting your brand and increasing churn.

The customer experience includes a customer’s interactions with your brand through:

  • Making an online or in-store purchase
  • Getting in touch with customer support for questions or requests for information
  • Exchanging a product
  • Returning a product
  • The after-sale experience

2) Happy customers boost sales and revenues

E-commerce businesses know this: Increasing customer retention by as little as 5% can boost profits by 25% to 95%. (Harvard Business School and Bain & Company)

In other words, happy customers are more likely to return and buy from you, which means higher revenues and sales.

customer satisfaction and retention happy customers
Customer review rating. Different People give review rating and feedback. Flat vector illustration. Customer choice. Know your client concept. Rank rating stars feedback. Business satisfaction support

3) Happy customers can help you see your strengths

By measuring customer satisfaction, you can learn where your business excels and where it doesn’t.

Getting feedback by running customer satisfaction surveys helps you maintain your level of quality. It also ensures you know your weak spots so you can improve those areas.

4) Satisfied customers can easily refer you

One of the major benefits of customer satisfaction is that it’s the first step in getting referrals.

Referral marketing is a great and inexpensive way to acquire new customers. And because the referrals come from satisfied and loyal customers, they’re less skeptical about your business compared to new customers who have never done business with you or have gotten a recommendation to try your products.

Since referrals come from satisfied and loyal customers, they’re less skeptical about your business and more likely to trust you from the start. That’s compared to new customers, who have never done business with you or gotten a recommendation to try your products.

5) Less churn

You’ve probably realized that happy customers are unlikely to churn, that is leave your brand for the competition.

It’s best if you ensure consistent and constant customer satisfaction so that not only customers don’t churn, but become loyal advocates of your business.

Creating personalized experiences and using a customer engagement strategy can also help reduce churn.

6) Happy customers can boost your brand loyalty

Another benefit to customer satisfaction is that it can increase customer loyalty towards your brand.

This comes as positive word-of-mouth and reviews of your products. It can also come in the form of referrals. 

How to measure customer satisfaction

To achieve satisfaction and increase it, you must first know how to measure it.

Measuring customer satisfaction isn’t hard. It trickles down and contributes to your customer retention strategy and your customer engagement strategy.

Measuring customer satisfaction means asking your customers for their feedback via surveys.

How you go about your surveys is up to you. It can be a one-question survey after releasing a new line of products or even after revamping your website.

You may also want to consider the sample size of your survey.

Do you want as many customers to respond to your survey? Or do you want a select few like your top-spending customers or customers in a certain city or region?

Understanding and evaluating survey answers 

In a survey, you ask your customers one or more questions to get their feedback. There are usually 5 multiple-choice answers for each question in your satisfaction survey. They are:

  • Very satisfied
  • Satisfied
  • Neutral
  • Unsatisfied
  • Highly unsatisfied/dissatisfied
customer satisfaction and retention survey diagram
Image source: Freepik

You can also get customers to give you feedback using star-ratings, or open-ended questions.

The result from the survey is known as the customer satisfaction score or CSAT score.

If a large portion of your customers respond with ‘Satisfied’ and ‘Very satisfied,’ then you’ll get a high CSAT score. It means you’re doing a good job and customers are happy.

If you get more responses with ‘neutral,’ ‘unsatisfied’ and/or ‘very unsatisfied,’ then your CSAT score will be low, indicating customer dissatisfaction.

How to create an e-commerce customer satisfaction survey

It’s time to look at the steps you should follow to create a customer satisfaction survey for your e-commerce business.

It’s worth stressing here — rather than later—that if you don’t plan on taking steps to address customers’ concerns and dissatisfaction based on the survey results, then you shouldn’t create a survey in the first place.

Creating a survey, getting customers to respond to it, collecting the data, and analyzing results is time-consuming and hard work.

To create your e-commerce satisfaction survey, you’ll need to follow a few steps:

1. Determine your goals

The first step in creating a successful survey is to determine your customer satisfaction goals. What do you want to achieve with this survey?

Do you want to know if customers are satisfied with their overall experience in your store?

Did you recently add a new partner or new line of products that you want to know how customers feel about?

