Understanding and measuring customer sentiment is vital for success in today’s customer-centric business landscape. Two key metrics that provide valuable insights into customer experience are the Customer Satisfaction Score (CSAT) and Net Promoter Score (NPS). While both metrics are essential for gauging customer feedback, they serve different purposes and offer unique perspectives, which we’ll discuss in this article.
Integrating both metrics into your Voice of the Customer (VoC) program can help you create a comprehensive understanding of customer sentiment, drive continuous improvement, and foster long-term customer relationships.
What’s the difference between CSAT and NPS?
While both metrics provide valuable insights, they serve different purposes and offer distinct perspectives. CSAT measures a customer’s immediate satisfaction with specific interactions or products, offering actionable feedback on various touchpoints.
On the other hand, NPS measures customer loyalty, specifically their likelihood of recommending the company to others, which acts as a predictive indicator of future growth and customer retention.
How to Calculate CSAT and NPS
Now, let’s discuss how to calculate your CSAT and NPS score to understand your customers better.
How to Calculate CSAT
Let’s say you’ve chosen what to measure, designed a survey around what you want to focus on, sent out the survey, and collected responses. Now, it’s time to calculate your CSAT score.
- Calculate CSAT Score: Add up the number of satisfied responses and divide by the total number of responses. Multiply by 100 to get the percentage.
- Analyze the Score: Look at the CSAT percentage to see how satisfied your customers are. Use any comments or additional feedback to understand why customers feel the way they do.
- Take Action: Based on your analysis, improve where needed to boost satisfaction and keep customers happy.
What’s a Good CSAT Score?
A “good” CSAT score can vary depending on industry standards, company goals, and customer expectations.
Benchmarking CSAT scores isn’t exact because each business is unique. However, you can gauge where you stand by looking at industry benchmarks, like the American Customer Satisfaction Index (ACSI). It offers typical scores for various industries, sectors, brands, and companies.
Here are CSAT score benchmarks for different industries, sourced from the American Customer Satisfaction Index:
Apparel: 79
Automobiles and Light Vehicles: 78
Banks: 78
Breweries: 81
Cell Phones: 79
Computer Software: 76
Consumer Shipping: 76
Credit Unions: 77
Financial Advisors: 77
Full-Service Restaurants: 79
Hotels: 73
Internet Retail: 78
Internet Travel Services: 74
Life Insurance: 78
Specialty Retail Stores: 77
It’s essential to interpret CSAT scores in your specific business and industry context. Comparing scores over time, benchmarking against competitors, and considering qualitative feedback alongside quantitative data can provide a more comprehensive understanding of customer satisfaction levels and areas for improvement.
How to Calculate NPS
Let’s say you’ve crafted an effective survey and collected responses using a distribution method based on your audience’s preferences and accessibility. Now what? Calculate your NPS score in three steps.
- Segment Responses: Categorize respondents into three groups based on their scores:
Promoters: Those who respond with a 9 or 10.
Passives: Those who respond with a 7 or 8.
Detractors: Those who respond with a 0 to 6.
- Calculate Percentages: Calculate the percentage of respondents in each group. For example, if out of 100 respondents, 60 are Promoters, 20 are Passives, and 20 are Detractors, the percentages would be:
Promoters: 60%
Passives: 20%
Detractors: 20%
- Calculate NPS: Subtract the percentage of Detractors from the percentage of Promoters to obtain the Net Promoter Score. Using the example above:
NPS = % Promoters – % Detractors
NPS = 60% – 20%
NPS = 40
What’s a Good NPS score?
What does your business’s NPS score mean? Let’s explore what a good or bad NPS score is.
Good NPS Score:
NPS scores can range from -100 to +100. Generally, any positive score is considered “good,” but the interpretation may vary depending on the industry and specific circumstances.
A score above +50 is typically considered excellent and indicates high customer loyalty and satisfaction.
Companies with high NPS scores often have a large base of loyal customers who are likely to promote their products or services to others.
Bad NPS Score:
A negative NPS score suggests that you have more detractors than promoters, indicating significant customer dissatisfaction.
While any negative score warrants attention, scores below -50 are typically considered very poor and may indicate serious customer experience or product/service quality issues.
Companies with low NPS scores may need help with customer retention, face increased churn rates, and experience challenges in attracting new customers due to negative word-of-mouth.
While a negative NPS indicates room for improvement, it also presents an opportunity for growth. If companies listen to customer feedback and take proactive steps to improve the customer experience, they can turn detractors into promoters and drive positive word-of-mouth.
For more on NPS scores, read this blog.
How to Use NPS and CSAT to Build Effective VoC Programs
Voice of the Customer (VoC) programs are pivotal for capturing customer feedback and driving meaningful improvements in customer experience. By integrating both Net Promoter Score (NPS) and Customer Satisfaction Score (CSAT) into your VoC program, you can harness the strengths of each metric to gain a well-rounded view of customer sentiment.
NPS is valuable for understanding customer loyalty and predicting long-term business growth. This metric helps you gauge customers’ overall sentiment and segment them based on their sentiment. This segmentation provides a clear picture of customer loyalty and helps identify underlying issues and areas for strategic improvement.
In contrast, CSAT is adept at capturing immediate customer satisfaction with specific interactions, products, or services. Using CSAT surveys at various touchpoints allows you to gather detailed feedback highlighting specific areas needing immediate attention. This makes CSAT an excellent tool for achieving quick wins and showing that you’re responsive to customer needs.
Combining the insights from both NPS and CSAT provides a holistic understanding of customer sentiment. NPS offers a high-level perspective on customer loyalty and future growth potential, while CSAT delivers granular insights into specific interactions and satisfaction levels. This balanced approach ensures that you work towards long-term customer loyalty and address immediate concerns that could affect customer satisfaction.
Conclusion
Regularly monitoring both NPS and CSAT scores allows you to track progress and measure the impact of your initiatives. This continuous feedback loop ensures that your VoC program remains dynamic and responsive to evolving customer needs. Treating your VoC program as an iterative process enables you to refine your strategies continuously.
