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Product Development Strategy: A Complete Guide to Create Better Products

Posted on Mar 15, 2023Mar 15, 2023 by Emily Louise Spencer

When creating a product, you can’t just spitball it. You need to take the time to create something that customers will actually want, and that is a better option than what they currently purchase. A product development strategy will assist you in finding your ideal product-market fit, and winning over customers from competing brands by providing a superior option.

What is a product development strategy?

You might have heard of the terms “new product development” or “new product development process” – while these are definitely important when creating a new product, they aren’t precisely what we’re talking about today.

A product development strategy is the direction that a new product release takes, from its market position to its overall demographic targeting process.

It’s a catch-all term that includes everything that takes place between having an idea for a product and actually putting it on the market.

The key takeaway here is that while new product development has to do with the actual act of creating a product, the product development strategy covers this and the steps needed to turn it into a viable, marketable product.

TCGen, which specializes in product development, has created a brilliant checklist that summarizes what a product development strategy is useful for, so take a look below.

So you might be thinking, if I’ve already implemented the new product development process, why do I need a product development strategy? After all, couldn’t I just take the end result and apply the same principles?

Well, you could. However, no business exists in a vacuum.

The fact of the matter is that some products aren’t just made for the sake of making good products that make money. They have another purpose. To gain a competitive advantage within the market, keep the company relevant, and claim a foothold that wouldn’t be available later.

It’s no coincidence that a new Xbox launches around the same time a new PlayStation does. Both companies can’t afford to concede market share to each other (Unless you’re Nintendo, and then you can do whatever you want).

Alternatively, businesses can patent & sell products simply so the competition can’t. Both Xbox and PlayStation have a long history of exclusive games, many of which were made by 3rd party companies.

The lesson here?

In the world of business, it isn’t enough to have a good product. You can still be undercut, out-advertised, and out-sold by another product if you don’t play it right.

That is to say, if you don’t have a good product development strategy.

What benefits can a product development strategy bring?

Okay, this sounds great in theory, but how do I apply it to my products? Fair question.

We touched briefly on why a product development strategy is important in the last section, but now it’s time to talk about tangible benefits.

So, what are some benefits of having a product development strategy?

Keeping an eye on the big picture from the start

When you have a product development strategy, you know exactly what it is you’re trying to achieve.

That might sound like common sense but bear with me here.

Let’s say you’re making a line of clothing, and your big-picture aim is to introduce hypo-allergenic fabrics that you can market to customers with sensitive skin.

Now, if you simply tell your design team that you want a certain set of clothing, e.g., pants, shirts, etc., from pure cotton, all they know is the letter of the instructions, not the spirit.

Nevertheless, they get on with it and have a working set of prototypes produced.

So the day comes for them to produce their designs, and lo-and-behold, they’ve used a dye that renders the line completely unusable by people with sensitive skin.

So what now? Well, they’ve got to go back to the drawing board with more precise instructions.

When you have an overarching aim, you need to keep all of your teams informed so they can create products that fit the spirit of your aims, not just the letter.

A product development strategy does exactly this, aiming to focus on the product’s placement and market position every step of the way.

Aligning cross-functional teams

When you run a business that creates products, it’s expected that you’ll have more than one team working on different steps of the process.

Those involved in product creation aren’t necessarily the ones who will be manufacturing it, and vice-versa. Thus, when creating a new product with a specific aim, you need to be keeping everyone on the same page if you want things to run smoothly.

Easier said than done.

Sometimes there are factors that one team is aware of, but the other is not, making the entire process grind to a halt when a plan is produced that simply doesn’t work under current limitations.

For simplicity’s sake, let’s take the example of the clothing manufacturer above again.

Your design team has managed to avoid the issue with dyes and has created a sensible prototype. And so, they decide to pass it on to the manufacturing team to produce.

However, you run into yet another roadblock.

You see, the supplier of the dye that you’ve selected has had some bad press, and the dye itself isn’t considered that reliable by those who find hypoallergenic clothes a necessity.

Now, anyone on the marketing team could have told you this. It’s their job to know the ins and outs of the current market, and they could have saved you from having to loop back again if only you’d communicated.

Product development strategies include communication aspects like these, using the big-picture focus to bring in new information when it’s needed.

Kellogg’s championed their traditional cereals such as Cornflakes, Froot Loops, and Frosties for decades, but with times changing and consumer preferences shifting, they’ve widened their reach by acquiring more diverse options to keep their customers happy.

Feedback & guidance loops

Both of the above are examples of a business that’s missing feedback & guidance loops.

Feedback & guidance loops are lines of communication in which advice is passed on from further down the chain back to the product design team. By keeping themselves in the loop, delays and design errors can be avoided, and the process runs more smoothly overall.

Of course, these loops aren’t limited to being relevant to the design team.

All teams involved can benefit from them to some extent, even if the most obvious examples involve product design.

The big-picture approach requires, well, keeping the big picture in mind at all times.

And if factors change in one area, it’s going to have a knock-on effect that might alter your overall approach.

Efficiency

Lastly, let’s talk about efficiency.

The ultimate goal of business is to bring in revenue & make profits.

Now, this obviously means that you need a decent amount of sales, but there’s another side to it too. Costs.

You can have the most incredible products ever created, but if the costs of design are too high, then you’ll spend years in the red before ever being profitable.

That’s not to say that you can’t plan to be in the red, but it needs to be done carefully. Plenty of businesses thought that they were in the clear, only to be blindsided by the COVID-19 crisis in 2020.

What I’m trying to say is that the future is uncertain, and you need to be able to bounce back. Sinking into the red with a lengthy, inefficient product development process is precisely the opposite of that.

See, a lot of the time, your manufacturing costs can’t really be altered without affecting the quality of your products.

Your costs of sale, packaging, delivery, advertisement, and the like are often relatively static, especially if you use a third-party platform like Amazon or Etsy to sell.

So, when those two types of cost are static, and you need to lower your numbers, what do you do?

You improve your product development strategy, improve your efficiency, and decrease the amount of time & money it takes to develop a new product.

Every factor we’ve talked about thus far has been leading up to the ultimate goal of product development strategies; to make the process smoother and less costly to go through.

The 3 types of product development strategy

Rewinding back, let’s look at what a product development strategy is again before jumping right into the types you can have.

Product development strategies are all about aiming for sales. They’re all about trying to create & develop your new products in such a way that they’ll not only be great, but marketable.

You can have the greatest volcano-proof diving suit ever made, for example, but if no one will buy it, then from a business perspective, it’s a dud.

With that in mind, the types of product development strategies you can have are largely dependent on your marketing tactics.

Let’s take a look at the three most common types.

PDS type 1: Premium

When I think of premium, my mind jumps to brands like Louis Vuitton and Porsche.

What do these brands all have in common? Well, they’re high-end brands that market their products as luxuries, as things to aim to achieve.

They’re brands that enjoy high brand equity, with their products making people go “wow.”

These brands aim to be right at the top of the market, selling small numbers of products but at high prices. That way, they make a lot of profit per unit and increase their revenue overall.

