Measuring and Managing Customer Satisfaction
Your definition of world-class customer service and creating a plan to achieve world-class customer service within your definition are two critical parts of creating a successful organization. Every Point of Connection (POC) carries its own opportunities and possible risks to achieving the goal of being a world-class customer service provider. Your next step in the planning process should include identifying every POC with your company.
It takes continuous effort to maintain high customer satisfaction levels. Measuring customer satisfaction is a relatively new concept. We know companies prospering in the new global economy recognize measuring customer satisfaction is the key. Only by doing so can they hold on to the customers they have and understand how to better attract new customers. The companies who will be successful recognize that customer satisfaction is a critical strategic weapon bringing increased market share and increased profits.
Creating processes to measure and track customer satisfaction is important to your success. A clear and accurate sense of what needs to be measured and how to collect, analyze, and use the data as a strategic weapon to drive the business is required. While many companies rely on outdated and unreliable measures of customer satisfaction, such as sales volume, sales reps describing their customers’ states of mind, track and count the frequency of complaints, or watch aging accounts receivable reports, recognizing that unhappy customers pay as late as possible–if at all. While these approaches are not completely without value, they are no substitute for a valid, well-designed customer satisfaction program.
It’s no surprise to find that market leaders differ from the rest of the industry in that they’re designed to hear the voice of the customer and achieve customer satisfaction. In these companies:
- Marketing and sales employees are primarily responsible for designing (with customer input) customer satisfaction surveying programs, questionnaires and focus groups.
- Top management and marketing divisions champion the programs.
- Corporate evaluations include not only their own customer satisfaction ratings, but also those of their competitors.
- Satisfaction results are made available to all employees.
- Customers are informed about changes brought about as the direct result of listening to their needs.
Internal and external quality measures are often tied together.
- Customer satisfaction is incorporated into the strategic focus of the company via the mission statement.
- Stakeholder compensation is tied directly to the customer satisfaction surveying program.
- A concentrated effort is made to relate the customer satisfaction measurement results to internal process metrics.
To be successful, companies need a customer satisfaction surveying system that meets the following criteria:
- The system must be relatively easy to design and understand.
- It must be credible enough that employee performance and compensation can be attached to the final results.
- It must generate actionable reports for management.
Defining Customer Satisfaction
Because the concept of customer satisfaction is new to many companies, it’s important to be clear on exactly what’s meant by the term.
Customer satisfaction is the state of mind that customers have about a company when their expectations have been met or exceeded over the lifetime of the product or service. The achievement of customer satisfaction leads to company loyalty and product repurchase. There are some important implications of this definition:
- Because customer satisfaction is a subjective, non-quantitative state, measurement won’t be exact and will require sampling and statistical analysis.
- Customer satisfaction measurement must be undertaken with an understanding of the gap between customer expectations and attribute performance perceptions.
- There should be some connection between customer satisfaction measurement and bottom-line results.
“Satisfaction” itself can refer to a number of different facts of the relationship with a customer. For example, it can refer to any or all of the following:
- Satisfaction with the quality of a particular product or service
- Satisfaction with an ongoing business relationship
- Satisfaction with the price-performance ratio of a product or service
- Satisfaction because a product/service met or exceeded the customer’s expectations
Each industry could add to this list according to the nature of the business and the specific relationship with the customer. Customer satisfaction measurement variables will differ depending on what type of satisfaction is being researched. For example, manufacturers typically desire on-time delivery and adherence to specifications, so measures of satisfaction taken by suppliers should include these critical variables.
Clearly defining and understanding customer satisfaction can help any company identify opportunities for product and service innovation and serve as the basis for performance appraisal and reward systems. It can also serve as the basis for a customer satisfaction surveying program that can ensure that quality improvement efforts are properly focused on issues that are most important to the customer.