These are all goals that you need to consider in this step. Just write them down as bullet points. The goal or goals you decide here will shape your survey questions in step 4.

2. Create a plan

Once you have your goals laid down, it’s time to create a plan to help you achieve your goals.

You can revisit this section once your results are in so you can highlight the points you need to address and how you’ll improve those points.

3. Choose a survey type

With customer satisfaction, there are three main metrics to consider. These are:

  • Customer satisfaction score (CSAT)
  • Net Promoter Score (NPS)
  • Customer effort score (CES)

You’ll need to decide which of these customer satisfaction metrics and survey types you’ll use. There’s no right or wrong answer here. Despite subtle differences, they’re all effective methods.

–  Customer satisfaction score (CSAT)

We’ve briefly mentioned how the CSAT works. It measures satisfaction by getting customers to respond to questions using a scale of 1 to 3, or 1 to 5, or 1 to 7, or 1 to 10.

Once customers have responded to the survey, you can measure their satisfaction by adding up the total scores and dividing the result by the number of survey respondents.

Businesses often turn to the CSAT as an instant-evaluation metric.

“CSAT is a transactional metric that’s based on what’s happening now to a user’s satisfaction with a product or service. We try and get a CSAT score within 15 minutes of an interaction. It’s super helpful to improvise on the resolution, mode of delivery, channel, etc. It’s ONE of the important metrics to evaluate the performance of the support desk.” Global lead of customer success at Freshdesk Vipin Thomas tells HubSpot

Net Promoter Score (NPS)

As mentioned, the NPS measures answers based on the following question:

–        How likely are you to recommend [brand name] to a friend/to friends and family?”

The Net Promoter Score is often considered a metric combining customer loyalty and satisfaction.

– Customer effort score (CES)

Though the customer effort score (CES) is a customer satisfaction metric, it doesn’t entirely focus on satisfaction. Instead, it measures how easy—or difficult—it was for the customer to experience your brand.

The CES examines the effort involved in the customer’s experience. Naturally, the easier—and faster — the experience, the better the experience and the score.

Offering a great customer experience means better and faster customer retention and loyalty. These, in turn, translate into more referrals and growth.

4. Create a list of questions 

Now it’s time to list your survey questions. You can have recurring questions for different satisfaction aspects you’re looking to measure.

Customer satisfaction questions can include:

  • How satisfied are you with [product name/product line]?
  • We’ve started using a new delivery service in the United States. Please rate your satisfaction level with this new service.  

You may also choose to create longer surveys with open-ended questions for customers to explain their problems or offer suggestions.

–        Do you think there are areas where [brand name] can improve? Share your recommendations below.

Don’t go overboard with the number of questions included in a survey. The shorter the survey, the more customers are likely to respond to it.

5. Create a trigger for your survey

Part of planning your customer satisfaction survey is to include triggers. A trigger is an automation where one action taken by a customer triggers a survey question.

A trigger can be once a customer completes an online purchase or 5 online purchases. It could also be when a customer chooses to return a product, request—and get—a refund, or something else.

Some brands choose to conduct quarterly or annual surveys.

For example, many brands send out a one-question survey after a customer completes a purchase, like this one:

–        Please rate your recent experience with [brand name]. OR You recently completed an online purchase at [brand name], please rate your experience. 1 is highly dissatisfied, while 10 is highly satisfied. 

6. Analyze results

Once your satisfaction survey results are in, it’s time to analyze them and see how your online business is performing.

Are customers happy with your new product line? Do they find your website easy to use? Is your mobile app easy to navigate?

7. Adjust and repeat

Now that you’ve completed a customer satisfaction survey for your e-commerce business and received responses, it’s time to evaluate your process and results.

The next step is to learn from this experience and automate new customer satisfaction questions and surveys.

This can include creating new triggers, longer surveys, and applying one or more of the recommendations you’ve received from those surveys.

Where to send customer satisfaction surveys 

It’s important to decide where you’ll get customers’ feedback.

You may do so via a simple website pop-up with one question and 2-3 choices. Or you can create a survey using platforms like Google Docs or Survey Monkey, among others.

Alternatively, if you use a chatbot service, you can automate your customer satisfaction survey questions through it.