There are downsides, though.

For one, costs are higher than average. This is expected, as you use “limited-edition” or “high-quality” materials in your products to make them more desirable.

Often, these materials are entirely superfluous to the nominal function of the product, such as diamond-encrusted handbags, but you could say that their purpose is to show off.

Remember, these are luxury products. Most drivers wouldn’t need a car that goes 250 mph and wouldn’t think about it when deciding to buy one. They’d just think about what can get them from A to B.

Someone looking for a luxury car, on the other hand, probably has the time and money spare to take it to a race track or onto a highway where such speeds are allowed, thus making such a feature relevant.

Further, luxury brands are very difficult to establish.

Unless you’re entering an entirely new market where almost all products were created recently, akin to Apple when establishing themselves in the PC industry, there are probably going to be big-name brands there already that won’t like you muscling in on their territory.

Keep in mind that often these brands have a long and proud history.

Many European and Asian brands date back centuries and take their longevity as a badge of honor. It’s taken as a standard of quality that they’ve been able to operate for so long and still stay in business.

The Genda Shigyō company that provides traditional Japanese gift wrapping has been running since 771! Just imagine trying to go up against that kind of established name!

There’s also the factor of a diminished customer base. It’s a fact that most Americans can’t afford luxury goods.

Fewer potential customers mean that every sale matters. Every sale lost matters even more. It’s vital to keep your quality high and your customers satisfied if you want to keep operating with this type of strategy.

PDS type 2: Budget

Entirely on the other end of the scale, we have the budget strategies.

These types of strategies follow the idiom “quantity over quality” to the extreme. In essence, by making very small amounts of profit on each sale but making lots of sales, you increase your profits.

And a low-cost product is far more likely to be bought by those who make choices on the basis of price alone, meaning a bigger reach for it.

Budget products are often thought of as low-quality, but this isn’t always the case. In this type of product development strategy especially, you keep your profit margins low to keep prices down rather than using cheap materials.

Remember, being a budget option does not mean you are cheap. It means you’re comparatively cheap when you consider the market as a whole.

A great example of this dichotomy is the smartphone industry. The cheapest new model will still set you back at least $50-100, not exactly budget.

Of course, if you do use cheap materials, you can lower your prices further and present yourself as a truly budget option, but that’s at the extreme end of the scale. The vast majority of products are not created to be cheap alternatives since consumers expect some measure of quality.

A phone that can barely load WhatsApp would probably sell poorly, after all.

There are some cons to this strategy.

You can quickly stray from low profit to no profit if your circumstances change. The difficulty with positioning yourself in this area comes with constantly having to monitor your operating costs, as even the tiniest increase will be a blow to your profits.

There’s also the factor of coming across as too cheap.

Generally, consumers are suspicious of products that are cheaper than others, even if reviews say that quality is consistent. It’s expected that certain types of products cost certain amounts, and any strategy that prices under this can be dismissed as being tacky.

Overall, this type of product development strategy is tricky to do but can perform wonderfully.

PDS type 3: Competitive

We’ve talked about the two extreme strategy types, but those are what they say on the tin, extremes. The vast majority of product development strategies fall somewhere in between, even if they do lean one way or the other.

Right in the middle of budget & luxury goods, you have competitive goods. These are products that have moderate profit margins and aim to sell a moderate amount of units.

How do you define moderate? A moderate price is determined by the average prices of that particular market as a whole. In other words, you price your product so it might be considered by the average consumer, keeping the quality consistent with what they’d expect for that price.

Let’s look at an example to make it clearer what this means.

When you think of high-end coffee, you might think of imported Jamaica Blue Mountain. On the other hand, if you want a low-budget option, you might settle for Dunkin’ Donuts’ own brand.

In the middle of these options sits Starbucks. Not too pricey and not low-quality. A good, reliable coffee shop that serves millions daily.

Starbucks occupies the competitive slot in this case, with their coffee being of a good enough quality to be called pleasant while keeping their prices low enough that they’re not a luxury brand.

Starbucks exemplifies the reason why most products are planned out to follow this route. You have the possibility of reaching almost all consumers, whether as a cheaper alternative to their luxury goods or as an upgrade from their usual once-in-a-while.

Your pricing strategy means that you make a decent amount of profit on each sale and aren’t that vulnerable to fluctuations in material costs or consumer tastes changing.

So what’s the catch? Why would anyone choose a different strategy than this, you might be asking?

Well, that’s precisely the reason. If everyone is aiming for this place in the market, then you’re simply one of a dozen.

Think of the last time you bought lightbulbs. Did you choose a specific brand, or did you just grab the first pack you saw on the shelf with a decent enough rating? Probably the latter.

When the market is saturated, you’re going to have a hard time establishing yourself as anything more than a face in the crowd. The reasons that brands want to choose this strategy are, paradoxically, the reasons that they can’t.

Not every coffee drinker goes to Starbucks, just as not everyone buys the same brand of shower gel. People buy what they’re used to, and unless you’re entering a market with something new and exciting, you’re simply going to fade away into the background.

Internal and external product development strategies – what’s the difference?

Now that we’ve talked about the different types of product development strategies, it’s time to take a brief note of… different types of product development strategies. ????

Hold on, this isn’t just a rehash of what we just spoke about, but something different entirely.

When you’re creating a new product, there are two different ways you can go about it. First off, you can utilize resources that you already possess, or you can look for possibilities that exist outside of these.

That’s what we call an internal vs. an external product development strategy.

Internal product development strategies

Internal product development typically refers to creating new products out of existing ones. That might be a personalized variant, a new and improved version of your product, or simply taking the ideas that exist within a product and applying them in new ways.

If you’re a smaller business or a start-up, you may find it hard to employ internal product development strategies since it’s possible you’ll lack the necessary resources. Look to the next section for how you might go about strategizing.

A common way for software companies to develop using internal product development is by acquiring smaller companies that produce complementary software, then combining them into a single package. This way, they can utilize their existing resources, which is far cheaper than creating new ones, and sell again as a new product.

Internal product development has several advantages, notably that you’ll already be established and can use the marketing from previous products to your advantage.

When Apple releases a new iPhone variant, for example, it’s always with the caption “the new iPhone” or “the upgraded iPhone” to allow consumers to subconsciously associate them with the success of previous versions.

Overall internal product development strategies are cheaper, easier to implement, and run far more smoothly on average since you probably know what you’re doing in this area.

On the flip side, there’s only so much you can do with an internal strategy since you’re limited by what you already possess. If you want to really innovate, you need to create an external product development strategy.

External product development strategies

External product development strategies are about creating something new. Something that your organization has never delved into before. This can be entering a new market, expanding into another country, etc.

External product development is a double-edged sword, however.

There are great rewards to be had with creating truly new, innovative products. Technological progress comes from external development, with giants like Thomas Edison & Nikola Tesla daring to be creative and develop something new.

However, this also comes at increased costs. After all, acquiring new assets takes funds, time, and effort, none of which are free.

When you create a new product using an external strategy, you could end up revolutionizing the future of electricity by patenting multiple electronic devices like Edison.

