Customer Perception: What It Is and How To Measure It

customer-perception

The concept of customer perception seems obvious, it is basically the customer’s opinion of a company at any given point during their customer journey.

What is not so simple is tracking and measuring all the different variables that influence customer perception. The good news is that one direct way to improve customer perception is to provide high-quality customer service. The reason is that customer service impacts the satisfaction metrics that influence customer perception, too.

Customer perception is directly tied to the bottom line. Nearly 70% of people are more inclined to spend more money with a company with excellent customer service. Good customer service extends Customer Lifetime Value (CLV), too. About  24% of satisfied customers will return to a business two or more years after a good customer service experience.

Not surprisingly, bad customer perception has the opposite effect. Customers don’t hesitate to move on. PWC found that, after just one negative experience, one-third of people would stop doing business with a company they were loyal to in the past.

Customer satisfaction is a powerful engine for business success, and customer perception is an important factor. Let’s look under the hood because it turns out there are many moving parts affecting customer perception.

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What is Customer Perception?

To form a perception, you first have to perceive. Webster’s Dictionary defines perceive as:

To attain awareness or understanding of, to become aware of through the senses.

Perception involves three psychological constructs: sensing, organizing, and reacting. In the context of customer perception, the sensory stage is how a customer feels moving through an experience with your brand as part of their customer journey.

They integrate their thoughts and emotions and then organize a response around that, based on what just happened and also on past experiences.

Brands can prioritize customer success at all three stages by providing satisfying experiences, clarifying the next steps when interacting with the brand (“don’t make me think”), and creating frictionless options for taking action.

Why Customer Perception Matters

One example of why customer perception is important in business is perceived value. When a brand can charge a premium price for a commodity product or service that is not that much different from the competition, they are successfully managing the customer perception that their product has more value.

Perceived value is at the heart of some brand image strategies. It helps a commodity product stand out based on an emotional connection with the audience. Examples of customer perception influencing pricing are:

  • Generic vs branded products.
  • Luxury brands that charge hundreds of dollars more for a product that offers the same utility as a much less expensive version.
  • Legacy brands that leverage the trust built up over time to command a higher price.
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Apart from pricing strategies, customer relationship management strategies have a huge influence on customer perception too. What factors should companies take into account? Some important areas include: 

Past experiences: Do your customers have high or low expectations based on past interactions? Positive interactions over time build trust, reinforce customer loyalty, and help  increase customer retention.

Example: Customers with a positive experience are more likely to recommend a product or service to family and friends.

Price: What is the customer’s perception of the price based on the marketplace and perceived value?

Example: Branded vs. generic drugs.

Quality: How does the product or service quality compare to others?

Example: Mercedes Benz vs. Suzuki

Experience with product or service: Is it pleasant or frustrating to interact with the product or service? In today’s world of social media, customers’ experiences influence other customers’ perceptions. Customers’ sharing their experiences can help or harm customer acquisition.  Negative or positive word of mouth helps other people form perceptions of your brand.

Example: Multiple Amazon reviews that mention a product defect that undermines functionality.

What Are Ways to Improve Customer Perception

Overall, the best way to improve customer perception is to provide best-in-class customer support. This increases positive word-of-mouth recommendations. Brands can also highlight customer success. Especially powerful are when customers share their successes, so be sure to give happy customers an opportunity to share their stories.

On the systems side, it’s helpful to minimize internal barriers to providing a good customer experience. Instead of maintaining siloed data, companies can reorient internal communications and data sharing around collaborations to best serve the customers.

Finally, bonding with customers over shared values by supporting social causes creates strong connections. Barron’s reports that nearly 60% of Americans want the companies they spend money with to speak out about issues such as racial discrimination and social justice. 70% of consumers want to know what brands are doing to help social and environmental issues, and 46% factor in the brand’s social responsibility efforts during purchase decisions.

How to Identify and Measure Customer Perception

As you know, many channels affect the customer experience with your brand. Social media, in-store experiences, online reviews, word of mouth, help desk experience, website user interface, help functions, service calls, and more.

