Why Customer Satisfaction Is Essential for Your Small Business

Customer satisfaction is important for any business, but it's essential for small businesses looking to grow. We'll look at whether you should measure customer satisfaction and how to do so.

Updated July 30, 2020

If you want your business to thrive, here’s an essential tip: Emphasize customer satisfaction.

You absolutely need to offer a great product or service at a reasonable price. But many companies successfully check those boxes. To stand out from the competition and secure lifelong customers, you must prioritize consumer satisfaction.

Think about your most recent negative customer service experience. Did you become a repeat customer? Did you recommend the product or service to others? Or, did you warn them to stay away from the company instead?

Now, consider the last time you experienced good customer service. Did you tell anyone else about your positive experience? Have you purchased from that company again, or will you in the future?

Happy customers are return customers, and they often bring more customers along with them! For small businesses looking to grow, customer satisfaction is king.

Overview: What is customer satisfaction?

Customer satisfaction is a measure of how customers feel about their experience with you and your brand. Are they happy with your product or service? Do they feel valued throughout the process?

If you have an online business or use an e-commerce software, is your website simple to navigate? Are issues quickly and courteously resolved?

Along with factors such as price and product, the customer service experience is an essential brand differentiator. Consistent customer satisfaction creates customer loyalty. Loyal customers may become brand enthusiasts and even brand advocates. For you, that means more customers and more profit.

Why is customer satisfaction important for small businesses?

More customers and more profit sounds great, especially for small businesses. So how does customer satisfaction help you achieve these results?

1. Customer satisfaction is a leading indicator of customer loyalty.

When someone experiences satisfactory customer service, they’re much more likely to return to your business in the future. Studies show that even a small increase in customer satisfaction can dramatically boost customer loyalty.

Work toward improved customer service by taking a few simple steps. Listen to your customers’ needs and pain points. Make sure the service you provide is quick and convenient, including customer self-service for help and troubleshooting.

Empathize with your customers, apologize for issues, and find a satisfactory fix. Train your employees in customer service.

As a small business, you have an advantage when it comes to customer satisfaction. You’re perceived as more authentic and personable, and you’re closer to your customers. Use this advantage by personalizing the customer experience and increasing customer engagement as much as possible.

Get to know the people who buy your products and services. Tell a brand story that resonates with your audience and their values. Check in after purchase to see if they have questions or complaints. Include a handwritten note in your packaging. Try some new e-commerce strategies.

Create loyalty programs for frequent customers. If possible, send discount codes or small gifts. By leaning into relationships, you’ll exceed expectations and earn loyal customers.

2. Customer satisfaction increases customer retention and advocacy.

On the path to becoming a loyal customer, people pass through the customer life cycle. Consistently satisfied customers reach the retention phase.

Customer retention saves money. It can cost five times more to attract a new customer than to retain an existing one.

Research from Bain & Company shows that increasing customer retention rates by just 5% increases profit by 25% to 95%. For small businesses, this increase may mean the difference between surviving and thriving.

Some delighted customers even reach the final stage — advocacy. Advocates are genuinely enthusiastic about your brand. They write glowing reviews online, recommend your business to others, and shop with you again. Both retention and advocacy generate profit, providing an excellent incentive to keep customers satisfied.

3. Customer satisfaction maximizes customer lifetime value.

Customer lifetime value is the amount of money you can expect to earn from a customer over the duration of your relationship.

Factors in calculating customer lifetime value include average order value, average purchase frequency, and average customer lifespan. It’s only natural that satisfied customers will spend more money, purchase more frequently, and stick with you longer.

So prioritizing customer satisfaction maximizes the lifetime value of your customers.

For small businesses, the lifetime value of each customer is even more important. Remember to use your advantage to form deeper relationships.

Understand your customers’ goals and go above and beyond in your efforts to meet them. Customers who feel valued provide increased value to your business in return.

4. Customer satisfaction differentiates your brand.

With heightened competition in just about every industry, brand differentiation continues to increase in importance. Customer experience, service, and relationships are key brand differentiators. When people like you and have consistently positive experiences with you, your business stands out from the rest.

Quality and price being equal, customer satisfaction makes the difference. Surveys show that people will even spend more money for a better experience. Two-thirds of U.S. consumers say they will pay more for a company that provides excellent customer service.

Meanwhile, 60% say they have decided not to complete a purchase due to poor customer service. The importance of customer service and satisfaction is evident. If you want people to choose you (and choose you again), consistently provide an exceptional, customer-centric experience.

Should you measure customer satisfaction?

Listening to your customers is one of the most important ways to ensure customer satisfaction. If you don’t ask them about their experience, you won’t know how to enhance it.

As with all business metrics, it’s important to evaluate and re-evaluate customer satisfaction. Determine where you stand now and what steps you can take to improve. After taking these steps, measure customer satisfaction again to see if your efforts worked. Then rinse and repeat.

How do you measure customer satisfaction?

Measuring customer satisfaction requires you to gather customer feedback and compare it to quantitative reports. Simple strategies include:

  • Social media feedback and polls
  • Live chat transcripts
  • Customer surveys, e.g., Customer Satisfaction Score (CSAT)
  • Marketing emails to collect feedback
  • Churn rate (percentage of customers who leave your business)

Trigger surveys and feedback as close to the customer experience as possible, especially after a meaningful part of the customer life cycle is completed. Finally, analyze your data to gain insight and make improvements.

Customer satisfaction increases loyalty and profits

Here’s the bottom line: Satisfied customers are loyal customers. Loyalty leads to recommendations, more business (from not only your customers, but also their friends and followers), and increased profits.

As a small business, you have a leg up when it comes to relationships and customer satisfaction. Use customer service as a way to differentiate and grow your brand. Build relationships and go above and beyond for your customers. Measure customer satisfaction, work toward improvement, and measure again.

By investing in customer satisfaction, you’re investing in the health and success of your business.

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The Motley Fool has a Disclosure Policy. The Author and/or The Motley Fool may have an interest in companies mentioned.