On the other hand, you could run out of money trying to build Wardenclyffe Tower like Tesla. The tower stood as a monument to human progress. However, it came at an extreme cost that couldn’t be recouped.

After all, it’s not enough in the world of business to simply innovate, you need to do it in a way that makes money and keeps your investors happy.

4 stages to creating a product development strategy

If you’ve read this far, you probably want to know how to go about creating a product development strategy.

To create one, you just need to follow the steps below. That’s it.

Go. ????

Stage #1: Defining your vision

First, you need to define your vision. This harkens back to our earlier discussion on the types of product development strategies you can use.

There are two questions that you can ask yourself when deciding what type of strategy is best.

Do you want to be a budget option, a luxury option, or a middle-of-the-road?
Do you intend to create something entirely new or to derive from existing assets?

To answer these, you need to have an idea of what you want to develop already in mind. Without this starting point, the entire plan falls apart.

Luckily, you can start with even the most ridiculous ideas. At this point, you’re not putting any material costs into the process, just time.

If you think your idea is too ridiculous, remember that someone once put their hand up in a board meeting and suggested a movie featuring “a tornado made of water with sharks in it.”

And it got sequels too!

Once you have your idea, you can start applying the potential options to it and seeing if they work.

Sometimes, you simply won’t be able to think of a place to market an idea, and that’s okay! Just file it away and move on to the next one until you find a concept you’re certain can fit one of these options.

Stage #2: Developing a strategic plan

Once you have your concept, it’s time to lay out a plan for how to create it.

The process of product creation can be as straightforward as designing a 3D file to send to a machine or as complex as mapping out a piece of software. Either way, it’s important to plan how you’re going to create it.

The strategic plan isn’t a step-by-step for how to produce your product. That comes later. Essentially, this is the process by which you link vision and reality, taking your concept and applying the first touch of real-world principles until you have a rough guide for how to begin.

The key idea here is to touch upon the real-world factors you’d need to consider, laying them out for future reference. It’s all about large strategic steps that might seem vague but are definitely necessary.

Remember, strategic plans aren’t the final word. They’re rough guides for how you want to go about your operations, with the actual details up in the air until they’re finalized. After all, you can’t predict how supply chains might look two years from now, so why finalize it right away?

Stage #3: Building a roadmap

Remember how we mentioned the step-by-step guide? This is it.

A product roadmap takes the broad steps of the strategy and breaks them down into recognizable, realizable steps. These are often built up over time and can be highly technical.

A roadmap is essentially a guide for how you will be bringing your product concept into being. It connects budgeting, assets, decisions that you need to make, and more.

When creating a roadmap, it greatly helps to keep things modular.

You might be thinking, what? Haven’t we just been talking about how important it is to keep everything running together?

So, when I say modular planning, I mean keeping every aspect of your roadmap separate yet connected.

Essentially, for each step of the journey, you need to keep it self-contained in such a way that it doesn’t depend on the previous steps having particular outcomes.

Let’s say you want to use a plastic-type material in your product, whatever that might be. You’ll need a machine that can utilize that plastic. You’re favoring polyurethane and have a machine in mind that can use it.

So what do you put down in your roadmap? Get polyurethane. Then, get a working polyurethane machine. No, no, no, you don’t do that. ????

When placing the polyurethane machine into your roadmap, you’ve essentially condemned yourself to alter your roadmap if your plan of using polyurethane falls through.

What does this mean? Remember how I talked about efficiency and lines of communication? The team looking into obtaining machines for you isn’t necessarily going to be the same one testing the materials. If you’ve placed a polyurethane machine into your roadmap, you’re going to have them running around looking for a machine that is no longer practical for you.

That’s time, effort, and money wasted.

Long story short? Make your planning modular in the early stages, so you don’t run into these issues.

Stage #4: Parallel innovation processes

The process of utilizing a product development strategy can be a tough one. How are you supposed to tie a long-term strategy into your daily operations?

Well, there’s an answer to that, and it lies in parallel innovation processes.

The trick to doing both at once is tying them together. Sure, you can try and run your daily operations independently, but that’s just asking to be led astray.

The key lies in having two systems in place:

A system for planning and budgeting in the long-term, often yearly.
A system for the short-term to explore possibilities and select emerging concepts, often monthly.

So how do you tie them in? The outputs from your long-term process become your inputs for the short-term.

In other words, you use the data you’ve gathered from your long-term vision projections as the starting points for your short-term.

You might think to yourself, what’s the benefit of doing this? Well, short-term planning without long-term management can be misguided, and the most crucial aspect of all is the budget aspect.

Every year there might be millions of product concepts thought up. However, you can only continue onto the creation process if you have the budget and assets to do so.

You can’t have your cake and eat it too. ????

The parallel innovation process keeps you on track to create only those products you’re capable of creating. Whether it’s due to budget restraints, technological limits, or simply a lack of resources, keeping your overall goal tied to the present circumstances will ensure you stay grounded.

That’s not to say that you can’t pick up ideas later on when circumstances change. Avatar had to wait almost a decade for special effects technology to catch up to James Cameron’s vision. In the meantime, Cameron devoted his attention to other projects.

The takeaway? Stick to what you can feasibly do.

Conclusion

So there you have it! You should now have everything that you need to create a workable, useful, and reliable product development strategy.

What’s next?

Once your product is out there in people’s hands, they’re going to have things to say. It’s imperative you’ll learn how to collect this data, analyze it, and use it to create better products. Check out our customer feedback analysis article to understand what needs to be done.

Using Customer Intelligence to Understand Customers and Give Them What They Want

Posted on Feb 24, 2023Feb 24, 2023 by Emily Louise Spencer

Know thy customer, and you will be able to please thy customer. When dealing with consumers, information is often lost in the hustle & bustle of everyday dealings. Few are able to fully utilize the signals their customers give in order to reap the rewards. Customer intelligence is aimed at doing just that.

It’s all about data in this age of e-commerce.

Once you have it, you’re working with first-hand accounts of how your customers wish to be treated, what they want to obtain, and how they think these things are to come about.

But data can be tricky to utilize effectively.

First of all, you have to obtain it. And not in any fishy manners if you want to build trust with your customers.

Secondly, the information provided by customers won’t be in a set format that’s easy to collate, making it difficult and time-consuming to process.

Finally, it’s very easy for these pieces of information to slip through the cracks and get lost, never making their way to the people who would be able to use them.

So, once you have this data, how do you go about using this valuable resource? The secret lies in the art of customer intelligence.

What is customer intelligence?

Customer intelligence is a catch-all term for analyzing customer data in order to find new ways to conform your business to their wants & needs.

While this might sound simple, it’s actually difficult in practice to achieve such an analysis due to the fact that consumers have different preferences.

Think of it like making coffee just the way someone likes it.

Sure, there are common factors between all of the cups you might make – coffee, milk, sugar, etc. – but there will be subtle differences that make the difference between a good cup of coffee and a great one. ☕

Customer intelligence can factor in those needs when potential customers approach you and vice versa.

