We’re all familiar with ” … out of 10″ rating scales for determining customer satisfaction levels. Many companies poll their customers on their level of satisfaction using such a multi-point numerical scale, where zero indicates a state of extreme dissatisfaction and 10 indicates a high level of satisfaction. And, we often hear the statement that ‘high satisfaction ratings indicate high customer loyalty leading to high customer retention’.
At first glance, it seems like a good way to assess customer satisfaction. After all, 10 out of 10 means perfect satisfaction and the highest customer retention levels, right?
Unfortunately, this is not necessarily the case.
In an investigation at The Dunvegan Group, we found that 80% of the Business-to-Business (B2B) customers who gave an Overall Satisfaction (OSAT) rating of 8 renewed their contracts … this was also the case for those giving ratings of 9 and 10. At the other end of the scale, among those who gave a rating of zero, 60% renewed their contracts.
So … there is an increase in customer retention (from 60% to 80%) as Overall Satisfaction ratings increase from zero to 8 but then retention remains flat across ratings of 9 and 10.
How can this be explained?
First, you may be wondering why retention or renewal is so high (60%) among customers who gave an Overall Satisfaction (OSAT) rating of zero? One of the key objectives of a customer satisfaction measurement program is to identify business at-risk (e.g., those who are highly dis-satisfied) in order to intervene and rescue this business. A retention or renewal rate of 60% suggests that rescue efforts were successful – it also muddies the research results by improving customer satisfaction in the process (and possibly retention) among those who gave an OSAT rating of zero.
Secondly, the proportion of retained business among those giving ratings of 8, 9 or 10 is ‘flat’ at about 80%. What does this tell us? This finding suggests that a high customer satisfaction rating … 8, 9 or even a “perfect” 10 … is no guarantee of renewal or retention. It also tells us that pushing for customers to increase their ratings from 8 to 10 is unlikely to deliver increased customer retention.
Opinions as to what a number ‘means’ are subjective.
One person’s 8 is another person’s 10 is another person’s 7. This phenomenon is discussed in Anne Miner’s book Measuring Up! Without specifically asking each customer to calibrate the scale in their own terms (as to what they consider to be an excellent rating), it’s impossible to know what each rating means in terms of the customer’s level of satisfaction.
The Dunvegan Group investigated this phenomenon and discovered that for some people, a rating of anything less than 10 (e.g., 9 or below) will suggest that performance is less than satisfactory – so much so that the customer will be looking around for alternate suppliers of your products and services. Other people indicated that they would be completely satisfied and would renew their contract at a performance level of 6 or even 5.
So, as you can see, without calibrating ratings for each customer, we are at risk of misunderstanding the customer.
At The Dunvegan Group, we prefer verbal point scales.
Think about your day-to-day conversations; people are more likely to say “The service was outstanding” than they are to say “I would rate the service a 9.” Or, “It was OK, but I would not rush back” rather than “On a scale of zero to ten, it was a three.”
At The Dunvegan Group, we prefer verbal point scales … scales that describe how the customer feels or what they intend to do . For example, when asking customers to rate their dining experience, we use the following scale: Great, Good, OK, Poor and Terrible. We also ask whether the customer would return to the restaurant – Yes or No. And, of course, we ask a follow-up question to better understand the specific reasons the customer rated their experience as they did and/or their reasons for not returning. We may also ask how the restaurant can recover or “win-back” the customer’s business.
With this method, companies receive specific feedback from their customers that can be understood with greater certainty.