Objectives of a customer satisfaction surveying program
In addition to a clear statement defining customer satisfaction, any successful surveying program must have a clear set of objectives that, once met, will lead to improved performance. The most basic objectives that should be met by any surveying program include the following:
- Understanding the expectations and requirements of all your customers
- Determining how well your company and its competitors are satisfying these expectations and requirements
- Developing service and/or product standards based on your findings
- Examining trends over time in order to take action on a timely basis
- Establishing priorities and standards to judge how well you’ve met these goals
Before an appropriate customer satisfaction surveying program can be designed, the following basic questions must be clearly answered:
- How will the information we gather be used?
- How will this information allow us to take action inside the organization?
- How should we use this information to keep our customers and find new ones?
Careful consideration must be given to what the organization hopes to accomplish, how the results will be disseminated to various parts of the organization and how the information will be used. There is no point asking customers about a particular service or product if it won’t or can’t be changed regardless of the feedback.
Conducting a customer satisfaction surveying program is a burden on the organization and its customers in terms of time and resources. There is no point in engaging in this work unless it has been thoughtfully designed so that only relevant and important information is gathered. This information must allow the organization to take direct action. Nothing is more frustrating than having information that indicates a problem exists but fails to isolate the specific cause. Having the purchasing department of a manufacturing firm rate the sales and service it received on its last order on a scale of 1 (terrible) to 7 (magnificent) would yield little about how to improve sales and service to the manufacturer.
The lesson is twofold. First, general questions are often not that helpful in customer satisfaction measurement, at least not without many other more specific questions attached. Second, the design of an excellent customer satisfaction surveying program is more difficult than it might first appear. It requires more than just writing a few questions, designing a questionnaire, calling or mailing some customers, and then tallying the results.
Understanding Differing Customer Attitudes
The most basic objective of a customer satisfaction surveying program is to generate valid and consistent customer feedback (i.e., to receive the voice of the customer, which can then be used to initiate strategies that will retain customers and thus protect the most valuable corporate asset–loyal customers).
As it’s determined what needs to be measured and how the data relate to loyalty and repurchase, it becomes important to examine the mind-set of customers the instant they are required to make a pre-purchase (or repurchase) decision or a recommendation decision. Surveying these decisions leads to measures of customer loyalty. In general, the customer’s pre-purchase mind-set will fall into one of three categories–rejection (will avoid purchasing if at all possible), acceptance (satisfied, but will shop for a better deal), and/or preference (delighted and may even purchase at a higher price).
This highly subjective system that customers themselves apply to their decisions is based primarily on input from two sources:
- The customers’ own experiences–each time they experience a product or service, deciding whether that experience is great, neutral or terrible. These are known as “moments of truth.”
- The experiences of other customers–each time they hear something about a company, whether it’s great, neutral or terrible. This is known as “word-of-mouth.”
There is obviously a strong connection between these two inputs. An exceptional experience leads to strong word-of-mouth recommendations. Strong recommendations influence the experience of the customer, and many successful companies have capitalized on that link.
How does a customer satisfaction surveying manager make the connection between the survey response and the customer’s attitude or mind-set regarding loyalty?
Research conducted by both corporate and academic researchers shows a relationship between survey measurements and the degree of preference or rejection that a customer might have accumulated. When the customer is asked a customer satisfaction question, the customer’s degree of loyalty mind-set (or attitude) will be an accumulation of all past experiences and exposures that can be indicated as a score from 1 (very dissatisfied) to 5 (very satisfied). It can also be captured with other response formats with an odd number of choices (e.g., 1 to 3 or 1 to 7 or 1 to 10) to allow for neutral responses.
Obviously, the goal of every company should be to develop customers with a preference attitude (i.e., we all want the coveted preferred vendor status such that the customer, when given a choice, will choose our company), but it takes continuous customer experience management, which means customer satisfaction measurement, to get there–and even more effort to stay there.
Customer Satisfaction Measurement Facts
- A 5-percent increase in loyalty can increase profits by 25%-85%.
