Tuesday, June 18, 2024

B2B Solution of the Week: How companies use different metrics to determine customer satisfaction

Last updated on June 8th, 2022 at 12:07 am

Evaluating B2B customer relationships is tricky. Two of the most important tools at a company’s disposal are customer satisfaction (CSAT) surveys and Net Promoter Score (NPS). While they might seem similar, they serve distinct purposes and using one or the other can make a difference in maintaining customer happiness and loyalty.

This article will examine when each tool is appropriate for B2B companies under which circumstances and for what objectives, and answer the question of what types of metrics measure customer satisfaction. 

Customer satisfaction (CSAT)

To begin, you need to understand what B2B companies mean when they discuss CSAT. Generally speaking, B2B firms use CSAT to determine customer happiness with specific transactions. Anyone who has ever made a call to a customer service line may remember getting asked to take a short survey afterward to rate it on a scale of 1 to 10, 10 being best.

“CSAT surveys help B2B organizations measure quality of individual customer service interactions,” says Marcus Bragg, senior vice president, enterprise, Zendesk, a customer service software and support ticket system. “Surveys are sent to customers shortly after a company believes issues raised were resolved. Organizations can then use that feedback to understand and improve issue resolution speed (and) completeness and the experience of interacting with support agents.”

For example, if a cellphone maker wants to know how its customers feel about the software or customer service, it will use CSAT to measure that metric, according to Larry Robinson, senior vice president, product management, Service Cloud, Salesforce.com. “LG might use CSAT to measure customer service,” he says.

A CSAT dashboard
A CSAT dashboard

Salesforce has experience with CSAT in its own business. For example, of 4,600 Salesforce customers randomly selected by Confirmit, they averaged a 45 percent increase in CSAT of their own customers by using Service Cloud, according to Robinson.

Net Promoter Score (NPS)

While CSAT scores help B2B practitioners determine how well their customers feel about discrete transactions at specific points in time, NPS provides more longitudinal perspective. It measures how the customer perceives her overall customer experience with a B2B enterprise. Co-developed by Laura Brooks, PhD, industrial psychology, Rice University; Fred Reicheld, Bain and Co.; and Satmetrix, NPS was published in 2003 in the Harvard Business Review to provide a relative metric for B2B companies to measure themselves against the competition, according to Brooks.

“Everyone would know what it means,” she says. “It’s open source and easy to calculate. In a poorly performing industry you could have a poor NPS but still be better than the competition.”

For example, facility assets adviser Sightlines has an NPS score of 47, two to three times the score of typical B2B service providers, according to Jeffrey Henning, president, Researchscape International, a customer research company.

As Brooks explains, NPS is based on a scale of 0 to 10 when asking customers how likely they are to recommend a B2B company to a friend, for example. To calculate NPS, a B2B company will take its customers’ 9s and 10s (i.e., promoters) and subtract the 0s through 6s (i.e., detractors) to arrive at the Net Promoter Score. In NPS, 7s and 8s are neutral, or passive.

“NPS is a relationship metric,” says Brooks, vice president, innovation and strategy, Satmetrix, a customer experience management company. “It measures more than one event. It looks at all the experiences a customer has had with a company.”

Determining when to use CSAT or NPS

When determining whether to use CSAT or NPS as a metric depends on what a B2B company hopes to accomplish with its research.

For CSAT, the B2B objectives primarily encompass the immediate future and past. Whereas NPS enables B2B firms to evaluate the staying power of their brands over the long haul with customers.

“For example, CSAT is good if you want to measure the short-term happiness of your customers around a single transaction,” says Tom Martin, CEO, Glance Networks, a visual engagement company. “NPS can give you a decent indicator of whether or not someone would recommend a product/service.”

A stock market analogy is used by Bharath Oruganti, senior vice president, services and operations, ShoreTel, a Unified Communications provider, when explaining the differences between CSAT and NPS.

