Are Your Customer Satisfaction Surveys Actually Working? Look at Your Customer Retention

A lot of businesses conduct customer satisfaction surveys. When they are conducted correctly, surveys are one of the best ways to understand how customers feel about your company, what things you are doing right, and where improvements are required. But the question is, how can you be sure that your customer satisfaction surveys are actually working and worth the cost and effort to conduct them regularly?

The answer is, look at your key metrics. In particular, look at your customer retention.

What are customer satisfaction surveys?

Customer satisfaction surveys are a tool used to measure how happy customers are with different aspects of your company, including product quality, customer service, pricing, and almost anything else related to your business. They give you insights into how to improve your products and services, and your overall sales process. The only way to make things better is to first understand where your weak spots are. That’s where the customer satisfaction surveys are critical.

How is your customer retention?

One of the most important metrics for your company is customer retention. You might even be able to say it’s the most important metric. In simple terms, customer retention looks at the percentage of customers that bought from you within the last 12 months who also purchased within the prior 12 months to that. Maintaining retention over the long term is critical for your purchase frequency, purchase volume, and overall profitability.

For the majority of companies we work with, the revenue that each customer generates increases dramatically when they go from year two to year three working with them. Here are the typical purchase frequency gains that we see for equipment dealers, as an example: 2.9X more equipment, 9.1X more rentals, 4.1X more service, and 5.6X more parts in the third year, compared to the second year. Overall, their customers spend 30% more in the second year of working with them and another 50% more in year three.

The relationship between customer satisfaction surveys and retention

We’ve established that customer retention is extremely important to increasing your revenue and the long term growth of your company. But how is that metric related to surveys?

If customer satisfaction surveys are working, you should be seeing significant improvements in your customer retention. For example, at Winsby, our customer satisfaction surveys consistently produce gains of 20% - 30% in customer retention. What an increase in customer retention means is that revenue is much higher than it would have been if we had not been conducting customer satisfaction surveys for them.

If you aren’t seeing these gains in customer retention and the corresponding increase in purchase frequency and revenue, then something is probably wrong with the way you’re conducting your customer satisfaction surveys.