Customer Satisfaction Score (CSAT)

How Does the Customer Satisfaction Score (CSAT) Work?

The customer satisfaction score (CSAT) is a customer-centric, systematic method companies use to understand and improve the quality of their products or services.

Customer satisfaction surveys gather feedback at critical moments in the customer lifecycle, such as the period following the initial onboarding phase, after important experiences (e.g. new feature roll-out), and the period before an upcoming subscription renewal.

The periodic collection of customer feedback and monitoring of the CSAT score is a practical tool for businesses aiming to enhance the perceived value received by their existing customer base.

The widespread adoption of the CSAT scoring system is attributable to its simplicity and ease of monitoring historical trends (and patterns), functioning as a systematic method to gauge customer sentiment for internal purposes.

Usually, the CSAT is measured by asking customers to rate their satisfaction on a scale based on a scale from either 1 to 5 or 1 to 10, with higher scores indicating greater satisfaction.

For instance, respondents are given the following choices to pick from under the 1 to 5 scoring system:

• 1 ➝ “Very Unsatisfied”
• 2➝ “Unsatisfied”
• 3 ➝ “Neutral”
• 4 ➝ “Satisfied”
• 5 ➝ “Very Satisfied”

Since the output from measuring the CSAT is straightforward and intuitive, the CSAT functions as a practical, easy rating method to confirm customer satisfaction (and implement changes as deemed necessary).

The periodic monitoring and analysis of CSAT scores ensure businesses stay aligned with customer needs and drive continuous improvement, which should be the priority of any company, irrespective of the industry in which it operates.

However, the CSAT is merely a standalone score, so the real value stems from businesses identifying the areas for improvement and acting upon the collected customer feedback, enhancing the overall customer experience and building more loyalty.

A positive score, typically between 75% and 85%, indicates customer satisfaction and helps businesses understand their performance better.

Using CSAT as part of a broader customer feedback strategy can significantly improve a company’s long-term sustainability and ability to achieve profitable growth.

Why? Customer satisfaction correlates with increased customer loyalty and retention, which coincides with generating more recurring and a higher repeat purchase rate, including reducing customer churn.

How to Calculate Customer Satisfaction Score (CSAT)

The process of calculating the customer satisfaction score (CSAT) starts with collecting customer feedback through a customer satisfaction survey and other relevant data.

For instance, the core question that businesses ask customers is, “How satisfied are you with our service?”

Once enough feedback from the survey responses is collected, the customer data is consolidated and input into the rating scale to retrieve a CSAT score.

Therefore, the CSAT scoring system provides a quantifiable measure of customer satisfaction, which serves as a score that can be closely monitored over time to determine the effectiveness of particular strategies.

Positive customer responses are ascribed higher ratings—such as a 4 or 5 on the standard 5-point scale—whereas negative customer responses are assigned scores at the bottom range.

Given a high customer satisfaction score, a company should anticipate more (e.g. long-term customer contracts and repeat purchases) and more positive word-of-mouth marketing, contributing toward a more sustainable revenue model.

Companies with high customer satisfaction scores outperform their competitors in terms of profitability, with a higher likelihood of establishing an economic moat.

CSAT provides near-instantaneous customer feedback, allowing businesses to address issues promptly and improve their services while establishing a benchmark for evaluating the effectiveness of changes implemented over time.

By improving CSAT, businesses can ensure customer expectations are met and their “pain points” are directly addressed, which is necessary to maintain a competitive advantage (or “edge”).

CSAT Formula

The customer satisfaction score (CSAT) is calculated by dividing the number of positive responses by the total number of responses collected from the customer base.

The CSAT is expressed as a percentage to improve the ease of comparability, so the output must be multiplied by 100 to convert the rating into percentage form rather than decimal notation.

For example, suppose a company conducts a survey where 170 out of 200 respondents provided a positive rating.

The CSAT score would be 85%, implying that 85% of customers are satisfied with the value received from product usage or service receipt.

How to Measure Customer Satisfaction Score (CSAT)

Businesses must design and distribute a well-crafted survey to measure CSAT effectively, often by offering an incentive for providing such feedback.

Moreover, adding a customer effort score (CES) survey can also be beneficial, as the method quantifies how easy customers find it to interact with the brand, helping to identify areas for improvement.

The survey should ask a direct question regarding satisfaction and use a simple rating scale as a general best practice. Gathering feedback at key touchpoints in the customer journey is crucial to understanding how effectively a company meets customer expectations and addresses any pain points.

The prompt issuance of satisfaction surveys to customers is necessary, as feedback should be collected post-interaction to capture accurate feedback as close to real-time as possible, causing the timing to be a critical factor here.

The strategic deployment of satisfaction surveys at key moments, such as after onboarding or six months before subscription renewal, helps in gathering continuous feedback using the customer satisfaction score (CSAT) as a key performance indicator (KPI).

Customer surveys—or whichever method the company uses to collect customer feedback—can be distributed through various channels, often email, SMS, in-app prompts, or website pop-ups.

For the data set on customer data to be meaningful, however, a sufficient number of responses must be collected to “cast a wide net.”

Furthermore, the data should reflect a broad range of customers to avoid the risk of analyzing biased data, where the pool of customers that partake in the survey and provide responses are not just those prone to provide positive feedback.

Companies must thereby proactively implement measures and structure the data collection method to represent the entire customer base to avoid blind spots.

While analyzing the CSAT rating score, by itself, still offers utility for spotting high-level trends and patterns (i.e. macro-level data), figuring out the specific areas needing improvement usually comes from direct, follow-up engagement with particular customers.

CSAT Calculation Example

Suppose we’re tasked with calculating a company’s customer satisfaction score (CSAT) based on the following assumptions from issuing a satisfaction survey after each customer service interaction. The company has collected 1.5k total responses from customers who decided to participate in the survey.

The responses provide valuable insight into how the company’s customers perceive the quality of service received.

The computation of the CSAT score involves identifying the number of positive responses—i.e. a 4 or 5 on the 5-point scale—as the initial step.

Of the 15k customer responses collected, 9.8k customers rated their satisfaction as either 4 or 5.

• Positive Responses = 9,800
• Total Responses = 15,000

The number represents the positive feedback the company received. The calculation of the CSAT score involves determining the ratio of positive responses to the total number of responses, which is crucial because it provides a clear picture of the proportion of customers who are satisfied with the service.

The process involves dividing the number of positive responses (9.8k) by the total number of responses (15k), resulting in a proportion that reflects customer satisfaction levels.

The next step is converting the proportion of positive ratings relative to the total ratings collected into percentage form by multiplying the result by 100, making the metric easier to communicate and track across time.

Upon inserting the customer-level data into the customer satisfaction rating (CSAT) formula, we arrive at a CSAT of 65% for the given period.

• CSAT (%) = 9.8k ÷ 15k = 65.0%

The CSAT score of 65% provides a benchmark for the company’s performance in the current period, highlighting areas where the service meets customer expectations and where improvements may be needed.

The tracking of CSAT over time allows companies to identify trends, analyze the impact of changes in their service delivery, and implement changes to their strategies to improve customer satisfaction, reflected in an incremental rise in the CSAT score.

In closing, the company must remain committed to tracking and improving upon the CSAT score—while cognizant of the baseline rating (65%)—to ensure the highest-quality product or service is delivered to customers.