“In the short run, the stock market acts like a voting machine—signalling which firms are popular and unpopular,” Oruganti says,citing value investor Benjamin Graham. “In the long run, the stock market acts like a weighing machine, assessing the substance of the company and the value it’s creating for its customers and shareholders.”

Similarly, CSAT serves as a short-term voting machine, measuring performance and capturing immediate feedback after a customer transaction, according to Oruganti. Conversely, NPS surveys take on weighing machine duties. In NPS customers are categorized three ways: promoters, passives and detractors. “These categories are better predictors of the customer’s loyalty to the company’s brand, and more importantly, their future buying behavior,” Oruganti says.

Lifetime customer value

Future buying behavior is imperative because loyal customers are worth up to 10 times as much as their first purchase, according to Martin, who cites White House research on this matter. “Clearly, it’s worthwhile to put in effort to make customers happy,” he says. And CSAT and NPS have distinctly different approaches to this information.

Others observe that NPS has more predictive power than CSAT for lifetime customer value. For example, NPS has emerged as a more effective measure of customer loyalty than CSAT, according to Keith Pearce, vice president, corporate marketing, Genesys, vendor of customer experience and contact center solutions.

“While CSAT offers more qualitative insights into a point in a customer journey, NPS is more scalable,” he says. “NPS is a more meaningful metric considering future customer behavior, offering insight into increased share of wallet.”

Using CSAT and NPS together for B2B business objectives

It is not the best practice for B2B companies to use a single score—whether CSAT, NPS, Customer Effort or a custom metric. If B2B companies favor a particular score, their customer agents will take the shortest path to achieve a positive outcome, experts say.

Dave Fish of Maritz
Dave Fish of Maritz

“Unfortunately, that will not generally result in an overall improved customer experience,” says Dave Fish, expert services team lead, MaritzCX, a provider of customer experience software and services. “Using NPS, CSAT or any other measure by itself can negatively impact the customer experience, with agents sometimes trying to coerce people into giving a passing grade. Basing incentives on metrics has to be done with care.”

For example, Jive Communications, a hosted VoIP and Unified Communications provider, working with Zendesk since June 2015, has implemented both CSAT and NPS. “While many Jive competitors require customers to sign three- or five-year contracts, the majority of Jive customers are month-to-month,” says David Rowley, vice president, customer experience, Jive Communications. “This requires keeping a pulse on customer satisfaction to ensure clients continue with Jive.”

Accordingly, Jive’s CSAT metrics are crucial to understanding transactional data, and this data is used to coach, train and improve customer service representatives. However, NPS results offer a unique perspective from a wider array of stakeholders. “While CSAT interactions tend to be with the more tactical, day-to-day points of contact, NPS can be sourced from anyone associated with the company, helping Jive better understand the complete customer experience,” Bragg says.

By any means necessary

In the final analysis, a B2B company must use tools that deliver the most customer value. That could be CSAT, NPS, a combination, Customer Effort—a measure of how easy it is for customers to do business with you—or something else.

Because every company that serves other businesses should have metrics of satisfaction and engagement, according to Joseph Michelli, PhD, business consultant and author of Driven to Delight: Delivering World-Class Customer Experience the Mercedes-Benz Way, a customer satisfaction study of fleet accounts and SMB users of commercial vans.

“Satisfaction metrics address whether you meet a customer’s needs and expectations,” Michelli says. “Those metrics get at, ‘Did I satisfy you at this moment in your journey?’ Other questions get at operational issues like, ‘How much effort did it take to get your needs met?’ While B2B customer relationships are slower to form and (stickier) than B2C relationships, B2B churn is a reality for companies that chronically dissatisfy or cause considerable customer effort.”

Main photo via Ga-Core.com


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Derek Handova
Derek Handova
Derek Handova is a veteran journalist writing on various B2B vertical beats. He started out as associate editor of Micro Publishing News, a pioneer in coverage of the desktop publishing space and more recently as a freelance writer for Digital Journal, Economy Lead (finance and IR beats) and Intelligent Utility (electrical transmission and distribution beats).