It takes into account various data points such as age, location, habits, and more so that you can work with customers on an individual level. It means using all of the different combinations of these that might crop up when dealing with customers.

It’s no exaggeration to say that this is enough data to give anyone a headache!

As a consequence, utilizing customer intelligence is always done with the help of specialized software. It’s simply too much data for a human to process by hand in any useful amount of time.

Why is customer intelligence important?

In the age of the internet, and even more so following the onset of the COVID-19 pandemic, e-commerce has become more and more personalized.

It’s no secret that customers expect a personalized experience when dealing with a repeat seller, as 59% of them admit that it has an impact on their purchase decisions.

The customer experience has become increasingly relevant over the past few decades, with consumers following their hearts instead of cold numbers.

Many will even select an objectively inferior product or service if they deem the experience they have with the seller to be more pleasant. After all, customers cite bad experiences as their number one reason for switching brands or providers.

And how do you provide good experiences? By understanding their individual desires.

What can customer intelligence do for you?

After talking about how emotions are so crucial to business, it’s time to get down to some cold hard facts (I love my coffee with a hint of irony).

As mentioned, improving the customer experience is an excellent idea that will boost your bottom line.

In the next section, we dive into the details of how customer intelligence makes it possible. While more strategies exist, the ones we’ll lay out definitely pack the biggest punch. ????

Cross-selling & up-selling

It’s often quite rare for people to go to a shop for a single item and actually walk away with only that item.

There are just so many good deals that you can see, and you just have to try them out, right?

Online, things are different.

You can’t see the entire store out of the corner of your eye like you can in a brick-and-mortar location.

In fact, you’ll often only visit those pages directly relevant to the single item you’re looking for.

So, how do you show off your wares? Cross-selling and up-selling.

They’re both methods of encouraging customers to view items other than the one they specifically came to your site for, with cross-selling being concerned with complimentary products and up-selling with upgraded ones.

Essentially, they’re a means of getting a customer to want to spend more.

These can be done through advertisement banners, recommended product sections, and by related product sections on product pages.

The catch? Items often have multiple uses and reasons behind purchases, meaning you won’t necessarily know why an individual is after a certain product.

This makes cross-selling and up-selling a bit less effective.

But with customer intelligence at your disposal, you’ll have the information you need to nudge individuals toward their next purchase.

For example, a customer may purchase a DDR2 piece of RAM, a common computer part.

They might be after it because it’s what they currently have and need a replacement, in which case advising the DDR3 as an up-sell is valid.

Or, they might be working with a legacy computer, one not compatible with DDR3, in which case it wouldn’t be.

If you know which one is the case, you know which action to take.

Below you’ll see a great example of how Amazon utilizes cross-selling.

Amazon offers both a “for you” section as well as one on trending deals. You can clearly see a theme across the top row of items, showing its effectiveness at showcasing an individual’s tastes.

This dual-focus method ensures that while general items that are enjoyed by many are not ignored when it comes to cross-selling, the individual is also acknowledged.

Customer retention

Consumers have changed the way they operate in recent years, being more willing than ever to switch brands or providers over minor disagreements or small mistakes.

One of the biggest changes we saw was the rise of e-commerce transactions, with people turning more and more to ordering products online.

This makes the e-commerce customer experience critical for driving revenue. If your layout is confusing and the infrastructure is ancient, users will quickly become frustrated. And when that happens, they will easily leave your site in favor of another.

Seems plausible, right? When emotions run high, decisions are made that otherwise might not have been.

There’s a very real possibility that customers will leave your website if they don’t get the personalized, easy-to-use experience they want. When they do, that’s another customer lost.

And perhaps worse than just another purchase lost, it may be an existing customer that’s not coming back.

Low customer retention is one of the most damning factors when it comes to e-commerce profits, simply because customers cost much more to obtain than they do to keep.

While customer intelligence won’t solve your infrastructure issues, it will help improve other aspects of the customer experience immensely. With all that information you possess, you’re able to highly personalize the experiences each individual has to a great degree. Be it specific items or even your site’s layout.

Given a choice between these two options:

A simple cookie-cutter website that’s rigid and confusing.
A personalized experience on a website that responds to the way you use it and makes itself easier to navigate.

Which would you pick?

Channel analytics

When you’re running an e-commerce business, you’re often operating across multiple channels of communication. It’s not enough to simply use one social media platform, for example, as you’ll miss out on selling to those who use others.

But what works on one platform won’t necessarily work on the others. Not just because they operate differently but due to the audience that frequents each channel.

With customer intelligence on your side, you can not only measure customer behavior on an individual level but apply these principles to the different channels of communication you work with.

After all, if you have data on the individuals, it’s not hard to lump those together for group analysis.

Then, you’re able to easily translate the customer intelligence data into a form that applies to the individual channels and analyze it accordingly.

This can give you information on:

Different customer behaviors by channel.
Effectiveness of customer service in each channel.
How specific customer service tactics work with each channel.
Your ROI for each channel.
Sales tactic effectiveness by channel.

Useful, right? You can even use the information you gain from this analysis to determine whether or not it’s worth keeping a channel of communication open.

You might be thinking, why don’t I just perform an analysis on each channel? Surely that’s just as effective?

Well, yes and no.

You see, you can always use individual data as building blocks to create channel data, but you can’t do it the other way around.

This means that if you want to see how demographics affect each channel, you’d have to factor that into your data collection methods.

While that might seem like common sense, sometimes you’ll only think of analyzing a factor after the fact, meaning you’d need to do the whole data collection part all over again.

All-in-all, customer intelligence can always build up to a bigger picture, which is one of its most useful traits.

Optimization & cost-effectiveness

This one follows on from both customer retention & channel analytics, but it’s also its own thing, so a separate title is due.

On the surface level, increased customer retention means lower costs, and channel analytics means that you can optimize your approaches to each channel.

But it goes deeper than that.

When you deal with customers on the individual level, you’ll need to provide individual experiences. Customer intelligence lets you gain the information you need to provide this in a very short time frame, meaning you don’t waste time and money on ineffective techniques.

Overall, the information that customer intelligence provides means that every aspect of your organization can be streamlined, improved, and cut back when necessary. It cuts right to the heart of what customers want, which is the essence of e-commerce.

Brand loyalty

Loyal customers are hard to come by, but they’re well worth the effort to maintain.

In addition to the retention benefits mentioned above, loyal customers will act as advocates for your brand. It’s like having your own organic advertising department, except it’s free!

So, what do brand loyalty and brand equity have to do with customer intelligence?

The thing about loyalty is that it doesn’t just come overnight. You need to perform consistently well in order to build up loyalty.

While in face-to-face transactions, you can usually tell how the customer reacts to specific methods and adjust accordingly, you have no point of reference as to how to best approach a customer online.

So, how do you choose the best approach? Well, with customer intelligence, you can make educated guesses using an individual’s data.

This approach won’t be accurate in the beginning, however as time goes on and you gather more data on an individual, you will be able to adjust your approaches more effectively.

You might be thinking that this sounds like developing a relationship with that individual, and you’d be right. It’s simply done via software, as no human could ever keep up with that many individuals at once.

