Best Practices in Customer Satisfaction Research

How satisfied are your customers? Are they more or less pleased with your company than they
were last year? How does your customer satisfaction level compare with that of your
competitors? What impact does it have on your companys profits?
How do you know?
Guesswork and hunches wont cut it. You need hard data. You need to measure and monitor
customer satisfactionconsistently and regularly. You need a customer satisfaction research
strategy and program.
You can do it yourself, but there are a few things you need to consider. This paper gives you the
benefit of the experience and lessons learned by industry experts to help you design, distribute,
and analyze your customer satisfaction research. We want you to act on insight, not instinct.
Why Measure Customer Satisfaction?

Customer satisfaction is tied directly to profitability. If your customers are happy, they tend to be
loyal. And if theyre loyal they not only buy more, they refer other customers. Well-established
research by Bain & Company found that, for many companies, an increase of 5% in customer
retention can increase profits by 25% to 95%. The same study found that it costs six to seven
times more to gain a new customer than to keep an existing one.


"It's six to seven times more expensive to gain a new customer than it is to retain an
existing customer."
"A 5% increase in customer retention can increase profits by 25% to 95%."
(Source: Bain & Company study in Harvard Business Review, 2001)

Moreover, one bad experience can outweigh a whole lot of good experiences. Because of e-mail
and instant messaging, that bad experience can quickly be broadcast to dozens, hundreds, or
thousands of other customers, magnifying its impact. So if your business is doing something that
frustrates customers, you need to know right away.
It is critical to give customers the opportunity to provide feedback about their overall satisfaction
level and specific likes and dislikes. It is equally important to consistently measure and monitor
that input. Without an effective customer satisfaction research program in place, your company
will be losing business, missing opportunities, and putting itself at a competitive disadvantage.
Customer Satisfaction Surveys: Tips and Practical Advice
The first steps in establishing a customer satisfaction program are determining when to distribute
your survey, how many customers will be invited to respond, and how to deliver the survey to
them. Well take a closer look at how to formulate your survey questions in the next section.
1. When to Conduct Customer Satisfaction Research

Many managers wonder how frequently they should conduct customer satisfaction surveys. The
answer depends on the size of the customer base and the purpose of the research. There are two
key types of surveys, and they serve very different purposes:
Transactional surveys solicit feedback directly from the product or service user about
that particular encounter. They are conducted immediately after each customer
transaction. For example, a survey may be administered after a call center experience.
Relationship surveys collect input from people who have an ongoing relationship with
the company and have had multiple transactions. They are regularly scheduled
surveysoften quarterly. The respondents typically are responsible for deciding whether to
continue the working relationship.
Transactional surveys are sent out at the discretion of whoever has contact with customersbut
the data should be collected immediately after the interaction while the experience is still fresh in
the customers mind.
Relationship surveys should be spread out over the course of a year. Here are a couple of points
to keep in mind:
If there is only one data point for each year, a single event could have a large impact on
results.
Research in the hotel industry reveals that satisfaction ratings are consistently higher in
the spring than in the fall.
For companies with a sufficiently large customer baseat least 10,000relationship
surveys can be conducted on a continuous basis but reported on a monthly basis to
address the effects of seasonality or single events.
In many cases conducting both transactional and relationship surveys may be appropriate. For
example, a company may conduct transactional research for customer service purposes and
relationship research for routine checkups on the health of the business.
2. How Many Customers to Survey

