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Forecasting future growth with customer satisfaction metrics

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You probably already know that tracking future growth is critical to the success of your business. Having an idea of how much revenue will come in 6 months to 1 year helps you to know when and how to expand, where to invest your resources, and whether you need to cut back on expenses. And while there are plenty of ways to forecast future growth, one frequently overlooked — but highly valuable — strategy is to measure customer satisfaction metrics.

Measuring CX metrics, such as net promoter score (NPS) and CSAT (customer satisfaction), helps you to be proactive instead of reactive. Rather than frantically responding to a disaster like a spike in your churn rate, you’ll gain valuable knowledge that will equip you to retain current customers and boost their satisfaction. In the end, using CX metrics can help you to not only forecast future growth, but to improve on that growth.

Why customer satisfaction metrics matter

The level of your customer satisfaction has a tremendous impact on your future growth.

Why?

It’s simple. Happy, satisfied customers will typically purchase your product or use your service again. Loyal customers will almost always purchase from you again — not only that, they’ll spend more, and tell their friends about your business. And dissatisfied, disgruntled, or disappointed customers won’t buy again. They might even do some serious reputation damage.

One of the most unpredictable factors plaguing many businesses is this question: Will my customers return?  If you work in a highly competitive industry with many one-time purchasers, the answer to this question is even less predictable.

Let’s look at the numbers:

In businesses that are transaction-based (such as ecommerce companies), satisfied customers will spend 140% more than dissatisfied customers.

For subscription-based companies (such as software or box delivery), customers who have had great experiences have a 74% chance of remaining customers for at least one more year. Customers who are over-the-top thrilled? They’re likely to stay for another six years.

Knowing whether or not your current customers are likely to buy or subscribe again can help you to accurately predict customer retention and churn — giving you the insight that you need to prepare for a shifting market, increasing competition, or a changing economy.

How to: Track CX metrics to forecast future growth

Tracking customer satisfaction metrics doesn’t have to be complicated, but it does require a solid strategy and consistent repetition. Here are some best practices for tracking two important CX metrics: CSAT and NPS.

Customer satisfaction (CSAT): Measuring the basics

Customer satisfaction (CSAT) is, unsurprisingly, the most basic customer satisfaction metric. Simply put, it measures a customer’s current level of satisfaction with your product or service, or with a specific interaction.

CSAT is typically measured with one question: How would you rate your overall satisfaction with product/service X?

Survey takers typically provide a rating on a scale of 1-5.

Customers who give you a 4 or 5 are considered “very satisfied.” Anyone who gives you a 3 or below is considered “unsatisfied.”

You can also apply CSAT to a specific experience. For example, if a customer has just had an interaction with customer support, you can send her a quick survey asking how satisfied she was with her experience.

To calculate your CSAT, you’ll divide the number of satisfied customers (4’s and 5’s) by the number of unsatisfied customers (3’s and below). Then multiply by 100 to get the percentage of satisfied customers.

[(# of satisfied customers) / (# of unsatisfied customers)] x 100 = CSAT

The average CSAT for internet retailers is 80%. On a global scale, average CSAT comes to around 86%.

Net promoter score (NPS): Measuring loyalty & advocacy

Net promoter score measures the likelihood that a customer will recommend your product or service to others. The strength of this metric is that it not only measures satisfaction; it measures loyalty and advocacy. When a customer is excited to tell a friend, family member, or coworker about your product, you can be sure that she’ll buy from you again. Not only that, but she’ll most likely spend more, stick with your business, and be less sensitive to changes in price.

Ideally, net promoter score should be measured with just two basic questions:

  1. How likely are you to recommend [X] to a friend or colleague? Please respond on a scale of 0 (extremely unlikely) to 10 (extremely likely).
  2. Please explain your answer.

First, let’s take a look at the ratings, which are generated from Question #1.

If a customer scored you a 9 or 10, she’s a promoter. She’s thrilled with your brand, almost guaranteed to buy again, and likely to recommend you to others. Promoters indicate not only retention, but a higher rate of growth in the future.

If a customer gave you a 7 or 8, she’s a passive. Passives are satisfied, but not thrilled. They will probably buy from you again, but may churn when something better comes along. After all, they’re looking for a product or service that thrills them.

If a customer rated you a 6 or below, she’s a detractor. She’s unlikely to buy from you again, and may even do some damage to your reputation. You’ll definitely need to close the loop for this customer (which we’ll discuss in a moment).

Then, you’ll calculate a score. The NPS equation is as follows:

[(# of promoters / Total # of survey takers) x 100]  – [(# of detractors / Total # of survey takers) x 100] = NPS

A positive NPS indicates that you have more promoters than detractors, while a negative score indicates that you have more detractors. A “0” simply shows that you have an even number of both promoters and detractors.

Of course, you’ll want to aim for a score of 100. But in general, any positive score is considered “good,” and anything above a 50 is “excellent.”

After calculating your score, you’ll want to take a look at the open-ended feedback that the customer has provided. How did she explain her answer? Did she offer actionable insight that can help you improve future levels of loyalty and advocacy?

Using NPS software can help you survey customers, calculate and track your score, and organize your feedback for rich, valuable insights.

A final word on forecasting with cx metrics: keep on tracking and close the loop

Generating a CX metric certainly provides you with valuable insight into future growth. But in order to take full advantage of the metric, you’ll want to continue tracking metrics regularly, and make a habit of closing the loop.

Continual tracking

Keep tracking your CX metric to give you insight into growth over time. Continual tracking will show you how specific changes impact customer satisfaction, and how fluctuation affects revenue. Of course, the more customers you have, the more frequently you can gather metrics. In any case, you won’t want to survey the same customer more than a couple of times a year, but if you have a larger audience, you can gather insight at a higher volume and more frequently.

Closing the loop

Take the insight you’ve gleaned and run with it! If you’ve measured NPS, you’ll want to identify common themes in your open-ended feedback, and take a look at how that feedback corresponds to a customer’s rating. Using this valuable intel, you can make strategic changes in your customer experience or product/service to boost overall customer satisfaction.

You’ll also want to follow up with dissatisfied customers to see if you can rectify the situation. In some cases, effective follow-up can convert a detractor into a passive — or even a promoter. Lastly, take careful note of why they gave you a poor rating to prevent future churn.

Tracking customer satisfaction metrics is a powerful way to get insight on your likelihood of either retention or churn. It also offers a tool that can actually help you improve future growth — generating new customers, improving the current customer experience, and turning satisfied customers into thrilled advocates.

About Ian Landsman

Ian Landsman is an entrepreneur and customer experience expert. He founded UserScape in 2005 where he’s created multiple customer focused applications including HelpSpot.com and Thermostat.io.

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