Companies have much enthusiasm for customer satisfaction. Many see it as a way of making customers happy, and others look at measuring loyalty.

But how important is satisfaction in reality?

Most of us have heard phrases such as “98% of our customers are satisfied”, “customer satisfaction is our priority”, and other “satisfaction” type phrases. These phrases are often an attempt to convey an organization’s concern and passion for making customers happy. To some business leaders, customer satisfaction indicates how well the firm is performing and how customers view them. To other leaders, it represents a goal or target for success.

Regardless, should organizations be concerned with satisfaction? Do satisfied customers demonstrate desirable behaviours such as recommending your product or services, increasing usage or number of purchases, and even resisting competing offers? All of this prompts the question – does an organization want, and truly know what to do with, satisfied customers? The answer is a resounding “no”.

What is satisfaction?
As a business leader, have you ever stopped and asked yourself, “What is satisfaction?” Possibly not. Perhaps a different, more relevant question would be “What does a satisfied customer mean to my business and what should I do with him or her?”

Satisfaction is a measure that suggests meeting minimum or basic requirements. Inherently, it falls short of truly helping an organization identify customer needs and expectations, what to do with them, and why. For example, a leading communications company found via satisfaction research that those customers proclaiming to be “extremely or very satisfied” were their least profitable customers in terms of revenue and product usage indicators.

Measuring customer opinions is an important aspect, and really the first step, of strategic business management. In addition, gathering opinions and feedback through customer surveys is an excellent method of demonstrating a true interest in and concern for customers’ needs and expectations. Good research will identify problems, successes and unmet customer needs. Hundreds of millions of dollars are spent each year on measuring satisfaction levels with results often influencing marketing, advertising, and sales budgets. More often than not, business leaders manage to a single number – the percent of satisfied customers. However, to improve business performance and customer relationships, measuring customer satisfaction is simply not enough.

Customer research has evolved tremendously over the last 30 years. From “satisfaction” measurement of the 1970′s, “value” of the 80′s, to the more recent exploration of “loyalty” – there has been an underlying theme of trying to leverage customer opinions to affect change in business performance. To that end, measuring “satisfaction” isn’t the best way to provoke change, as it does not strive for excellence or exceeding customer expectations. Many of the world’s leading organizations have learned the shortcomings of satisfaction and have advanced their approach to measuring performance excellence and customer relationship loyalty. Think Nordstrom’s, Ritz Carlton, American Express, Tesco, Lexus and many others. They continually strive to provide exceptional customer experiences, even if it requires sacrificing short-term revenues or profits. The effect is the creation of lasting, loyal and profitable customer relationships.

Seeking loyalty through excellence?
Today, the pursuit of excellence and loyal customers are dominant themes in business management and marketing. Many factors can influence these items, but most are related to customers’ interactions, attitudes and behaviours towards an organization. Interactions are the actual experiences customers have with an organization, such as customer service, sales and billing procedures to name a few. Attitudinal items include images of an organization, such as being customer focused, ease of doing business with, or proactive customer service. Other, more rational topics may include price, quality, value and overall performance. Behavioural items include desired customer actions or outcomes such as recommending the product or service to family and friends; to continue to use (or increase usage of) the product or service themselves; and if they were able to resist competitive offers.

Quantifying an organization’s performance on interactions, attitudes and behaviours using an excellence scale rather than a satisfaction scale can help better define superior business, product and services practices. Specifically, when asking consumers to evaluate experiences using a satisfaction scale, the ability to distinguish high-end performance is greatly reduced as you are evaluating against minimum requirements, not exceeding expectations or needs (see Figure 1). As a result, identifying detailed actions to surpass basic service levels are stifled. This translates into missed opportunities, delivering only “average” performance, and spurious customer relationships.

A good example of missed opportunity is the telecommunications company that received a prestigious award for overall customer satisfaction in 2005. Their customer attrition (churn) rates averaged less than 2%, but during the award winning year, their churn rates were at record highs of 3.5% or higher across all customer segments. If customers were satisfied, why were they leaving at such an alarming rate?

Prioritizing actions
But gauging performance is only the first step. In order to gain the truest value of customer research and measurement, organizations must apply the information and drive change that will affect customer behaviours and improve ROI. But, how do you prioritize action based on customer opinions? Some would suggest addressing areas with the lowest performance ratings. Others may ask customers to state what is most important to them. And in many instances, customer opinions are considered secondary and priorities are established by non-customer business initiatives.

Through loyalty and data analytics and organization can prioritize areas having the most impact on consumer opinions and future behaviours. Using techniques such as regression analysis and other more advanced approaches, a firm can minimize the subjectivity associated with “stated importance” or the volatility of performance-only priority setting. Much of the strategic relationship loyalty analysis and modelling is founded on the social science theory that experiences influence on attitudes, which, in turn, are powerful predictors of future behaviours (see figure 2, below). Each layer of the model seeks to identify cause and effect relationships.

Combine performance data and analytics

The combination of analytic results and performance data provides a powerful, unbiased management tool that can aid in decision-making and resource allocation. Those areas with the highest level of influence and lowest performance are considered the top priority for management to address. In contrast, areas with high impact and high performance are often strengths that can be promoted or leveraged with customers.

Added to this, actual behaviour and profile information from your existing customer database and the focus of action becomes even more targeted and completes the cycle of information. By leveraging existing customer database information, you can identify segments most likely to exhibit specific behaviours, such as profitability, response to communications, and purchase of products or services. With this information, business leaders have a multi-pronged approach that helps target and drive product and service offering improvements, which in turn will have positive effects on customer loyalty and financial results.

Conclusions
So what can we learn from all this? We hear and strive for customers to be “satisfied”. If customers have had an exceptional experience, they will share that news with colleagues. Then we have the foundation for longer-term, more profitable and loyal relationships.

Enhancing your business performance is a never-ending process. World-class organizations do not want “satisfied” customers. Developing strong, loyal relationships with customers, effectively managing these relationships, and applying the latest thinking to measuring and managing customer perceptions, are the keys to turn satisfied customers to loyal customers. By asking the right questions, analyzing the responses, leveraging the existing information and applying the findings, business can to help achieve performance objectives and business success beyond what even the businesses’ investors could even imagine.

By Graham Tutton (Vice President of Customer Solutions, DataCo LLC)
Published by The Wise Marketer )