An interesting
article written by Harvey Schachter dated May 4, 2014 points out the conundrum
that we often face when reviewing customer satisfaction. Many people believe
that if you focus on customer satisfaction success will follow. Mr. Schechter
points to some of the research by Timothy Keiningham which shows this
relationship between customer satisfaction and spending is simply not true. He points out that the
relationship between customer satisfaction and customer spending behavior is
actually very weak. Quoting Mr. Keiningham “yes, the relationship is
statistically significant, but it is not very managerially relevant.”
The article
points to three factors which should be considered when evaluating customer
satisfaction.
1. The first factor in customer
satisfaction is low price. Unfortunately, greater satisfaction gained by lower
prices is not sustainable and should not be considered a long-term strategy.
2. The second factor to consider is the
size of the organization. He points out that companies with a lesser market
share may, in fact, have higher customer satisfaction scores. An example would
be that Burger King and Wendy's typically have higher satisfaction scores that
McDonald's. The point he is making is
that as a company becomes larger the customer base becomes more diverse and it
becomes more difficult to keep everyone satisfied.
3. The third factor which is often
overlooked is that single brand loyalty is no longer dominant in today's
market. When a company shares loyalty
with other brands in the market, the better metric is to have your product or
service as first choice. This will likely be a better measure of your
performance than the customer satisfaction score by itself.
The bottom
line is the customer satisfaction is not as simple as it used to be. No longer
are customers uniquely loyal to only one brand. An example noted in the article
is a study of the hotel industry by Deloitte that found that about 50% of
spending by hotel guests does not occur with their preferred hotel brand.
Certainly, it is important to maintain customer satisfaction, but the
satisfaction scores by themselves are not sufficient to ensure sustainability
and growth.
It is
important to understand the basis of your satisfaction scores. You may want to
consider how your product or service ranks in the choices be made by your
customers when they are spending before you sit back and think that all is well
because your satisfaction scores are high.
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