More effective approaches = more customer satisfaction = more loyalty.

The types of customer intelligence data

Generally speaking, customer intelligence data falls into two types, internal and external. The latter branches out into several other sub-types, but it’s quite straightforward and well worth familiarizing yourself with them.

It’s important to note from the get-go that both internal and external types of customer intelligence mix zero, first, and third-party data.

This means we recommend using both forms to gather as much relevant data as possible, especially as zero and first-party data becomes more and more precious with privacy concerns going up in recent years.

Internal customer intelligence

Internal data is the blanket term used to cover anything generated within your organization.

You can obtain internal data from your databases, point-of-sale systems, etc. The data that you receive from this won’t necessarily be different from that obtained externally, but it can be considered more organic and representative of a person’s true feelings than the data generated by prompted methods.

This data is the data that you don’t have to go out of your way to collect. It’s data that you’ve naturally picked up over the course of an individual’s interactions with you.

External customer intelligence

External data is what you get when you specifically gather customer intelligence data.

This data can be obtained via survey, from cookies, information that a user has been prompted to give to you, etc.

This data is often the more useful of the two types as it fills in the gaps and lets you see why certain methods are preferred, certain lines of communication are more used, etc.

You can split externally-gathered customer intelligence data into three types, personal, geographic, and attitudinal.

Personal data

Personal data is all about demographics. That can mean:

Age.
Career.
Disability status.
Education level.
Gender.
Income.
Marital status.
Religion.

All of this is incredibly useful when trying to personalize the experiences you can provide, not the least to avoid making irrelevant or even downright unhelpful changes.

There are many ways in which personalization can go wrong, but the more personal information you have, the greater your chances of making it go right.

Geographic data

This covers anything to do with location. It lets you know roughly where a person is when they buy from you.

Why is this important information? Surely when working online it’s all the same, right?

Well, no.

Certain tactics and strategies might work well in an urban environment but not in a rural one. Why? Because the people who live in these different places think in different ways.

Different environments create different experiences, which in turn means different habits are developed. While not exactly the same, there will be rough similarities in how people who live in the same city might behave online.

Similarly, there are probably differences between cities, states, and countries that need to be accounted for when drawing up plans.

Different geographies can also mean different delivery times, languages, tones, and more.

Attitudinal data

Attitudinal data is a little trickier to quantify, as it can change over time.

Effectively, it consists of any information on how an individual perceives your brand and the general emotions they feel towards it.

A useful tactic to gather such data is by going through review data.

This gives you a direct line to the voice of the customer, helping you understand strengths, weaknesses, opportunities, and (what’s the T for swot?)

To complement the review data, you can conduct other market research methods like surveys, questionnaires, and focus groups. These can help you get a more rounded picture of attitudinal data.

The process of utilizing customer intelligence: 5 steps to follow

It’s time to get down and dirty.

When trying to utilize customer intelligence, there are five key steps that need to be taken. It’s important to keep these steps in order and not miss any out, as they’re all necessary to obtain a complete picture.

Keep in mind, however, that you can always cycle back a step if your data is confusing. If it’s hard to analyze, hard to decide what to do with, etc., you might just need more data or data from a different source.

Before we begin going over the steps, though, a brief disclaimer.

Customer intelligence is highly contextual, meaning that when you’re performing it you absolutely need to have your aims in mind.

You can’t just perform customer intelligence for the sake of it, as the algorithms and data collection methods will differ depending on what area of the customer experience you’re trying to take a look at.

That said, let’s begin.

???? Step 1: Sourcing

The first step in the process is to choose your sources.

While each source that you could draw from will give some amount of similar data, there are distinct differences between how they operate and what data you can obtain from them.

You can split sources into three types: transactional, behavioral, and psychographic. We’ll talk a little more about them later on.

???? Step 2: Collection

The second step is data collection.

Once you have your sources, you need to collect data from them. This can be done via website monitoring, heat maps, surveys, and more.

The data collection methods you should use are heavily dependent on the type of source you’re drawing from, so keep that in mind.

???? Step 3: Categorization

Next, you need to categorize your data.

This step is usually done while keeping the different facets of your organization in mind. If you’re looking to improve a specific area of your business, you should place the most weight on the relevant data.

Data can fall into the following categories:

Direct feedback, such as reviews & ratings.
Indirect feedback, such as comments & chatter.
Inferred feedback, such as history, cookies, and location-based data.

Direct feedback can be seen as a reflection of the customer experience, meaning it’s up to the marketing & customer service departments to use.

Indirect feedback is more broad but generally valuable for marketing & product testing departments.

Inferred feedback is all about website data, so it’s the domain of your dev team & design team.

All of these categories contain useful information, but some are more useful in specific contexts than others.

???? Step 4: Analysis

Once your data is all sorted into neat little packages, it’s time to analyze it.

This step is where customer intelligence software packages really shine. It’s one thing to know how to analyze data in theory, but a whole other ballpark to actually perform it.

Some common analyses methods that come pre-programmed include:

Customer lifetime value predictions.
Customer behavior modeling.
Predictive customer analysis.
Dynamic micro-segmentation.
Actionable insights.
Customer persona modeling.
One-to-one insight generation.

By using these pre-existing software packages, you’ll save yourself countless hours of hard work. We’ll discuss some of the platforms to generate customer intelligence available later on, as well as their features, advantages & disadvantages.

???? Step 5: Taking action

Finally, once your data has been analyzed, you need to take action.

This step is the crucial one where a lot of customer intelligence strategies fall apart. You see, in order to take action on your data, you need to be able to use the methods necessary to utilize it most efficiently.

Whether this is integrating new software into your website, adding this information to customer journey maps & workflows, or even altering your marketing campaign approaches entirely to account for different responses, you need to commit to these changes if you plan to get the most out of your data.

Change is scary, we can all agree on that, and many businesses would rather stick with tried and true methods than take a chance on something that may or may not work.

So why should you act on customer intelligence? Why should you risk your profit margins?

Simply put, if you’re thinking of these actions as entirely new strategies, you need to reframe your perspective on them.

Customer intelligence isn’t about telling you what to do. It’s about finding out what you already do, to some degree at least, that is the most effective.

When taking action, you’re not altering your direction, merely refining it.

You can use customer intelligence to measure responses to new methods, that’s true, but the information you gain is useful in all aspects of your organization.

What are the sources of customer intelligence?

As mentioned above, the different sources of your data will grant you different information on customer behavior.

Selecting your sources is the first step in the customer intelligence process, and making that selection depends heavily on what you’re trying to achieve.

So, what are the types, then? Well, they generally fall into three types, transactional, behavioral, and psychographic.

Transactional

Transactional data is all about purchase history.

Think back to the last few times you’ve ordered items online. There are probably several of those items that fit a trend or are even repeat purchases. Sound about right?

Purchases rarely take place in a vacuum, and what you buy today is likely going to have an impact on what you buy in the future.

In the same way, what customers have bought from you in the past will show trends that can indicate what they might want to buy next. Using these, you can tailor your recommendations, discounts, etc., to each individual’s tastes.