For companies with a small customer basefor example, 2,000 or fewerinterview as many
customers as possible. If your budget allows it, offer an incentive such as company merchandise
or a small gift certificate to compensate respondents for their time.
If your company has more than 2,000 customers and it is not economically feasible to survey all
of them, you can survey a subset. In this case youll need to consider the following concepts
relating to sample selection and accuracy of results:
Random selection. First, it is essential that a random selection of customers be contacted
to avoid introducing bias into how the customers were selectedand to help ensure that
the sample of customers is representative of the entire customer base. For example, if a
company surveyed only customers who contacted customer service, those individuals
may be very different from customers who have not contacted customer service.
Margin of error. Next you need to establish the level of precision you want to have in
the accuracy of the results. The margin of error (also known as a confidence interval) is
an indicator of sample accuracy for random samples. It is the plus-or-minus figure that is
commonly reported with news polls, such as plus or minus four points. In a customer
satisfaction example, if the reported result is 80% satisfaction with a 4-point margin of
error, that means the true answer is somewhere between 76% (80 4) and 84% (80 + 4)
assuming the whole population of customers had been asked. The larger the sample size,
the more accurate the results (or the smaller the confidence interval).
Confidence level. Then you need to determine how certain you want to be that the survey
results are within the margin of error. The confidence level indicates the level of certainty
that the survey results are within the confidence interval for random samples. Typically,
researchers use the 95% confidence level.
Together, the confidence level and margin of error together describe the certainty you have in the
precision of the data. For example, for a reported result of 80% satisfaction at the 95%
confidence level with a 4-point margin of error, you can say that you are 95% certain that
percentage of satisfied customers is between 76% and 84%.
The table below outlines the sample sizes needed for different customer bases at varying levels
of accuracy at the 95% confidence level.

Another important consideration in determining the sample size is how much analysis will need
to be done on groups of customers. To analyze customers in particular industries or regions, the
sample size should be adjusted to at least 75 people in each group.
A number of online sample-size calculators are available that will provide the sample size
necessary for a particular confidence interval, or the margin of error for a particular sample size.
Just search sample size calculator with your search engine of choice on the Internet.
3. How to Distribute Your Survey

The best means of distributing a survey depends on whether it is a transactional or relationship
survey. A transactional survey is conducted at the point of customer contact. Depending on the
nature of the customer contact, an in-person, telephone, or online survey may be appropriate.
Relationship surveys, on the other hand, are most cost-effectively conducted online.
Online data collection offers significant advantages over other modes of interviewing customers,
and you should use it whenever possible. The advantages include:
Speed. The Internet offers instantaneous distribution of survey and real-time
accumulation and tabulation of results. This allows for immediate data analysis, even
while the survey is still in progress. Because customer satisfaction results are used to
identify problems and fix them, the faster responses arrive, the faster they can be
addressed. In contrast, mail surveys suffer from long lag times and low response rates, as
low as 5%. Telephone surveys take longer because of declining response rates. Refusal
rates for phone interviews have reached 60% (AC Nielsen, 2004). With the ease of
answering online surveys, they can be completed faster and a broader segment of the
customer base can be reached. Depending on a number of variablesthe relationship
with the survey recipients, the length of the survey, whether a reminder is sent, and
whether an incentive is offeredresponse rates for online surveys can be upward of 35%.
Even for online surveys in which there is no prior relationship with recipients, response
rates can be 23% to 31% (Quirks Marketing Research Review, 2005).
Candor. People are more honest when their answers are not filtered through someone on
the phone. This is essential for research on sensitive subject matter where studies indicate
people are more likely to answer questions on the Web than they are on the phone or in
personal interviews. (Quirks Marketing Research Review, 2003). The removal of
interviewer bias and the elimination of the wait time for an interviewer to record results
also yields more candid and complete responses to open-ended questions. This is
particularly important when customers volunteer additional information to explain their
satisfaction ratings. Such responses provide insight into what a company is doing well
and frequently provide warning signs about the health of the business relationship.
Cost. The Internet eliminates many of the costs associated with traditional marketing
research. Online surveys avoid postage and telephone costs as well as basic materials like
paper, staples, envelopes, and printing. Because it is self-directed, there is no interviewer
cost. Finally, its more convenient so the cost of offering incentives can be reduced.
Online and offline methods of data collection can also be combined. If offline methods are
necessary for part of the customer base, the data for customers who can be reached only via mail,
in person, or by telephone can be input to an online survey tool. That way all survey results can
be captured, reviewed, and analyzed together.
How to Design an Effective Customer Satisfaction Survey
Most businesses and organizations embrace a philosophy of continuous improvement. A
welldesigned customer satisfaction survey will help measure your progress toward that goal. A
quick way to get started and ensure a successful survey design is to use Zoomerangs Customer
Satisfaction Survey templates. If the survey will be designed from scratch, follow Zoomerangs
recommended design principles. For an example survey demonstrating these principles, click
here.
1. Ask Overall Satisfaction Early in the Survey

