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Customer loyalty initiatives have succeeded and failed for a variety of reasons. The customer satisfaction field has developed a great deal over the past decade, and practitioners now agree on a number of factors necessary for a customer loyalty initiative to have a bottom-line impact. Following is a brief summary of these factors, each of which should be addressed in your customer satisfaction research.
1. Set the bar high enough. Customer satisfaction has a direct impact on customer retention and share of wallet, but the relationship is not linear. It is curvilinear. In competitive markets, a somewhat satisfied customer is rarely any more loyal than a somewhat dissatisfied customer; only highly satisfied customers are loyal. Organizations that do not understand how high to set their customer satisfaction bar will waste a great deal of money improving their service to a level that has no bottom-line impact. This means you need to have some type of ďbottom-lineĒ measure in your survey (anticipated loyalty, percent of purchases, primary supplier, account balances) as well as an overall satisfaction measure, and then look at the relationship between the two.
2. Make sure youíre talking to the right customers. Probably the most important aspect of any customer survey is selecting the right people to talk with. First, focus on your most important customers; consider the 80-20 rule. Many organizations segment there customers based on sales or sales potential. Then they survey a larger percentage of major customers, and a smaller percentage of their smaller customers. Second, identify the decision-makers; end-users are not always decision-makers. Third, customer relationships are complex, and in business-to-business situations you may need to talk with different customers about different aspects of the relationship. The customer who answers about ordering and delivery may not be able to tell you about billing practices. Fourth, factor your customer segments into your research design. And finally, as in all research, be demanding about response rates. Sample sizes are irrelevant; response rates among the right customer groups is what counts.
3. Donít focus too much on problem resolution. Research demonstrating that a dissatisfied customer tells an average of 10-15 people (depending on the industry) about their negative experience led to a focus on problem resolution as a means to build loyalty. But loyalty does not come from having problems resolved; it results from being highly satisfied with an offering. Most customer satisfaction surveys query customers about problems and problem resolution; thatís fine, just donít use problem information as a primary driver in setting improvement priorities.
4. Capture competitive information. Whenever possible, competitor information should be captured because this is the best way to establish improvement priorities. If your customers use more than one provider, ask them to rate both. If not, you may need to conduct a market (as opposed to a customer) survey. Because capturing competitive information can be expensive, many organizations conduct a larger baseline survey once every 1-3 years with competitive information, and then conduct smaller tracking surveys without competitor questions on a more frequent basis.
5. Donít ask customers whatís most important to them; figure it out from the data. Customers do a poor job of telling us what is really most important to them. The best way to understand the relative impact of various factors on a customerís satisfaction and loyalty, is to use an inferred statistical analysis approach. (There are several analytic techniques used to determine key drivers of satisfaction, including regression and discriminant analysis.)
6. Use both competitive performance and derived importance ratings to set priorities. If you capture competitive information, divide the satisfaction ratings into three buckets: those where you do significantly better than the competition, those where youíre at par, and those where you perform below the competition. Use statistical analysis to determine the relative importance of each factor to the customer, and divide these importance scores into three groups: high, medium and low. To set priorities, simply create a three-by-three matrix of competitive performance by importance. Your first priority is obvious: important areas where you perform below the competition. In addition, you should have an approach to the improvement process in place before you conduct your survey to insure that youíll be able to act quickly on improvement priorities. This does not mean that you need a formal Quality organization; it simply means that you have an agreed upon approach to problem solving and action planning. Most customer satisfaction research consultants can also provide assistance in the improvement process.
7. Consider asking some informational questions. The clothing retailer Sy Syms is correct when he says that an educated customer is his best customer. Understanding how to use a companyís product or service has a very strong bearing on satisfaction with that product or service. Mercedes owners who had the operations of their new vehicle explained to them when they picked it up reported fewer engine problems over the next two years. Cellular phone customers who understand all the options on their phones are less likely to switch carriers. Chinese food customers who know the food is made without MSG are more loyal. Examples cross virtually every industry. Consider testing your customerís knowledge of key features you provide, and use any low information scores as an indication that you need to communicate better with your customers.
8. Use demographics information to help identify root causes. Traditional cross-tabs can offer a great deal of insight into satisfaction ratings. Are there differences in satisfaction with delivery performance by geographic location? Do retail customers think they receive better service on certain days of the week or times of the day? Is satisfaction higher at branches with longer tenured managers? To avoid unnecessarily adding length to your questionnaire, attach key respondent information to your initial customer list whenever possible. If youíre conducting a longer baseline followed by shorter tracking surveys, you may only need to add the demographics questions to your baseline. Just remember that having this information is going to be extremely important when you get to the problem solving phase.
9. Use follow-up qualitative customer research to fine-tune improvement plans. In customer satisfaction, employees with customer contact can usually provide all the information you need to design your questionnaire, thus eliminating the need for initial qualitative research with customers. But really understanding how to delight customers is a little like pealing the onion. The quantitative survey gives specific direction on improvement priorities, but can rarely provide all the details. Subsequent qualitative research is often needed to help define and test recommendations. In addition, in industries with a small number of large customers, itís highly recommended that your President send a follow-up letter to customers when the survey is completed. This is a short communication that simply says: thank you for participating in our survey, this is what we heard, and this is what we intend to do about it.
10. Create focus and donít try to be all things to all people. The biggest mistake in customer satisfaction is the temptation to try to do too much in an effort to delight customers and exceed their expectations. Rather, successful companies understand how to set priorities, to focus on the key issues, and to align their organization around key success factors. You are most likely to delight your customers by focusing on a small number of very important issues that differentiate you from the competition. Such focus accomplishes two things. First, it forces you to focus scarce resources on the most important things, thus increasing your likelihood of success. And second, it allows you to fully develop your improvement process before you attack additional problems.
All these issues should be factored into your customer satisfaction survey. A well designed customer satisfaction survey can be an invaluable tool to management, but a poorly designed program will likely result in wasted resources and demotivated employees.
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