CSAT: What It Is and When (Not) To Use It

Summary

1. What is CSAT?
2. Why is measuring Client Satisfaction important?
3. How to calculate CSAT Score?
4. What is a good CSAT?
5. CSAT vs. NPS vs. CES: When to use which and why
6. CSAT and Revenue
7. Conversational AI and Client Satisfaction
8. The Future of Client Satisfaction

There are many options available when it comes to measuring customer satisfaction for your business. With all the metrics out there, it can be difficult to choose which one will best suit your needs. In this post, we will be looking at the Customer Satisfaction Score (CSAT) - one of the most popular metrics available - and compare it to other popular choices like NPS and CES.

If you work in the customer service industry, you have most likely come across the term CSAT before. You may have even administered CSAT surveys yourself as part of your role. Read on to learn exactly what CSAT measures and when it’s best to use it.

What is CSAT?

CSAT is an acronym for Customer Service Score: a popular metric measuring the quality of a business’s customer service and products. As one of the simplest survey methods, CSAT provides a snapshot of customer satisfaction at a certain point in time. 

The most common question asked in CSAT surveys is “How satisfied were you with your experience?” The possible responses will fall on a certain scale, usually from 1 to 5, where 1 means “Very Dissatisfied” and 5 means “Very Satisfied.” 

Once you have calculated the average based on the survey results, you can determine your CSAT score. This score is expressed as a percentage, with 100% being fantastic and 0% being terrible. 

For example, a CSAT survey could measure how effective a training module was during an onboarding process. This can provide insight on how effective the module was and if any improvements can be made to help trainees retain more information.

Why is measuring Client Satisfaction important?

A Customer Satisfaction Score measures client satisfaction with a certain business, purchase, or interaction. This is important as it can help provide useful data for changing and improving your business practices to better meet the needs of your clients.

CSAT is often used interchangeably with the term CX, which stands for customer experience. A company’s CX is determined by the perception its customers have about the brand and how they are treated throughout their journey.

Having a high CX can lead to increased brand loyalty and customer retention. Studies show that businesses with a high CX are 5 times more likely to recommend a brand to people they know. On the other hand, for every complaint a business receives, there are about 26 other people who are similarly dissatisfied but do not make their voices heard. 

While measuring the quality of the customer experience is important in general, there are several metrics you can choose from to make this measurement. Each has strengths, weaknesses, and limitations. First, we will look more in-depth into CSAT and then compare it to other options like NPS and CES, which may be better measures depending on business context.

It’s important to note that CSAT doesn’t always correlate with net-revenue retention: the percentage of recurring revenue retained from existing customers after your renewal period. This measure, which includes expansion revenue, downgrades, and cancels, is the ultimate measure of whether your business is delighting clients.

How to calculate CSAT Score?

CSAT score can be calculated using a simple formula:

Number of satisfied customers (4 and 5) / Number of survey responses x 100 = % of satisfied customers

In other words, the two highest values on the survey (4 for satisfied and 5 for very satisfied) are divided by the total number of survey responses and multiplied by 100 to determine your CSAT score, which is expressed as a percentage. For example:

210 (people who responded 4 or 5) / 250 (total survey responses) x 100 = 87.5% CSAT

Including the two highest survey responses in the numerator of the equation has been shown to be an accurate predictor of customer retention. This number is easy to determine if you are administering the survey on a digital platform versus tabulating physical surveys yourself.

What is a good CSAT?

Once you have carried out a CSAT survey and gathered the results, it is time to calculate your CSAT score. So you might be wondering, what is a good CSAT score?

What is considered a good CSAT score depends on your industry, but the general standard is that it should be in the range of 75% and 85%. As CSAT is measured through survey responses, near-perfect scores are very rare.

For example, if you have a CSAT of 75%, then 3 out of 4 customers selected a positive response as opposed to a neutral or negative one. Regardless of what your score is, if it increases over time you are making good decisions and should keep doing what you’re doing.

This is easy to determine if you track your CSAT over time. This can be done by implementing it directly into your customer service platform. If you ask every customer about their experience after every interaction, you can recognize whether your score is trending upwards or downwards over time.