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You can control some of these aspects but not others. The key to improving customer perception is to optimize the variables under your control. To create and maintain a positive customer perception, you have to offer an exceptional experience and form a connection with buyers at every stage of the customer journey.

The place to start is simple: ask them. Most companies don’t collect customer feedback, so the ones that do could gain a competitive advantage. In a 2021 survey, 97% of companies did not send a follow-up email to gauge customer satisfaction.

Collect Customer Feedback

People are more likely to complain than to offer praise. If you don’t have an ongoing system for collecting customer feedback, you probably hear most frequently from unhappy customers. While that feedback is definitely important to pinpoint where your processes need improvement, your data will likely be skewed toward negative comments from unhappy customers.

Here are some steps to consider to help get a bigger picture of the potholes in the customer journey:

  1. Create a strategy before you start asking. What do you need to know and why? 
  2. Create specific questions rather than broad ones. 
  3. What segments of your customers are best to ask? 
  4. Be sure to include short-answer and blank space opportunities for customers to elaborate. 
  5. Personalize the ask. Don’t send a survey to “Dear Customer” from the “customer service department.”

A great place to start is with a couple of quick, simple questions that yield two important metrics: Net Promoter Score (NPS) and Customer Effort Score (CES).

Net Promoter Score (NPS)

The Net Promoter Score is a way of gauging how likely a customer is to recommend your product or service. The NPS matters because word of mouth is very powerful for brands in customer acquisition, retention, and attrition.

The NPS is a customer service Key Performance Indicator (KPI) metric that helps companies quantify overall customer satisfaction. While there can be some variation among different campaigns, the basics question for the NPS is:

On a scale of 0 (extremely unlikely) to 10 (highly likely), how likely is it that you would recommend our offering (product, service, or company) to a friend or colleague?

Scores of 9 or 10 are “promoters”.

Scores of 0 through 6 are “detractors”.

What is the formula for Net Promoter Score?

The NPS formula is:

NPS = (# of Promoter Scores / Total # of Respondents) – (# of detractors / total # of respondents)

For example, from a survey of 100 customers with 60 promoters and 20 detractors, the NPS is 40.

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While calculating NPS is important, the NPS alone may not tell you the whole story. Combining NPS scores with other customer data can yield deeper insights to improve overall customer satisfaction. Kayako pulls back the curtain on exactly how we did that in this article.

Customer Effort Score (CES)

Like the NPS, the Customer Effort Score (CES) is a metric based on one question:

On a scale of 1 (very low effort) to 5 (very high effort), how easy was it for you to get your problem solved?

The CES measures customer effort because it turns out that customers don’t like to expend much effort getting answers to questions or resolutions to their problems. Gartner says that the amount of effort a customer has to expend to get a resolution is the most important predictor of customer satisfaction, directly affecting customer perception.

Compared to the Net Promoter Score (NPS), the CES is a better predictive metric for customer repeat purchasing and increased spending. According to Gartner’s research, 94% of customers with a low-effort experience had the intention to repurchase, and 88% said they would increase spending.

Poor CES performance leads to customer attrition and lower customer perception. In fact, 81% of customers with high-effort experience intended to spread negative word of mouth.

A positive CES improves NPS substantially. For companies with top-performing CES metrics, the NPS is 65 points higher than for companies with marginal CES.

The CES impacts future sales as well. 88% of low-effort customers said they would increase their spending, and 94% said they would repurchase. In contrast, only 4% of those with high-effort outcomes intended to repurchase.

Favorable CES also leads to cost savings for companies both in staff time and turnover. Low-effort interactions decrease up to 40% of repeat calls, 50% of escalations, and 54% of the need for channel switching. Overall, low-effort interactions cost 37% less than high-effort interactions. When companies equip service agents to provide better customer experiences, they feel better about their jobs, and their intent to stay increases up to 17%.

Moving Ahead

Companies can pull several different levers companies to improve customer perception. The key is to create a strategy and track simple metrics to see which area has the most impact. Providing quality customer service is one lever that can help raise all your metrics.

Are you ready to deliver Friction-Free Customer Service? Capture your customer’s entire journey in a way a support ticket or traditional help desk never could. Discover Kayako Single View

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