Tracking Customer Satisfaction: 5 Compelling Benefits

You’ve heard the old saying “what gets measured gets done.” And it’s not very convincing to tell your employees and the marketplace that your company is customer focused if you’re not even taking basic measurements of customer experience, such as satisfaction and loyalty. None the less, I think we can all agree by this time that customer focus pays big dividends and measuring customer satisfaction is worth the investment to gain these benefits.

Benefit #1: Customer Satisfaction is Key to Customer Retention
The relationship between customer satisfaction and customer retention is well documented:

• Five times as many customers would switch suppliers due to poor service quality than for either price or dissatisfaction with product quality.
• 69% of customers said they quit doing business with companies they had dealt with in the past because they had perceived an attitude of indifference.
• At any one time, approximately 25% of customers are dissatisfied enough to switch, but only 4% will complain.
• For every one complaint received at company headquarters, the average business has another 26 customers with problems, at least six of which are serious.
• The odds are that between 65% and 90% of your non-complainers will not buy from you again and you will never know why.

And if your customers are leaving because of low satisfaction, you’re going to have a harder time replacing them as well. Because those dissatisfied customers don’t just creep away quietly – they tell their colleagues and friends about what happened and why they don’t do business with you anymore. Companies must do everything possible to get customers to voice problems and complaints in order to identify problems to fix, as well as to increase the probability of converting a dissatisfied customer into a loyal one. There is nothing more expensive than a dissatisfied customer.

Benefit #2: Increased Revenues and Market Share
Customer satisfaction leads to customer retention and customer retention leads to increased revenues and increased market share. The Strategic Planning Institute, in a study of 800 organizations, found that those companies that received the highest customer satisfaction ratings charged 10 percent more for their products and services. They also had market share growth of six percent versus a market share decrease of one percent for the low service providers. Dr. Jag Sheth, of the Goizueta Business School at Emory University, has stated that unless a company is willing to reorient its people and reorganize its operations to be customer driven, excellence in R&D, manufacturing, and marketing would be unable to stop a decline in market share, corporate growth and business profitability.

Benefit #3: The Virtuous Circle of Customer Satisfaction and Employee Morale
It’s a classic chicken-and-egg scenario. Improved employee productivity improves a company’s ability to exceed customers’ expectations. More satisfied customers lead to greater employee morale and productivity. Whichever comes first, there is a clear positive correlation between employee productivity and morale and high customer satisfaction.

Companies with high customer satisfaction have four behaviors in common that create the link between employee and customer:

• Value employees as a source of ideas for product and service enhancements.
• Set performance standards that reflect the organization’s commitment to the customer.
• Hire people who focus on the customer and train them accordingly.
• Ask questions and listen to their employees.

Reason #4: Customer Satisfaction Improves Financial Performance
Satisfied customers actually result in lower costs. Hard as that is to believe, most corporations that have put in place zero-defect policies have found that reductions in returned products, complaint call handling, repairs, repeat customer site visits and repair parts inventory more than justifies investment both in capital and in trained, qualified personnel

Customer focus pays off in bottom-line performance as well. Ford recently rated the business performance of its 850 largest U.S. dealers against the satisfaction of customers during the customers’ first year of ownership. Dealers who did the best job of satisfying customers had returns on investment nearly 30 percent higher than average.

As Theodore Levitt said in The Marketing Imagination, “The purpose of a business is to create and keep a customer.” Measuring customer satisfaction is a key activity for creating customer focus and sustainable competitive advantage which will lead to customer retention. In the end, the ultimate goal for any business should be to retain “delighted” customers by exceeding their expectations.