CSAT vs. NPS vs. CES: When to use which and why

While CSAT is the most popular metric for customer satisfaction, alternatives like NPS and CES can provide deeper insight into how customers view your organization.

Net Promoter Score (NPS) focuses on customer loyalty over time as opposed to satisfaction with an individual purchase or event. This provides a more thorough understanding of how satisfied your customers are with your product or service and how likely they are to refer your business to people they know.

The most common NPS question is “How likely are you to recommend this brand to a friend or colleague?” Responses to an NPS survey usually fall on a scale from 0 to 10, with 10 meaning “Very Likely” and 0 meaning “Very Unlikely.” This allows you to group your customers according to their score, providing valuable data on how different segments view your product or service.

Detractors, or those with a score from 0 to 6, have had a negative experience with the company and need special attention to avoid the risk of customer churn. Passives are those who chose a score of 7 or 8, which means they had a positive experience but are unlikely to promote your company to others. Promoters are those with a score of 9 or 10, and they love your company enough to actively refer your products and services to others. 

On the other hand, Customer Effort Score (CES) measures the difficulty customers have when completing a certain business task. It is a numerical score representing the client’s level of effort when interacting with your company’s products or services. CES surveys are often administered after a customer engages with customer support, purchases a product or signs up for a service. 

For example, a common question on a CES survey is “How simple was it to place your order on our website?” Respondents can choose from several options ranging from “Very Difficult” to “Very Simple”. Like CSAT, the responses are analyzed and averaged to determine a CES score.

So what makes CSAT different (but not necessarily better) than NPS or CES? As mentioned before, CSAT focuses on providing a “snapshot” of customer satisfaction during a certain interaction. For this reason, CSAT is not ideal for determining a client’s overall relationship with your business. However, it provides flexibility by allowing you to focus on multiple areas of the customer journey.

On the other hand, NPS focuses on customer loyalty, asking your customers to look at the bigger picture instead of focusing on a specific event. By asking how likely they are to recommend your brand to a friend, colleague or family member, you get a broader view of how the customer feels about your company.

CES works in tandem with CSAT and NPS, providing greater insight into the customer experience than either metric alone. Determining how easy or difficult it is to interact with your brand makes it easier to predict customer loyalty.

For example, a CES survey could ask “How simple was it to place your order online?” Respondents can choose between several answers ranging from “Very Difficult” to “Very Simple”. Like CSAT, the results are analyzed to determine an average score.

Let’s look at the pros and cons of each metric to gain a further understanding of how they differ:

CSAT - Pros

• Easiest, simplest, and shortest method

The largest advantage of CSAT is how easy it is to administer. Useful data can be obtained by asking a single question with a simple rating scale. CSAT surveys can be distributed across a range of channels and lines of business to provide useful insights at every step of the customer experience.

• Easy for customers to complete

Since CSAT surveys are quick and simple, they tend to get high response rates as long as they are limited to a few questions. They can also be implemented across multiple stages of the customer journey, giving an idea of how customers feel at different stages without burning them out.

• User-friendly data analysis

CSAT surveys collect numerical data that is simple to analyze and draw meaningful results from. By tracking CSAT scores at different points of the customer life cycle, you can quickly determine where issues lie and how to fix them, resulting in a more positive customer experience.

• Most popular option

CSAT has become the gold standard for measuring customer satisfaction across most industries. As a result, it is relatively easy to benchmark your CSAT scores against similar companies in your industry. Due to its popularity, it’s a good idea to include a great CSAT score in your brand’s marketing and promotional material.

CSAT - Cons

• Prone to customer bias

As CSAT is based on individual customer experiences, it is possible for survey results to be biased or inaccurate. Responses can be skewed depending on the customer’s emotional state or certain life events that may influence their score.

CSAT can also fall prey to cultural bias. Psychological Science’s article on the topic found that respondents from individualistic countries tend to choose extreme sides of the scale more often than respondents from collectivistic countries. For example, a customer from the U.S. is more likely to select “Very Satisfied” or “Very Dissatisfied” while a respondent in Japan would choose “Satisfied” or “Dissatisfied”.

• Data lacks complexity

CSAT’s simplicity can also be a downside. It’s a shallow measurement of satisfaction or dissatisfaction which fails to capture detail or depth. Instead of providing an overview of the customer’s opinion on the brand, it is dependent on the last experience they had which could have been affected by their mood that day. 

