Why Measure Customer Satisfaction?

As markets shrink due to the current global melt-down, most companies are scrambling to boost customer satisfaction in order to keep their current customers rather than devoting additional resources to acquire new customers. The claim that it costs five to eight times as much to get new customers than to hold on to old ones is key to understanding the drive toward tracking customer satisfaction.

Defining Customer Satisfaction

Customer satisfaction is the state of mind that customers have about a company when their expectations have been met or exceeded over the lifetime of a product or service. The achievement of customer satisfaction leads to customer loyalty and repeat purchase.

Understanding Differing Customer Attitudes

The most basic objective of customer satisfaction surveys is to generate valid and consistent customer feedback (i.e., to get first hand information from horse’s mouth – in this case it’s the voice of the customer, which can then be used to initiate strategies that will retain customers and thus protect one of the most valuable corporate assets — loyal customers). It is important to understand the highly subjective system that customers apply to their decision making process. Their decision making is primarily based on input from two sources:

• The customers’ own experiences — each time they interact with a product or service, deciding whether that experience is great, neutral or terrible. These experiences are defined as “moments of truth.”
• The experiences of other customers — each time they hear something about a product or service, whether it’s great, neutral or terrible. This is known as “word-of-mouth.”

There is a strong connection between these two inputs. An exceptional experience leads to strong word-of-mouth recommendations. Strong recommendations influence the experience of the customer, and many successful companies capitalize on this connection. How does a customer satisfaction survey program allow you to make the connection between the survey response and the customer’s attitude or mind-set regarding loyalty? Market research conducted by both corporate and academic market researchers has shown a distinct relationship between customer satisfaction measurements and the degree of preference or rejection that a customer might have accumulated. When the customer is asked a customer satisfaction question, the customer’s degree of loyalty mind-set (or attitude) will be an accumulation of all past experiences and exposures which will be indicated as a score from 1 (very dissatisfied) to 6 (very satisfied). Obviously, the goal of every company is to develop customers with a preference attitude (i.e., we all want the coveted preferred supplier status such that the customer, when given a choice, will choose your product or service), but it takes continuous customer experience management, which means customer satisfaction measurement, to get there — and even more effort to stay there. Therefore, it is very important for companies to continously invest in finding out what their external stakeholders think about their service or  products. 

Most Fortune 500 companies have huge research budgets to continously monitor and manage their customer’s perceiptions regarding their service and product offering.