If you received a discount offer for a product you were thinking of buying in the future anyway, wouldn’t that tempt you to go through with it?

Behavioral

Behavioral data is concerned with customer behavior. In the realm of e-commerce, that translates to how they behave while using your website, emails, app, etc.

Now, you might be thinking, is it possible to track these factors? Well, yes.

With emails, I recommend tracking mostly clicks rather than opens. Clicks are a strong indicator of subscribers’ intentions, while opens are much weaker ones. Further, with Apple MPP causing inaccurate open data, it’s best not to rely on this metric as it can lead you to false conclusions.

On your website and app, you can track various metrics such as time on page, viewed products, abandoned pages, and much more. In fact, there’s so much data readily available that it’s best to hone in on your goals before diving into them.

Psychographic

Psychographic data is about customer intentions.

You can think of it as the underlying reasons behind purchases and what encourages someone to buy certain products.

You can get psychographic data in two ways.

First, there is the direct route where you simply ask them. Customer surveys, questionnaires, preference centers, and reading reviews all fall into this category.

Remember though, while customers are mostly honest when filling out these forms, they may not remember or even be aware of the full story. Thus, treat these answers wisely.

Secondly, there are indirect indications that can inform you about customer intentions.

Transactional & behavioral data are often the sources that lead to this type of psychographic data, as what they show allows you to infer factors that otherwise might have been missed.

To give an easy example, imagine you’ve just received an order for some hockey equipment. It can be described as:

Good quality.
All bright red or white.
Dispatched to New York.

These facts alone don’t tell you much about why the customer purchased these particular items. However, when you take a look at their purchase history, you find that a previous order was dispatched to Detroit.

Taken together, these two factors indicate that this person might be a fan of the Detroit Red Wings and was motivated to buy these particular items as they resemble the team’s uniform.

Indirectly obtained information can be wrong sometimes, as there can be factors that appear together simply by coincidence. When dealing with a customer for whom you have little information, this is expected, and you can adjust your software accordingly.

As time goes on and more evidence is gathered, you can relax and become more confident in your deductions.

After all, if it walks like a duck, swims like a duck, and quacks like a duck, it’s probably a duck. ????

Customer intelligence platforms to help you understand up from down

The customer intelligence platform you should use will largely depend on what you intend to do with it.

Some are built for large-scale enterprises, some smaller, and some scale. There are also key differences in how each platform operates, with some being better than others at certain tasks.

As you can see in the below chart from SoftwareReviews, users of each platform rate them differently in two different yet equally important aspects, features & vendor experience.

Overall, you should look carefully at each option before you decide, but let’s go through some of the more commonly used ones and assess their capabilities.

Revuze

Not to toot our own horn, but the Revuze platform does a stellar job at gathering and analyzing data, providing you with easy-to-understand reports and insights.

Not only that, it does everything in real-time and in a couple of clicks.

This means that you can respond to customers’ needs and demands swiftly, allowing you to gain a crucial advantage over competitors.

But don’t take my word for it.

Our recent case study with Georgia-based grill innovator Char-Broil tells that story much better.

Adobe Analytics

Adobe Analytics, a part of the Adobe Experience Cloud, has the ability to interface with all other pieces of software within the Cloud. In particular, the AI-powered Adobe Target.

The downside? Like most Adobe products, it’s difficult to interface with software from other providers, so if you already use these, you’ll need to build an interfacing program to translate between the two.

Gavagai Explorer

Gavagai Explorer’s text analytics boasts multilingual features, quite useful for those working across borders.

It also boasts an API that allows for interfacing with third-party platforms, notably Slack, SurveyMonkey & Zendesk.

Pricing starts at $130 per month, with a limitation of 20 ongoing projects per user.

Graphext

Graphext is a Spanish company that supports six languages in its main version, with another four being in beta versions.

Their seamless translation abilities are particularly useful for those wanting to operate in Europe, Latin America, and South America, as English, Spanish & Portuguese are among the languages that have been fully developed.

Users have noted that Graphext is cloud-based and limited to small or medium businesses due to its capacity limits. The platform is also available to individuals for small use with zero charges.

The downsides? As a small company, Graphext isn’t able to easily respond to queries, only offering a text-based chat solution currently. They’re also fairly new and thus not well established in terms of API integrations.

Microsoft Dynamics 365

Microsoft Dynamics 365 is a Microsoft product line, so you know it’s going to be able to run on almost any Windows system. It’s also available in both cloud and on-site versions.

Dynamics boasts excellent ratings for usability, good ratings for support, and mixed reviews for its user interface options.

As a Microsoft-provided app, it also boasts the ability to interface with dozens of third-party applications. It speaks the same language as your operating system, after all.

One complication is that Dynamics is not one app but a series of twelve applications. Naturally, these all seamlessly work together. However, for those working on mobile devices, this isn’t ideal.

Optimove

Optimove CI is known for its user-friendly interface, flexibility, and easy learning curve.

As an organization founded in 2009, Optimove has had a long time to refine its processes. It’s known for great database organization abilities, as well as for learning exactly what customers want.

One of their greatest strengths, according to reviewers, is its very visual interface which makes visualizing concepts easy.

Downsides quoted include manual importing of data, issues with integrations, and an inability to delete templates which can quickly leave you swamped in them.

People Pattern

People Pattern comes from a US-based company operating outside of Silicon Valley. It’s rated highly for its data import abilities and its analytics but less highly for support & integrations.

One aspect that sets People Pattern apart from its contemporaries is its highly-rated customization abilities, which users have cited as their main reasons for purchase.

On the flip side, this software is only really useful for small & mid-size businesses or individuals.

Signal CI Platform

Signal’s main pros are all about integration and scalability. That said, ease of use isn’t quite up to standard with some of the other platforms on this list.

Signal CI also suffers from dataset size limitations, making it unideal for larger businesses. It more than makes up for this, however, with its Rules Engine feature that allows for automatic data filtering during collection & segmentation.

Overall, a solid choice for anyone from individuals to medium-sized enterprises.

Takeaways

Customer intelligence can be tricky to get to grips with, but once you’re more familiar, you’ll have access to a wealth of customer information.

Ultimately, customer intelligence in e-commerce is driven by the need to personalize and customize the user experience, lest you be left behind by others who do this more effectively. It’s one thing to know what your data says you need to do and another to actually put that into action.

Fortunately, we’ve recently published an article on that very topic, so check out our complete guide to e-commerce personalization next, so you can put your customer intelligence insights into action!

How To Generate a Customer Satisfaction Analysis Report

Posted on May 1, 2022May 7, 2024 by Emily Louise Spencer

When your customers are not satisfied with the services you provide, they tend to look elsewhere for their next set of purchases. In the age of eCommerce, where alternative providers are easy to find, over 80% of customers are ready to switch companies after merely a single bad experience. This is very bad news if you want to stay in business, since it’s generally much much easier and cheaper to retain existing customers than it is to attract new ones.