• Limited to single-person responses

While CSAT works well when measuring an individual customer’s satisfaction, it is less useful when it comes to larger groups like families, business departments, or entire companies. If a single person is responding on behalf of a larger group, it might not truly reflect how satisfied that group is as a whole.

• Potential for response bias

Customers who had a very positive or very negative interaction with your business are more likely to respond to a CSAT survey than those who would have responded “Neutral” or “Dissatisfied”. Those who had a neutral experience are less likely to make their voice heard, skewing results higher than they would have been normally.

NPS - Pros

• Ability to segment customers

By grouping your customers into Promoters, Passives, and Detractors, it is easy to see which clients need more attention to improve the customer experience. By keeping track of the ratio of Promoters and Detractors over time, you can gain valuable insight into how customer relationships are evolving in the long term. This is key for predicting long-term growth for your business.

• Results are more accurate and objective

Compared to CSAT, NPS survey questions are broader in scope, making them less likely to be prone to bias. Asking how likely they are to recommend the brand as a whole means results are not skewed by any particular interaction. NPS is also not limited to recent interactions, allowing for a larger sample size that includes more of your total customers.

• Focus is on the long term

NPS is a powerful measurement for potential long-term interactions with your brand. It focuses on how likely customers are to refer others to your company, providing data not possible from individual customer interactions. If a customer doesn’t trust your company, they are less likely to be a repeat customer or to recommend your brand to others. 

• Higher response rates

NPS surveys tend to get higher response rates than other options. One study by Mailchimp found that while the average survey response rate is around 3%, NPS surveys often fall between 20 to 40%. As a result, even small-scale NPS surveys provide useful data that can increase revenue and retain valuable customers.

NPS - Cons

• Often require follow-up surveys

If your company receives a high NPS score, it can be tempting to think your customer experience is perfect the way it is and leave it at that. However, even highly positive scores need to be acted upon.

This can be done by regularly communicating with your Promoters to encourage referring your brand to others. Issues with the customer experience expressed by Detractors need to be recognized and resolved in order to turn them into Passives or even Promoters in the long term.

CES - Pros

• Accurate predictor of repeat customers

A study from Harvard Business Review found that 94% of customers who find a brand’s customer experience to be “low effort” will purchase again in the future. Customers want a product or service that requires as little effort as possible. This makes CES the perfect metric for measuring how your company holds up.

• Customer effort predicts likelihood of referral

Research has shown that 81% of customers who respond that their experience was “high effort” would talk negatively about the brand with others. If interacting with your brand is a simple process, clients will be more likely to recommend you to friends, family and colleagues. This makes it easier to predict customer loyalty, especially when complemented with NPS.

• Generates practical data

As CES focuses on customer effort, surveys can highlight where weaknesses in the customer experience lie and where improvements need to be made. By focusing on an objective standard like effort as opposed to a subjective one like customer satisfaction, CES provides more practical data when it comes to streamlining business processes.

CES - Cons

• Customer segmentation is not possible

Similar to CSAT, CES is calculated from an average of survey results, treating all customers the same and making it difficult to determine which customers are having issues with your product or service. Unlike the customer groups available with NPS, it is difficult to determine how the customer experience differs from individual to individual.

• Can’t determine why the customer is having trouble

While CES gives you an idea of where the customer is running into issues and how much effort they’re putting in, it does not provide information on why the issues exist. As a result, it can sometimes be difficult to determine what the issue is and how to correct it for future interactions.

So after comparing the three metrics, which one is best? As you can see, CSAT, NPS, and CES all have their pros and cons. CSAT is the simplest and most popular, NPS offers segmentation and long-term growth data, and CES is a practical predictor of future behaviour.

Since no one metric is better than the other, the most effective method is to implement as many that are relevant to your business as you can. This way, the potential is higher to capture useful data that will help your business improve and grow.

CSAT and Revenue

Does CSAT actually impact your bottom line? It might, and it might not. From our analysis, whether CSAT correlates with net revenue retention varies greatly by industry, company, and even product line.