Here, the chatbot appears like a person asking customers about their experience when they log in to your website. This is also known as a chatbot satisfaction survey.

How to increase customer satisfaction in e-commerce

By now, you should be familiar with how customer satisfaction and retention go hand-in-hand and the top satisfaction metrics to track.

It’s time to explore ways to better satisfy customers and accordingly increase customer loyalty and retention.

1.    Provide excellent customer support

The top element you can use to increase customer satisfaction and retention is an understanding and responsive customer support team.

While customers may expect you to have 24/7 support, it’s an expensive endeavor. Leading B2B brands like PayPal, Stripe, and even Ubersuggest and Freepik don’t have 24/7 customer support. What they have is a chatbot that clarifies when they’re available and when they aren’t.

They also inform customers they’ll get a response within 48 hours. Usually, the response arrives in less time. These brands give themselves the 48-hour buffer so their team can respond before their allotted time, making customers happier.

Your customer support team is your customer-facing team. Whether they respond to customers over the phone, via chat, or email, be sure your team is top-notch, responsive, and understanding.

2. Create unique customer experiences

Customer experiences today can make or break a brand.

A recent Emplifi survey found that over 86% of 2,000 customers in the US and UK “will leave a brand they were loyal to after only two to three bad customer service experiences!”

Meanwhile, a survey by Segment found that while 85% of brands “believe” they’re offering personalized customer experiences, only 60% of customers agree with that.

Just because you think you’re doing a good job doesn’t necessarily mean that. To see whether or not you’re creating unique experiences, helping customers, and engaging them, use customer satisfaction surveys.

Unique experiences are memorable experiences. They make customers happy.

To create unique experiences that help you increase customer satisfaction and retention, use a rewards and referral program. That way, you can also measure loyalty marketing metrics and see if your efforts translate into a higher referral conversion rate.

3.    Keep customers in the loop

Be sure to keep customers up-to-date on site down times, new updates, new products… etc. But… don’t overdo it!

Customers like to take part in surveys but don’t spam customers with your surveys. Otherwise, you’ll see the other -negative- side of too much customer communication.

4. Give customers an incentive to take part in surveys

A great way to get customers to participate in your surveys is to give them an incentive to do so.

Using a customer loyalty and rewards program can help you offer incentives. It shouldn’t be a financial incentive—otherwise, that’s bribery!

You can reward customers with points when they complete a monthly survey. If you’re using Gameball, you can also create a monthly survey challenge where customers earn points and a badge when they complete one or more surveys.

Also, the longer the survey, the better the reward. This means a one-question survey can result in 10 or 50 points for a customer. Meanwhile, a 10-minute survey can translate into a $10 cashback reward or 100-200 points that customers can use later on.

How often should customer satisfaction be measured?

There’s obviously no one-size-fits-all for this question. Every business is unique. Small businesses want to know more about how customers feel about them, but they don’t want to appear like they’re nagging.

Meanwhile, larger businesses don’t want to misuse their customers’ trust by sending a ton of emails about satisfaction.

Here are a few ideas as to when to ask customers if they’re satisfied or not:

  • Launching a new campaign
  • After launching a new line of products
  • After the holidays (usually websites are busy so it’s a good time to ask what the customer experience was and how you can improve it)
  • Ask after a certain number of purchases or large amount spent (create an automated email that’s triggered once a customer completes 10 or 20 purchases or after a customer spends a certain figure ex. $1,000)
  • After implementing major site changes or updates

How does customer engagement differ from satisfaction?

Since we’re on the topic of customer satisfaction, many business owners often wonder about the differences between customer engagement and customer satisfaction.

Like satisfaction and loyalty, engagement and satisfaction go hand-in-hand.

But unlike loyalty, where satisfaction begets loyalty, engagement is the first step.

Customer engagement is the process of engaging your customer throughout their journey and relationship with your brand. Customer engagement can create unique experiences which make customers happy and satisfied and, therefore, loyal.