While it’s expected that there will be some people walking away unsatisfied, you need to keep track of the levels of customer satisfaction you provide and act on any deficiencies you notice. There are several metrics which you can use to measure customer satisfaction, with the choice of which to use being up to you depending on your specific needs.

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What Does a Customer Satisfaction Report Aim To Do?

The ultimate goal of a customer satisfaction data analysis report is to measure customer satisfaction levels. This might seem straightforward, but depending on what it is you’re looking at specifically you will want to use different metrics.

There are a myriad of ways to get information, but all have a fatal flaw — you only get answers to the questions that you put on your survey! How specific are you supposed to be in your survey questions? The more specific your questions the more quantifiable your data will be, but overall less specific too as your customers are limited in expressing their views. Using several metrics will give you a good handle on different perspectives, but in turn will make your data harder to analyze.

Types of Customer Satisfaction Metrics

There are several different metrics you can use in order to measure your customer satisfaction score. Below we’ve listed a few of the most useful and commonly used ones, and a little bit of information about them.

Customer Satisfaction Score (CSAT)

The customer satisfaction score is a direct measure of the satisfaction customers had with a particular interaction or process they went through with your organization. It’s usually measured using a scale from one to five, with one being extremely dissatisfied and five being extremely satisfied. Those who rated the interaction a four or five out of five are counted as satisfied customers, with all others being dissatisfied. The percentage of customers who are satisfied with your service is your CSAT score.

The CSAT scale is good for fine details, as each interaction can be rated out of five to get a look at the overall quality of each step in an interaction. You should be aware, however, that there is a cognitive bias involved – people tend to fixate on a standout experience, whether good or bad – thus your responses are likely to be biased towards the extremes.

Net Promoter Score (NPS)

The net promoter score is used in cases where you want to look at the long-term customer satisfaction and/or loyalty to you and your brand. NPS looks at the overall experience a customer has had with you, rated as a percentage of those who would promote you vs those who would actively discourage others from interacting with you.

The NPS has been criticized as flawed by some due to its methodology, which actively ignores those who seem indifferent. The method assumes that, due to the human tendency to only create buzz after either a very good or very bad experience, others who those indifferent customers come into contact with will have no impact on your overall reputation.

Customer Effort Score (CES)

The customer effort score is different to the previous two metrics, as it measures not the experience but the amount of effort that a customer had to put in in order to get what they wanted out of an interaction with you. It’s usually measured in a percentage, similar to CSAT, with customers rating your interaction out of seven and those who score five or above being counted as satisfied.

CES is one of the strongest predictors of whether a customer will return to you, as many consumers seem to prefer settling for a lower quality product or service that is easier to obtain. Think about it – would you fly all the way to another country simply to obtain a slightly better quality product, or settle for one you can find in your local high street?

How To Collect Your Data

Once you’ve decided on a metric to measure, you need to decide on your method. The most common way of gaining data for customer satisfaction scores is surveys, both at the point of sale and after the fact.

The layout and style of your survey is decided for the most part by the metric you’ve chosen, however you can add more questions if you feel like it. Remember though, while shorter surveys give you less information they are more likely to be completed!

The metrics described earlier generally have the following layouts:

CSAT: A series of questions about satisfaction levels, with answers from 1-5 (very bad to very good).
NPS: A single question – “How likely are you to recommend this product or service” – with a rating out of 10 (not likely at all to extremely likely).
CES: A series of questions about how easy customers found it to interact with you, with answers from 1-7 (very difficult to very easy).

Additional questions should be added on after the questions about the main metric, and making the option for additional feedback optional will definitely help when you’re gathering data. Remember, most customers will want to just tick a box and be done with your survey, so forcing them to input detailed information will cause a lot of them to simply abandon their feedback – the last thing you want.

Exactly when and how the survey is distributed will also vary by metric:

CES focused surveys should be issued at the point of sale or immediately afterwards such that the experience is fresh in the customer’s mind.
NPS focused surveys should be issued after several interactions with a customer, and can be done at any point so long as the method of distribution is not intrusive.
CSAT focused surveys can be issued at any point during the sales process, and in fact can be broken down into several questions that are asked at each step in the process so that the experience of each step is examined rather than the overall experience. This is much easier to do in online spaces, where you can have feedback popups appear without disrupting the overall experience too much.

You should try to keep such questions to a minimum however, as repeatedly asking a customer to leave you feedback can get irritating and may even cause them to leave.

Analyzing Your Data: Quantitative Results

Once you have your data, the next step is to analyze it. Using software you can easily filter through thousands of responses to give overall scores, but what that software spits out is decided by you. Computers are very good at working with numbers, so this step should be quick and easy to perform.

Common ways to break down survey responses are:

By demographic
By location
By which product or service is being examined
By the number of interactions a customer has had with you

These categories will all give you more detailed insight into how your customers think. Are there differences between new and existing customers? Is there a particular product that is causing problems? In theory you can assume that repeat purchases are a good sign of customer satisfaction, but are there alternatives available in that particular sector?

Analyzing Your Data: Qualitative Results

If you’ve added space for additional write-in feedback, you’re going to get text responses. This type of feedback isn’t something that can be reduced to a set of numbers, so a more detailed analysis is needed. Luckily, the number of people leaving write-in feedback is usually small, and limited to those who have had a particularly good or particularly bad experience with you. The more detailed information that such feedback provides is more valuable in uncovering a customer’s motivations and feelings than a single tickbox.

Computers can help you with your qualitative feedback in some respects. Text mining and other tools can help separate out those pieces of feedback that are similar, adding some order to the madness that is raw text data. You can also use sentiment analysis to extract the intended meaning of the text rather than simply filtering by the words a review contains, though you will require specialized software to do so.

Overall, quantitative data tends to show you where you stand and what your customers think of you, while qualitative data tells you why that is the case. It’s not perfect by any means, but you can only work with the information customers are willing to give you.

Visualizing Your Results

There are plenty of ways to visualize results. Bar charts, pie charts, simple graphs – all of them have a place in presenting your customer satisfaction data and can be useful at times. Overall, your aim when presenting the data is simple – make sure that the general results can be understood at a glance, with the more specific results being available when you examine them more closely.

What you want to examine determines your presentation. Want to take a look at customer satisfaction before and after a new protocol or procedure is implemented? A score vs time graph is probably your best bet. Do you want to compare across demographics? Bar charts are your friend. Want to produce a simple chart that will give the current satisfaction rates at a glance? Pie charts are delicious.

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Additional: Churn Rate

Another potential source of information is your churn rate, which is the percentage of customers that cease interactions with you without leaving any kind of review or rating as feedback. There will always be those who simply don’t want to leave reviews – they see it as wasting their time and don’t want to provide feedback to an organization they’re dissatisfied with.

If you have a high churn rate, it’s safe to say that you have issues. By taking a look at when and where the customers leave you, you can hazard a guess as to what the underlying issues might be. You won’t be able to get as detailed information as if you had feedback on the topic, but it’s better than nothing at all. Your churn rate can also be used to verify the results of other forms of customer satisfaction analysis, making sure that their predictions match up with reality.

