It is 10 times more expensive to get a new customer, than to retain a current, loyal
customer. There are also the bread and butter of your organization. Without customers, a business doesn’t exist. This is why it is vital to keep your customer satisfaction up to par. Here are 6 reasons it is so important:
1. It’s The Leading Indicator of Customer Loyalty
Customer satisfaction is by far the best indicator of how likely it is a customer will repurchase. Let’s say we are measuring our customer satisfaction on a scale of 1-10. It they are a 7 or above, they will like purchase your product or service again. This is customer loyalty.
Better yet, if they are at a 9 or 10, they can act as customer advocates for your business. They may give you a 5-star review online, or share their positive experience with their friends and family, which can bring you new customers at little to no cost.
However, scores of 6 or less indicate that the customer is unhappy and at risk for leaving. It is vital that you identify these customers, determine why they are unhappy, and solve the problem. Then of course, to ensure a positive customer experience, you should follow up and ensure that the customer is happy.
2. It’s a Point of Differentiation
We live in a world with a very competitive marketplace where businesses must compete for customers; customer satisfaction is a key differentiator. The businesses that make customer service a priority, and a key element to their business strategy are the ones that are successful in this cut-throat environment.
Don’t believe me? Picture two products that are exactly alike. What will make you choose one over the other?
If your friend recommended one of those companies, would that sway your decision? Probably. This is a case when superior customer satisfaction
results in advocates that create a key differentiator for your company.
3. It Reduces Customer Churn
The most common myth is that price is the main reason for customer churn. In reality, poor customer service and a poor customer experience is why customers leave.
Customer satisfaction is a key metric for measuring and predicting (and thus avoiding) customer churn. You can use this information to increase the overall quality of your customer service.
It is important that you have accurate metrics and customer data. For many businesses, this is difficult. The vast majority of organizations have well over 6 disparate systems, so gathering accurate data, free of manipulation can be difficult. Ensure you get help from specialists
to solve this problem, if this is the case.
4. It Increases Customer Lifetime Value
This study by InfoQuest
found that customers that are “totally satisfied” contribute 2.6 times more revenue than a “somewhat satisfied customer,” and 14 times more than a “totally dissatisfied” customer.
If you increase your CLV (customer lifetime value), then you increase the returns on your marketing dollar.
5. It Reduces Negative Word of Mouth
It is said that an unhappy customer tells between 10 and 15 people about their negative experience. It is one thing to lose one customer because of a bad experience, but losing 20 can have an impact on your business.
Furthermore, with the rise of communication and reviews online, this has even a greater impact. Because now, anyone that uses the internet (which is the majority of the world) can see the negative testimonials.
To reduce this negative word of mouth, you need to ensure that customer satisfaction is measured on an ongoing basis.
6. It’s Cheaper to Retain Customers Than to Acquire New Ones
Simply put, customers cost a lot to acquire. You and your marketing team spend thousands of dollars getting the attention of prospects, nurturing them into leads and closing them into sales.
Imagine if you spent only one sixth of your marketing budget on retaining customers. You’d have fewer costs, and your revenues would increase.