- A very satisfied customer is nearly six times more likely to be loyal and to repurchase and/or recommend your product than is a customer who is just satisfied.
- Only 4 percent of dis-satisfied customers will complain.
- The average customer with a problem eventually tells nine other people.
- Satisfied customers tell five other people about their good treatment.
If you aren’t measuring customer loyalty today, then you need to contact us. Check out this link for more information:
Making certain that your Customers get what they want and come back for more is of critical importance to the long term success of any organization. All factors that impact negatively on the Customer (unfriendly policies or processes, untrained employees, etc.) must be identified and corrected if you wish to compete most effectively and profitably now and in the future.
To every successful business, having a customer is obviously the most important ingredient. Try conducting a successful business without one.
As a management team, one of your most critical functions is determining how best to relate to your customers. You must develop appropriate customer-oriented strategies, design and implement customer-friendly policies/processes, develop your employees to create and sustain customer relationships, and constantly monitor and continuously improve your progress for the issues that are most important to your customers.
To create loyal customers, an organization needs to provide a positive emotional tie during every Point of Connection (POC) even though it may seem to be a small, insignificant detail. A customer’s experience is inherent, a positive experience is not.
The customer consciously and unconsciously filters a barrage of impressions at each POC in the form of experiences and organizes them into sets of impressions, some rational and others emotional. Anything perceived or conspicuous by its absence is an impression. If customers can see, smell, taste, or hear it, it is a POC. Product and service providers provide measurable POCs, as does the physical environment in which they are offered. Therefore, in order to effectively manage POCs, they first must be identified. Once they are identified, management must clearly understand what value your customer desires.
Why Would You Want Loyal Customers?
The notion that there is no linkage between customer retention and profitability is being proven false. Recent studies that sought to find a linkage between customer retention and profits have supported the fact that the old notion is false. There is, in fact, a direct linkage between customer retention and profitability.
Even insignificant changes in customer retention rates have resulted in extraordinary improvements in profitability. One survey found that a 5% shift in customer retention consistently resulted in 25-100% profit swings. These almost unbelievable results would suggest that there must be a powerful force, your emotional connection to your customers, which needs to be understood and managed.
So what can you do differently for your business? A good place to start would be to find better ways to create and sustain a loyal customer base, the advantages of which will be enormous to customers, employees, and investors. Strictly from a financial perspective, revenue increases of improved service quality tend to be 10-20 times the costs associated with fixing the problem.
Measuring Loyal Customers
It can be difficult for an organization to measure the economic value of creating a loyal customer if they only focus on the balance sheet as a means of measuring current and future success. Only considering balance sheet items could lead one to conclude that relationships are irrelevant, and customers should be dealt with based only on what is profitable rather than what is right for the customer. Given this thought process, it is little wonder then that the customer often gets lost in the shuffle. So if profit is not the only, or even perhaps the best measurement of Customer Loyalty, what is a better measurement system?
How to Get Started
Schedule a two-day workshop with your team and Inspired Performance Solutions, you will be able to determine if Customer Loyalty is a strategy needed for your organization.
- Develop a dashboard to maintain management and employee focus
- Create action steps to retain loyal customers
- Develop a methodology to measure employee loyalty
- Examine relationships between customer loyalty and profitability
- Identify core points of connection
- Understand if this strategy will help you achieve your strategic objectives
If a Loyal Customer Strategy is right for your organization and successfully implemented, you could expect:
- Increased Profits
- Reduced Costs
- Increased Employee Retention and Loyalty
- Improved Team Culture
- Motivated and Productive Employees
- Increased Future Growth Potential
- Increased Competitive Strength
To schedule a meeting with Inspired Performance Solutions to discuss how Customer Loyalty might benefit your organization, contact us:
Website: Customer Loyalty Page
Phone: 402 707-4868 (Dave) or 816 647-8112 (Lee)