If we’re to explore steps leading to satisfaction and loyalty, the process would look like this:

how customer engagement leads to customer satisfaction and loyalty
How customer engagement leads to customer satisfaction and loyalty

Increase customer satisfaction and engagement with Gameball

Now that we’ve covered all there is to know about customer satisfaction, it’s time to see how you can boost your satisfaction and retention rates with Gameball.

Gameball is a customer engagement, retention, and referrals platform. We help e-commerce businesses build better and longer-term relationships with customers through engagement and rewards.

For Shopify businesses, you can get Gameball from the Shopify app store, where we have an always-free plan.

Here we’ll offer some customer engagement ideas to create memorable customer experiences and boost your customer retention rate.

1)    Create challenges and offer badges

One of the most exciting features on Gameball is the challenges and badges feature.

As a business owner or marketing manager, you can create challenges where customers can perform certain tasks like:

  • Sharing a social media post
  • Adding products to cart
  • Completing a $50 purchase

2)    Use customer segmentation

Segmentation offers unique opportunities to build and boost loyalty. Customer segmentation is grouping your customers based on similar behavior, factors, or patterns.

You can create segments of your top-spending customers or customers who make purchases on Mondays. It’s up to you.

The next step is to see how you want to engage those customers.

By the way, Gameball’s segments are dynamic. This means that if a customer’s behavior suddenly changes and they become ‘Monday regulars,’ they’re automatically added to the ‘Monday-only buyers’ segment.’

You can also segment customers based on who’s active in challenges, customers who buy certain products or from specific product lines,…etc.  

Further reading: Customer Segmentation and Loyalty: How to Combine them for Better Retention

3)    Offer cashback rewards

Cashback rewards are one of the top ways to keep customers coming back.

With cashback, customers get a percentage of what they’ve spent the next time they shop at your store.

They’re also a great sales-boosting tactic. Want to increase your end-of-the-month sales? Offer double or triple cashback.

If customers normally get a 5% cashback reward on their purchase, you can make it 10% or even 20% on the 30th and 31st of the month. It’s a win-win!

4)    Use instant rewards

One of the biggest challenges for customers when it comes to rewards programs is that it takes too long for them to earn those rewards.

To overcome this, Gameball created its ‘Instant Rewards’ feature, which – as its name suggests – lets customers get their reward instantly.

It’s easy; it’s fast, and it makes customers instantly happy!

5)    Use loyalty tiers

Tiered rewards programs are one of the top ways to build a community of loyal followers and fans. They’re also one of the most widely-used types of loyalty programs among global brands.

With loyalty tiers, your brand segments customers based on how much they spend per year, offering them exciting rewards based on their tier. And the higher the tier, the better the reward.

create and customize loyalty tiers with Gameball

Many of the world’s leading beauty loyalty programs boast a tiered program. Similarly, H&M, GAP, and Michael Kors are among the top tiered fashion rewards programs.

Further reading: 7 Examples of Tiered Loyalty Programs that Made their Mark in the World [And What You Can Learn from Them]

6)    Increase referrals with points and rewards

There are two ways to get referrals. Ask people to refer you and hope for the best. Or ask your already-loyal and satisfied customers to recommend you to their friends and family.

Use Gameball’s loyalty points to give customers more benefits when they refer customers. We also recommend giving newly-referred customers points for signing up or – depending on your business – a free sample or first-time discount.

Coffee shops and restaurants often offer new referrals a free cup of coffee, sampler plate, or even a one-time 50% off their first salad.

Keep tabs on your top referrers using referral program metrics directly from your Gameball dashboard.

Wrapping it up

The first step in building brand loyalty is to satisfy customers. And the first rule of creating customer happiness, satisfaction, and retention is to admit that you want to improve.

In its Customer Experience Trends Report 2022, Zendesk found that while 60% of companies “gave themselves high marks for service,” 68% of customers said there was “room for improvement.” In addition, 54% of customers believe that customer service is more of “an afterthought for most businesses” they shop at.

As you grow your business, where you improve will vary.

If we had to highlight the two most important customer satisfaction and retention elements to focus on, they’d be: your customer support team and your customer experience.

Once you believe you can improve, only then will you truly be able to improve, satisfy customers and grow your business.

Want to see Gameball in action? Sign up for a free demo or add Gameball directly on Shopify.

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