While collecting feedback from your customers will provide meaningful insights, stopping here won’t prevent churn. Instead, you’ll need to analyze the data and prioritize changes to your customer experience based on the results you collect. To this end, you can think of the CSAT feedback process as one important component of a larger system designed to iteratively increase net revenue retention.

Maximizing CSAT in your company’s customer experience has been shown not only to increase revenue but reduce the costs associated with serving customers. With today’s economy being more competitive than ever, having an exceptional customer experience can help you stand out in your industry and grow faster as a result.

To illustrate an example of why CSAT may be misleading here: Imagine a company with 10 non-paying users, and 2 paying users. If as a customer success later, you start prioritizing the paying customer responses, you might decrease average CSAT (because the 10 free tier users all see slower responses). However, you could still see an increase in net revenue retention, as you’ve improved the customer experience for your 2 most valuable users.

Measuring the profitability of a customer over time is known as Customer Lifetime Value. This is a great metric for determining whether improvements in your customer experience are leading to more purchasing behaviour in the long term. The more satisfied customers you retain, the more likely they are to purchase again and recommend your brand to others.

Improving CSAT will not only increase revenue but improve the health of your business at all levels. For example, increasing satisfaction with employee training will result in higher productivity. Employees are empowered when they feel like they’re invested in, and therefore more likely to recommend your company as a great place to work.

While CSAT is the most popular option for quantifying your customer experience, it should not be the only consideration when evaluating great customer service. Using a combination of metrics, like NPS and CES, will give you a more accurate idea of how customers view your brand.

Another way to measure successful customer service is through valuable customer interactions. In today’s climate, businesses are able to communicate directly with customers through more channels than ever. Customers expect reliable, responsive, and empathetic communication with the brands they interact with regularly.

Whether it’s through social media, webchat, or email, creating valuable customer interactions is becoming the new standard when it comes to customer satisfaction in today’s world. If your brand can directly communicate with clients in a way that makes them feel understood, you are much more likely to build loyal customers who recommend your brand to others. 

Conversational AI and Client Satisfaction

One area where customer satisfaction metrics are evolving is in the field of conversational AI (artificial intelligence). These AI chatbots can be found on company websites and social media platforms and are revolutionizing the way customers interact with brands.

Conversational AI provides a tool to optimize towards your business or support goal. A faster handoff to your agents could increase engagement rates but lower containment rates. When using Conversational AI, it is important to know your goal and make sure your Conversational AI partner gives you insights on how to optimize towards your goal.

Conversational AI provides a new avenue for companies to capture satisfaction-related metrics and understand customer behaviour. By creating a conversation-like experience that feels like talking to a human, AI chatbots are streamlining how CSAT surveys are administered, resulting in higher response rates and more accurate data.

A comprehensive view of client satisfaction involves capturing data across multiple communication channels. This can include webchat, email, social media, SMS, and other messaging apps. AI chatbots can capture satisfaction metrics in real-time through multi-channel conversations, which makes gathering customer insights easier than ever.

For example, if a customer initiates a conversation on your company’s website about a recent purchase, conversational AI can recognize this and automatically administer a CSAT survey. This survey will naturally fit into the flow of the conversation, making it very likely that the customer will respond to it.

If you’re looking to improve the way your business implements satisfaction surveys, investing in conversational AI technology is one of the best things you can do. This modern approach can change the way your business looks at CSAT and put you a step ahead of your competitors.

The Future of Client Satisfaction

So what does the future hold for measuring client satisfaction? Companies should design a client satisfaction platform that aligns with their bottom line and business objectives. Ideally, this should include a combination of several metrics to gain the advantages of each. While CSAT, NPS, and CES are some of the most common options, there are others available that might be more in line with your business needs.

Whichever route you choose, your metrics need to be scalable, measurable, and actionable. If your survey platform falls apart as your company grows, it won’t be able to accurately measure how customers feel about your brand. Likewise, the data that you collect needs to be easy to analyze, allowing you to effectively implement the changes necessary to improve your customer experience.

When it comes to conversational AI chatbots, Ada is an effective solution for measuring valuable customer interactions and how that translates into legitimate actions. It can also distribute satisfaction surveys on a mass scale with ease, integrating them into human-like, message-based conversations that increase the likelihood of responses.

For more information on how Ada can help improve your company’s customer experience, visit our website here.