Customer satisfaction is a great way for MSPs to measure the efficiency of their operations. It also helps them in customer retention, which is critical for their subscription-based business model. However, a study by Analysys Mason has found that only 38 percent of MSPs track customer satisfaction compared to other metrics like profitability and revenue.
This article explores why businesses must focus on customer satisfaction to improve customer retention and how they can succeed in meeting the expectations of their customers.
Why MSPs should track customer satisfaction
MSPs operate on monthly recurring revenue. If your customers are not satisfied, they will stop subscribing to your services and this will affect your revenue and profitability. Therefore customer satisfaction has a direct impact on MSP profitability. Without tracking customer satisfaction, MSPs have no way of identifying what to improve and how to improve what needs to be improved.
By tracking customer satisfaction, MSPs can swiftly address the issues faced by their customers. This reduces the churn rate and improves the possibility of cross-selling. And satisfied customers are more likely to purchase other services from you. Gartner has estimated that businesses have a 60 percent to 70 percent chance of selling a new product to their existing customers, whereas it is only 5 percent to 20 percent for new customers. And the only reason existing customers will buy more from you is if they are happy.
Most importantly, tracking customer satisfaction helps MSPs differentiate their services in a highly competitive market. Considering these factors, MSPs must track customer satisfaction if they wish to become more profitable.
How to track and improve customer satisfaction
MSPs are seen by small and mid-sized businesses as problem solvers and this image is crucial for their growth in a challenging market. Managed services can improve customer satisfaction and maintain this image using the following ways:
- Get feedback from customers: MSPs should create a channel where customers can provide regular feedback about the services. They can also send strategic survey questions to them occasionally to get specific feedback on their offerings. A periodic review of this feedback will help improve their services.
- Manage customer expectations with clear SLAs: Often, customers get disgruntled when services fail to meet their expectations. MSPs must properly communicate what to expect from their services through their service level agreements (SLAs). When customers are left to make their assumptions, they are bound to get dissatisfied no matter how good the services are.
- Educate your customers: Your customers do not have to be technology experts. However, some basic understanding of how to use your products and services is essential for them to feel completely satisfied. You need to educate your customers about the basics of IT services and the things they can do on their own. This must be a continuous process if you want customers to make the right decisions on their IT services.
- Target a small group of valuable customers: Providing service to a vast customer base can be overwhelming for MSPs, especially in their early years of operation. The trick is to keep a manageable customer base and provide high-quality service to them. A study by Gartner has estimated that just 20 percent of your top customers will be responsible for 80 percent of your future profits. Make sure you do not lose them in the process of acquiring new customers.
- Always aim to over-deliver: Most customers, by nature, expect services that go beyond what they have paid for. So, the strategy of under-promising and over-delivering always works for MSPs. However, make sure you do not under promise too much. For instance, do not ask for 1 hour time to fix an issue that can be resolved in just 5 minutes. This will hurt your reputation in the MSP industry.
Customer acquisition vs. customer retention
Sometimes, customer satisfaction takes a backseat when MSPs focus excessively on acquiring new customers and boosting revenue growth. Though acquiring new customers is essential for business growth, customer retention should always outweigh acquisition. It’s always much cheaper to retain customers than acquiring new ones.
Moreover, your marketing budget can be considerably minimized by cross-selling to your existing customers. Since you have already established trust, your customers will be eager to try out your new services without any apprehension. Acquiring new customers is essential for your growth in the early stages of your business. But, once you have built a solid customer base with steady recurring revenue, invest more in a retention program that focuses on establishing strong relationships with your customers.
Want to learn more about increasing the profitability of your business? Download our eBook MSP Guide to Higher Growth: Pricing for Profitability.