Of course, this isn’t applicable to every industry. When buying a car, for example, a high churn rate would be seen as successful as the customer has settled and is satisfied with the car that the dealership has provided them with. This is something that’s true for every metric we’ve described today, so keep in mind how the specifics of your industry might make things vary.

Additional: CSAT & DSAT

CSAT (Customer Satisfaction Score) has a counterpart in DSAT, or Customer Dissatisfaction Score. While you may think that is simply the inverse of the CSAT score, keep in mind that the CSAT score takes into account only those customers who are deemed “satisfied” and ignores those who are indifferent.

The DSAT is the percentage of customers who are actively dissatisfied with their interactions with you.It’s taken from the same survey as the CSAT, and takes those who answer 1 or 2 out of 5 to be “dissatisfied”. In this way, it counts the truly dissatisfied customers rather than those who merely seem indifferent to their experiences.

The DSAT is important to keep an eye on, some might say even more so than CSAT. It actively identifies problem areas and reasons why you might be losing customers. From the data that the DSAT provides you should be able to perform a root cause analysis and improve the underlying issues rather than simply attempting to smooth over surface level problems.

How to measure customer satisfaction in 5 easy steps

Posted on Oct 8, 2019 by Boaz Grinvald

There might be only one thing different business owners and service providers can agree on: Knowing how to measure customer satisfaction is crucial for keeping your business growing. The customers are the key element of every business and keeping them happy means keeping the business alive.

Over the years, many studies have shown the importance of customer satisfaction, how crucial it is to gain the correct data about it, and why many businesses fail by not doing so.

The main issue is the complexity of conducting such research and of gaining accurate, actionable data regarding your customers’ satisfaction.

This is the question we will answer in this article, providing you a simple and tested method of gathering this data and acting upon it.

There are two main types of overall satisfaction measurements – Customer Satisfaction Score (CNAT) and Net Promoter Score (NPS)

What is Customer Satisfaction Score (CSAT)?

Customer Satisfaction Score (CSAT) is a score that measures the satisfaction customers had with a certain process or interaction.

This is measured multiple times during the customers’ experience and each measurement provides you with the understanding of how satisfied your customers are with this experience. It is important to understand, we are talking about a certain experience (The shipping process, how was the service the online chat representative provided, how is the product itself, etc).

You can choose between different measurement methods, though we would recommend the standard Happy Customer Percentage measurement.

How to conduct a happy customer percentage survey?

This is rather simple. First, we need to ask our customers, for a specific experience they had, how did they feel about their experience, between 1 to 5:

Very Unhappy / Dissatisfied
Rather Unhappy / Dissatisfied
Neutral
Happy / Satisfied
Very Happy / Satisfied

We then use the following formula:

CSAT score equals the number of satisfied customers divided by overall customers times 100.

When the satisfied customers are those who answered 4-5 in the survey.

For measuring the overall satisfaction and the perception a customer has for your company, you should use a Net promoter Score (NPS). We will cover this subject in an upcoming post.

Many confuse between Net Promoter Score (NPS) and Customer Satisfaction Score (CSAT), so let’s first make the terms clear.

What is Net promoter score?

Net Promoter Score (NPS) is a way to measure the long-term loyalty a customer has to a brand or company.

It is measured using an index ranging between -100 to 100 points and is used to predict how likely a customer will promote your product, service or brand.

What are the differences between CSAT and NPS?

Both CSAT score and NPS survey are types of feedback surveys that allow you to know if you are handling your customers in the way they are expecting. The key point to remember here, is that CSAT score is measured multiple times during your customers’ interaction with your brand, and NPS is measured once, on the final stage of the interaction (for example, after the goods are supplied). Both are extremely important and they complement each other.

We will cover Net Promoters Score in the following articles. CSAT might sound more complex to conduct, but actually it is fairly simple.

When should I measure the Customer Satisfaction Score?

As mentioned, this measurement should take place in a few of the key points of your customers’ interaction with your company or brand.

The key here is to find the magic number between too few and too many measurement points. Too few measurement points will not give us enough data and we might miss a critical feedback point that makes us lose customers constantly.

Let’s say for example, that we have an online product that is automatically sent by a Chinese factory to our customer. The factory receives the order details from our website upon order and sends the product using Hongkong post.

All fine until here, but let’s say one of the programmers has made a mistake and all phone numbers are printed without the country code. Some of the customers then cannot be contacted by the delivery person and their parcels are left near their doorstep, which might disappoint them.

These customers will never order from us again .Can you see the importance in this case, of gathering the customers’ experience for the shipping of our product specifically?

On the other hand, too many customer surveys are a problem by themselves, causing customers to leave false feedback (just to get on with the process), not to leave feedback at all, or worse – to be irritated by the whole feedbacking system and stop interacting with our business.

There is no one solution or formula for this, for it depends a lot on the type of customers, the type of the product and the length of the interaction.
So, what are the steps to measure our customer satisfaction?

How to measure customer satisfaction

Step 1: Decide on when to ask for feedback.

As mentioned above, there is a magic spot between asking for too much feedback and not asking for enough feedback. Choose wisely and try to adjust these data collection points along the way.

Step 2: Carefully articulate your question.

Make sure that the question you ask your customers at each point is very specific and accurate. You want to avoid any misunderstanding of what you are surveying them for.

Step 3: Use both Customer Satisfaction Score and Net Promoter Score.

This article is mainly about CSAT, though it is equally important to measure the overall satisfaction of our customers by conducting an NPS survey too. The more data you have, the better your customer service will be.

Step 4: Constantly improve your feedback taking mechanism.

It’s important to regularly examine the methods and the times when you interact with your customers (Especially with CSAT where this is not specifically defined) and improve it over time. If the feedback causes too much hustle for your customers, find ways to reduce the time they need to invest in it and the number of times you ask for feedback. On the other hand, if you see that there are some customers that are unsatisfied but have not given a specific feedback at one of your survey points, find a way to ask for this data in the future.

Step 5: Act upon the feedback.

This is the most important point, and the one that many businesses fail to apply. When you find that there is something that needs to be improved for your customers’ overall satisfaction, IMPROVE IT. I hope there is no need to explain why this is the most important step. Not acting upon the feedback you have received is similar to not taking feedback at all, and since you are reading this article, I guess you understand the importance of your customers’ satisfaction.

2 Important tips for better feedback from your customers:

Before we summarize, there are 2 tips that will help you understand your customers better.

Make sure your questions, when taking feedback, are clear and is not ambivalent. This way when a customer leaves feedback, you will know the exact experience they are referencing.
Add a comment box for further notes.

Sometimes a scale is just not enough and you would want to understand EXACTLY HOW you could improve a certain experience. A free-text comment box might give you wonderful insights.

5 Steps for measuring customer satisfaction

Conclusion

Customer feedback is critical. You want your customers to return and to bring their friends and relatives too. Make sure you understand how satisfied they are and keep in mind that whenever you think there might be a problem, there probably is. Act upon rising problems as quickly as possible to make sure the name of your brand is mentioned with joy and spread by word of mouth.

Good luck!

(And feel free to give your feedback ☺)