Although the goal of satisfied customers is all well and good, it misses the point in any strategic branding effort for three reasons.
First, “satisfaction” is too fuzzy to serve as a meaningful benchmark. Definitions of satisfaction will vary from customer to customer, or even within departments inside the same company. The same event that satisfies one customer might be meaningless to another. The confusion gets even greater during analysis. Does “somewhat satisfied” mean that we do a superlative job in most categories but a poor job in others, or does it mean that our performance is adequate in all areas? What does “90 percent of customers are satisfied” mean? That 10 percent of customers are impossible to please or that operations are not firing on all cylinders?
Data collection inadequacies also complicate analyses. Most customer satisfaction surveys are “self-reported,” which opens the door to several failings. Questions can shape answers. Questions posed in positive terms (“how satisfied are you?”) get more favorable responses than those posed negatively (“how dissatisfied are you?”). Measurements taken immediately after purchases are likely to yield more favorable responses than measurements taken later on. Even the temporary mood of respondents can alter results.
Customer satisfaction is also inextricably linked to price. We can be satisfied with a product that performs adequately when the cost is low, yet we may be dissatisfied with adequate performance if we paid more. So if price is the weakest foundation for a brand, then why have an objective that varies according to the price paid? Additionally, a commitment to increasing customer satisfaction usually means increasing costs, with an unknown effect on profitability. For example, a customer survey by one large bank indicated dissatisfaction with long lines. So the bank hired more tellers. While this increased costs, it had little effect on the satisfaction levels of its most profitable customers, who rarely came into the bank and who were more interested in process improvements.
The problem is compounded when customer satisfaction is tied to compensation. That leads to either “purchasing” customer satisfaction with lower pricing or resistance to innovation or other changes that could impact satisfaction levels. Ethics can even be compromised. Since J.D. Power started measuring dealer performance, some dealers have offered “free car washes” or other benefits to any customer who gives the dealership high grades on satisfaction surveys.
Finally, and most important, satisfaction has little connection to repurchase loyalty, essential to customer equity and profitability. The Juran Institute, a leader in studies of quality management, found that fewer than 2 percent of the 200 largest U.S. companies were able to measure a bottom-line improvement from documented increases in levels of customer satisfaction. The Harvard Business Review reported that between 65 percent and 85 percent of customers who chose a new supplier say they were satisfied or very satisfied with their former supplier.
While customer satisfaction is certainly a noble goal, companies dedicated to building a FusionBrand should concentrate on a goal that’s more closely linked to customer equity. Instead of asking whether customers are satisfied, companies must determine how customers hold them accountable.
For some customers, accountability might be driven by on-time deliveries. For others, it might be quality, with minimal defect rates. Some might judge you by order processing and billing capabilities; others, by the immediacy of customer support.
Knowing how customers hold you accountable has numerous advantages. It allows you to focus your improvements in operational excellence. If the majority of your customers hold you accountable for on-time deliveries, you then know where to devote the bulk of your attention and resources. It makes little sense, for example, to invest in improving “satisfaction” when it’s not relevant to customer operations. Knowing accountability also provides an early warning signal. If customers who hold you accountable for excellent customer support start defecting, it’s time to add more front-line personnel or take other steps.
Additionally, knowing what’s vital to customers refocuses relationships away from satisfaction and price toward value, which enables the most profitable pricing. If you are effectively providing services and capabilities the customer values most, it’s unlikely that the customer will defect solely based on price. A relationship based on accountability becomes simply too vital to risk for a few dollars.
The increasing number of Service Level Agreements (SLAs), especially in the IT industry, symbolizes a new emphasis on accountability. SLAs are negotiated agreements between a vendor and its customer, outlining such performance standards as uptime and support levels. Most SLAs have penalties if benchmarks aren’t met. Look for SLAs to spread to other industries. How many, for example, would love to have an SLA with their cable company?
Finally, it allows you to segment customers by the ways they hold you accountable. Customers who demand high support levels can be grouped together to improve operational efficiencies and pricing. Low-equity customers who demand high—and expensive—levels of accountability can be dropped.
Satisfaction is important, but in the customer economy, it is no longer enough. Customer satisfaction provides little guidance about what’s wrong, how to fix it or even whether a customer is worthy of satisfaction. Even worse, it has little relationship to increased profitability or customer equity. So stop looking for warm-and-fuzzies from customers, and start looking for the definitive ways they hold you accountable to their bottom line.