Ask the general satisfaction question at the start of the survey to avoid bias. This will allow
measurement of customers overall impressions of a company or an organization prior to
prompting them to think of specific aspects of the relationship.
Consider the example of a banks customer satisfaction survey. The first question should be
Overall, how satisfied are you with Bank X? Then ask for specifics: their teller experiences,
the availability of ATMs, etc. Otherwise, the customers answers to the overall satisfaction
question will be influenced by their satisfaction with specific attributes of that relationship that
they may not have thought about until they were asked.

2. Use a 5-point Satisfaction Scale
Question scales should have descriptive labels associated with the numbers, and the top end of
the scale should mean that customers are truly wowed. If the ends of the scale are simply
satisfied and dissatisfied, it will not provide a sense of the intensity of customers happiness
with a product or service. A customer who is simply satisfied just hasnt found a better deal
yet.
The 5-point Satisfaction Scale

An insightful alternative to the 5-point satisfaction scale for customer service is a 5-point
expectations scale. It provides clear direction and allows customers a polite way to suggest that a
company has not done a great job.
The 5-point Expectations Scale for Service

3. Be Consistent in Your Questions

Consistency is critical in customer satisfaction research. Question scales should be consistent
within a particular questionnaire as well as over time. The key measures of customer satisfaction,
including the overall satisfaction question and those asking about specific aspects of the
relationship, should all use the same scale. That way an apples-to-apples comparison can be
made and it is readily apparent where a particular part of the business may need improvement.
For example, if a 5-point satisfaction scale is used for the overall satisfaction question and 7-
point scales are used for other questions about timeliness of service or product quality, it will be
challenging to quickly uncover weaknesses in the business. If the survey reveals that 80% give a
top rating in overall satisfaction on a 5-point scale but only 62% do so for a particular attribute
on a 7-point scale, how much of that difference is a result of the difficulty of meeting a higher
threshold on a larger scale?
Similarly, question content and scales should remain consistent over time. Customer satisfaction
scores are typically evaluated on a quarterly basis or at regular intervals; and if the questions and
the scales change, evaluating performance over time is compromised.
Note: Scales can have a dramatic effect on satisfaction ratings, so be wary of writing questions to
drive up the numbersespecially if results are being used for compensation purposes. Be
cautious about interpreting competitors claims of satisfaction scores. Know how the question
was asked before jumping to any conclusions about the health of the business.
4. Keep the Survey Short and Focused

Focus on getting a read on your customers relationship with you. Avoid the temptation to ask
everything youve ever wanted to know. The more ground you try to cover, the more likely it is
that respondents will abandon the survey. This can also result in inflated satisfaction scores
because those customers willing to spend that much time answering your survey are probably the
ones with positive feelings toward you.
An expedient way to develop a short, focused survey instrument is to rely on Zoomerangs
Customer Satisfaction Survey templates.
If you build your own survey be sure to include all the key questions:
Overall satisfaction
An open-ended probing into the reason for the satisfaction rating
Likelihood of recommendation
An open-ended probing into the reason for the likelihood of recommendation
Likelihood of repeat purchase
Satisfaction with specific attributes of the product or service
An opportunity to provide additional feedback
For an example survey demonstrating these questions, click here.
Think of the customer satisfaction survey as part of an ongoing conversation with your
customers. Rather than cramming every question you have into a single survey, do multiple
surveys throughout the year on different topics.
5. Ask Demographic or Firmographic Questions

