Are you still placing your faith in "customer satisfaction?" If your answer is yes, you are trapped in an outdated mindset. The new paradigm is customer value - and it's quickly being embraced by forward thinking corporations everywhere.
These days of economic anxiety have spawned a real "back to basics" movement. More and more, customers are demanding value in what they buy. That's why we at Market Value Solutions are committed to helping our clients stop thinking in terms of customer satisfaction and start thinking in terms of customer value.
So what makes the customer satisfaction paradigm so, well, unsatisfying? Here are five solid reasons:
Satisfaction does not equate to market share. Satisfaction is an emotion; another word for it is happiness. If a customer is satisfied, he is happy, if dissatisfied, he is unhappy. The satisfaction paradigm is predicated on the assumed linkage between happiness and loyalty, a linkage that can be deceptively reassuring. For example, several prominent enterprises (AT&T and Cadillac) have found that while their satisfaction scores were increasing, they were in fact losing market share. Customer Satisfaction is not a good predictor of performance and being able to link a strategic measure such as satisfaction or value to performance is paramount.
Satisfaction is based on what customers expect. When a customer's expectations are met, she might say she is satisfied. But is merely meeting her expectations good enough? Many organizations suspect the answer is no; therefore they say "Not only do we want to satisfy the customer, we want to delight the customer." This is an effort to make the tenuous relationship between company and customer less tenuous, and to move the actual experience further away from what the customer expected. But does it actually do that? It also begs the question, "What is it that customers want to be satisfied with?" Is it each and every attribute or is it something more profound, something that takes into account the way in which most customers make a choice decision? We believe it's the latter.
Satisfaction does not address the "worth it" question. Consider a simple example: a fine dining experience. After trying out a nice restaurant for the first time, you evaluate your experience. Typically you would evaluate individual aspects of the experience such as the atmosphere, the service, the quality of the food, the quantity of the food, perhaps parking and any other factors. Oh yes, and the price you paid for the experience. Usually you will evaluate all of those factors and then look at the performance of the restaurant relative to the price that you paid to experience those factors. At the end of the day, you are asking whether the dining experience was "worth it." The "worth it" question is the essence of value. The more "worth it" an experience is, the greater probability that the experience will be repeated.
Satisfaction fails to acknowledge the competition. Many organizations focus their customer satisfaction system solely on their own customers. In the process, they are ignoring what their competitors are doing. This can lead to the trap where customer satisfaction scores are increasing or remaining high but the organization is losing market share. In other words, while remaining customers may still claim to be happy, many others are defecting to better competitive value opportunities. It is impossible to use your customer information for such key strategic initiatives as planning if it does not give you a competitive read. Planning by focusing solely on your own customer base leads to false conclusions and initiatives that are not only misleading, but often disastrous. No competent military general goes into battle without understanding the disposition of the enemy's troops and their strengths and weaknesses. Unfortunately, many organizational generals do.
Customer Satisfaction too often exists in a vacuum. How many organizations can actually link their satisfaction information to such performance measures as margins, profits or market share? Surprisingly few. The reason satisfaction is a poor predictor has to do with many of the issues just discussed-it's an emotion and is too far removed from behaviors such as loyalty, repurchase rates, and price sensitivity. When it is not considered within its interactive role, the individual scores on independent attributes typically have a low relationship with performance outcomes. And perhaps most importantly, absent a competitive perspective, no linkage with competitive performance measures is possible. How can evaluations of your own customer base be linked to competitive market measures such as market share or return on investment? Simply put, they can't.
For your own survival you must pursue a customer value program. Once you have an overarching strategy of value in place, it will render all those "flavor of the month" business initiatives irrelevant. It will drive every move you make, from how you plan for the future to how you view the competition to how you interact with customers to how you treat your employees. Embracing a customer value model is almost like undergoing a religious conversion-it redefines everything you do, and the decisions you used to agonize over will fall effortlessly into place.
