Customer satisfaction index

Customer satisfaction is one of the most widely used non-financial KPIs. In commercial organisations it is often treated as an indicator of future performance: customers whose experience meets their expectations may be more likely to stay or repurchase. The index summarises how well the organisation is delivering products and services from the customer’s point of view.

When to use it

• Answer the key performance question: “How well are we satisfying our customers?”
• Assess this KPI within the Customer perspective.
• Plan data collection, formula use, reporting frequency, and data-source requirements for this KPI.
• Compare results against the targets, benchmarks, examples, or trend guidance available for this KPI.

Origins

National customer-satisfaction indices were pioneered by Claes Fornell, beginning with the Swedish Customer Satisfaction Barometer and followed by the American Customer Satisfaction Index, created at the University of Michigan with the American Society for Quality and CFI Group. These models use several survey indicators and statistical weighting to estimate an underlying satisfaction construct rather than relying on one question.

What it is

Perspective: Customer perspective.

Key performance question: How well are we satisfying our customers?

Research has repeatedly shown that acquiring customers is generally more expensive than retaining suitable existing ones. Keeping current customers satisfied can therefore support stronger relationship economics, although satisfaction should never be assumed to guarantee loyalty.

Public organisations also need to understand satisfaction even without a direct profit motive. Service users increasingly compare public delivery with strong private-sector experiences, and dissatisfaction can lead elected officials to demand visible, auditable and comparable improvement targets.

The most useful managerial output is the gap between current delivery and customer expectations. That evidence shows leaders where intervention is needed and whether changes improve the customer-facing experience.

How to use it

Measurement

Data collection method