How to Calculate CSAT and Why It Matters

Customer Satisfaction - or CSAT for short - is a phrase that businesses regularly declare as something positive toward which to aspire. In reality, organizations often mistake it an unquantifiable desired outcome they hope to achieve with customers without having a deeper comprehension as to why it matters. The simple truth is this: high CSAT matters a great deal.

Let us get our operational definitions in alignment. What is CSAT and what is it not?

CSAT is not merely an indication of customer happiness with a brand or business. To consider CSAT such would equate to focusing on either a single event, touchpoint or customer experience.

In fact, CSAT represents the totality of a consumer's experiences with a brand within a snapshot of time. Of course, such experiences can be reflected in a customer's interactions with a company's employees. That is evident. However,  CSAT also encompasses how well a product or service has met or not met (as well as exceeded or fallen short) a consumer's expectations that a business has delivered on its brand promise.  

Did the service solve a pain point for the customer? Did a product provide value that had the customer not used the service would have been an opportunity cost for him or her? Was the product able to make a customer's life easier or perhaps help her to shine within her organization? Did a customer expect a certain attribute - the color blue perhaps - that the product line did not offer?

What is clear is that customer satisfaction involves an emotional response from an individual. An emotional response by its very nature can be an outward expression derived from an actual event or a consumer's perception that might be based on little more than that person's expectations that may or may not be rooted in fact. However, marketing teaches us that "perception is the reality."

So how then does an organization measure an emotional response that may or may not have been originated from an actual event?

One may think that revenue or market share would be the appropriate measurements to use. That person would be correct - correct if that person was measuring how his or her organization is performing currently. Neither are measurements well suited for predicting the future.

How to Calculate CSAT

CSAT is surveyed at the individual level, yet almost always reported at the aggregate level. A single data point will not tell an organization much more than whether a single customer had a positive or negative experience. It does not imply broader institutional CSAT health.

Customers replying to a CSAT survey are asked to measure their satisfaction on a five-point scale (or ten-point scale, depending on the organization):

1 = Very Dissatisfied  

2 = Somewhat Dissatisfied

3 = Neither Satisfied nor Dissatisfied

4 = Somewhat Satisfied

5 = Very Satisfied

The next step is to receive the surveys, add the individual responses (for each choice) and then divide by the number of total surveys received.  

For example, if 50 of the 200 surveys returned a "Very Satisfied" answer, "Very Satisfied" accounted for 25% of the total response.  If 40 of the 200 responses returned a "Neither Satisfied nor Dissatisfied" response, the organization would know that 20% of its respondents felt this way.

Why Does CSAT Matter?

Now that we know how to calculate CSAT, let's dive into the reasons why customer satisfaction matters. CSAT touches upon almost every aspect of a business and its A-Z relationship with customers. Let us focus on three:

1. CSAT can provide insight into expectation management. As such, CSAT can be relative. When customers have high expectations - or were promised the Earth and moon by Sales - and what they experience falls short of such promises, CSAT tends to be lower. When customers have reasonable expectations - perhaps guided by expert Sales team members - and an organization delivers, CSAT tends to be high. Interestingly, what both organizations deliver could have been at the same level; The critical difference was the customers' expectations.

2. CSAT is a metric that provides not only the snapshot of how a consumer is feeling in that moment; It also provides a leading indicator of that customer's loyalty and future purchase intent. It makes sense. Low CSAT scores do not encourage repeat business. A single low CSAT score here or there might be outliers. Regularly low CSAT scores at the aggregate level is a sign that an organization's future stability and existence are at risk.

3. CSAT does not exist in a silo. People - consumers - talk. When someone talks, someone is listening in return. One complaint or rave here and there might not seem like much, but compounded out from a hundred, thousands or even millions of conversations about your brand, and your company could have either a massive problem on its hands or a pot of gold. The choice is yours! We have a phrase for it in marketing: word-of-mouth. In the Social Media Era, word-of-mouth has expanded from friends speaking with friends, neighbors and family. It has transformed into a global conversation. A single low CSAT score - derived from a single customer - has the power to destroy your organization's reputation completely. Conversely, a single high CSAT score - a single customer - has the power to lift your business up to great success.

CSAT matters to your business and to your customers. Focus on it and reap the rewards!

Michael Buenaventura

November 18, 2016