Inquiring about demographics or firmographics (company or industry type and size) enables you
to analyze the data by different subgroupssuch as new customers or regional customers.
Consider hypotheses about customer profiles that may affect satisfaction and include questions
that capture that data.
Interpreting Survey Results
When youre analyzing customer satisfaction survey results, the most important goals are
minimizing the low scores and improving the top scores. It is important to monitor the top two-
box satisfaction number, which is the combined percentage of those saying they are very or
somewhat satisfied. It is essential, however, to call out to management the proportion of
customers who are dissatisfied and to reduce those percentages. Insights into how to do that are
found by learning what those who provide high ratings have to say and reviewing the results of
those who are dissatisfied with performance.
1. Trends in Satisfaction Score

Observing the top-two box percentage over time will reveal where a company is improving and
provide warning signs of what needs improvement. Percentages are a useful means of
communicating results in customer satisfaction research because they are readily understood by
most people. Moreover, they are more aligned with business objectives (increasing the
percentage of people who are satisfied and minimizing those who are dissatisfied).
Example of Trend Report in Overall Satisfaction

A succinct way to measure how well a company is succeeding in minimizing low scores and
improving top scores is to calculate the satisfaction differential by subtracting the bottom two-
box scorethe combined percentage of those saying they are very or somewhat dissatisfied
from the top two-box score. A company that is successful on this metric will see this number
increasing over time. The table below illustrates that score for the example trend report.

Competitive benchmarks for customer satisfaction can be difficult to come by because this is
typically proprietary information. Moreover, competitors results cannot be accurately
interpreted without knowing the specifics of question wording and the scales used. The
satisfaction ratings for the recipients of the Malcolm Baldrige Quality Award given by the U.S.
Department of Commerce, however, provide some insight into those companies that have been
recognized for achievements in quality and performance.
Malcolm Baldrige Quality Award Recipients Satisfaction Ratings

2. Find Sources of Dissatisfaction

To increase the top two-box score next quarter, it is critical to understand what is driving the
bottom two-box scores. There are two easy ways to do that:
Review the open-ended comments. Reading the volunteered comments following up on
the rationale for the satisfaction rating is essential. The remarks among the most satisfied
customers will shed light on what a company is doing well. They may also provide early
warning signs if satisfied customers voice concerns with a service, product, or customer
support experience. Dissatisfied customers will be vocal about the rationale for their
satisfaction rating and will provide actionable suggestions for how to improve.
Cross-tabulate by satisfaction rating. A key analysis includes looking at the people
who are really happy and those who are not happy. Cross-tabulation features make
comparisons between satisfied and unsatisfied customers fast and easy. The tendency in
analyzing customer satisfaction results is to focus on those company, product, or service
attributes that elicit the greatest dissatisfaction overallprice, for example. Most
customers will want a lower price regardless of their satisfaction level. It is more
revealing to compare how satisfied and dissatisfied customers feel about various aspects
of the product or service relationship. The gap in satisfaction ratings for each attribute
will help prioritize areas for improvementthe areas with the greatest difference should
have the highest priority. In the example cross-tabulation table below, price has the
lowest top two-box satisfaction score among all customers. The gap between satisfied
and dissatisfied customers, however, is biggest for customer service, so that is the area
with the most impact on overall satisfaction.
Example Cross Tabulation by Satisfaction Rating

3. Present Findings and Action Items
Collecting customer satisfaction data is useful only if there is a process established to deliver
recommendations, implement action plans, assign plan owners, and monitor plan execution.
Once the results have been compiled and analyzed, they should be presented to management
with recommendations for resolving the identified weaknesses. The recommendations should be
actionable reduce response times to four hours for example and the person responsible and
the resources allocated to meet that goal should be determined. There should be periodic
meetings to evaluate progress on the action plan and the next customer satisfaction survey should
evaluate progress on that goal.
4. Contact Customers
If possible, dissatisfied customers should be personally contacted to see if there is something that
can be done to improve their perception of the business. This is important not simply to increase
the odds of keeping that customer but also to prevent negative word of mouth. The personal
contact itself may succeed in doing that. Additionally, a discount or free product should be
considered. If policies or products are changed based on customers feedback, those customers
should be contacted to let them know about those changes and that their feedback was taken
seriously.

Start a Customer Satisfaction Research Program Now
Put an end to guesswork as you know it. Start a customer satisfaction research program
today.