In markets where almost every sector has reached saturation, strategies are built less on growing the market and winning new customers than on “stealing customers” by attracting competitors' customers. If we can think of this strategy, competitors' marketing managers are surely thinking of it too. The marketing manager of an FMCG company with different strategies to encourage customers to buy their products will probably follow attack and defence tactics such as product performance, competitive pricing and periodic (tactical) discount activity. Marketing managers at a company selling services must, alongside all of that, also take into account how the service is perceived by customers and use that perception if it works in their favour. Because in the service sector, customer satisfaction is the most important element of “zone defence”.
The literature offers many similar examples for this zone defence:
• Retaining an existing customer is 5 times cheaper (8 times, according to some sources) than acquiring a new one. The examples from daily life are clear enough. It is enough to compare the campaigns a mobile operator or a TV subscription company offers new customers with those it offers existing ones. The subsidy given to acquire a new customer naturally has a negative effect on the profit line.
• A 5% increase in customer loyalty delivers an increase in profitability of between 25% and 85%. Considering that very satisfied customers are 6 times more likely to recommend your brand than ordinary customers, their likelihood of becoming loyal customers or repurchasing your product is also considerably higher.
• While satisfied customers share positive views about your brand with an average of 5 people, unhappy customers tell an average of 9 people. And on social media, thousands…
Many similar data points can be used to argue why customer satisfaction matters. This is why customer satisfaction becomes an important strategic weapon in the hands of conscious managers, delivering market share and consequently profitability growth.
Fine in theory — but do company managers really want to do this well? Do companies that want to gain a loyalty advantage against the competition by increasing customer satisfaction know where to start and how to finish? Or do they see satisfaction measurement and improvement areas merely as a cost item? For years I have argued that you have to put money on the table to achieve customer satisfaction. Because, as the saying goes, you don't begrudge a chicken where a goose is coming.
To measure and manage customer satisfaction and loyalty, you first need to decide what will be measured and how it will be quantified. Starting without deciding what needs to be measured, how data will be collected and how it will be analysed and reported usually ends in wasted time and money. Various approaches can be used for measurement areas and data sources. Every company should define different criteria according to its own field of activity and decide on suitable data sources accordingly. As many marketing managers know, market research is not the only means of measuring customer satisfaction and loyalty.
Internal Sources
The databases and customer representatives a company already has can provide very valuable information for measuring customer satisfaction and loyalty. Data such as repurchase rates for the same product or service, the percentage of customers using one product or service who buy another offered by the company, orders that are not repeated, increase/decrease trends in service usage, customer churn rates, applications and complaints submitted through call centres and websites where these exist, and repeat complaint rates all serve as guides to the level of customer satisfaction. Similarly, reports from customer representatives (reported accurately and systematically) can signal whether customers are satisfied.
Another data source that can be considered internal is the satisfaction surveys customers complete. Through these applications — which we can picture as the surveys on a restaurant table or at a shop door — companies interact directly with the target audience and try to form a view of their satisfaction levels. The point to watch here is finding ways to match surveys to customers. Because knowing the answer a customer gave to a question about food quality when we do not know what they ate is not much use to anyone trying to increase satisfaction.
Again through internal sources, analysing the messages customers convey to the company directly or indirectly can help understand loyalty and what the market thinks about the company. In the age of the internet and technology, this is far easier than it used to be. Because customers voice their complaints both to the company and to their friends through platforms with high reach. This also makes the impact far less predictable. The approach of “tell your friends about your satisfaction and tell us about your complaints” is unfortunately no longer valid. But this new-world approach also offers everyone opportunities to gain clues about measurable satisfaction levels and loyalty. Social media analysis is among the key performance measurement topics for some companies.
External Sources
It is a sound approach for companies to measure with their own resources, without allocating too much, and to carry out improvement activity based on the metrics measured. But for managers, information provided by independent sources has a different value. Because measurements a company makes with internal resources may not be a precise gauge of satisfaction. If we define satisfaction as “meeting expectations”, it becomes clear that companies' internal reports provide very little data on expectations. This is why measuring through questions put directly to the target audience and compiling data on what expectations are is so critical. Expectations are highly subjective, and that subjectivity directly affects satisfaction. Companies should pay attention to this in the research methods they use to measure customer satisfaction, and must always examine the effect of “perceived performance” on satisfaction on a criterion-by-criterion basis.
When designing customer satisfaction and loyalty research, usually conducted through market research firms, the following points should be observed:
• There should be question sets and analysis methods that reveal customer expectations
• Performance assessments on the relevant criteria should be obtained for both our own company and competitors
• The findings obtained should be brought up to standards that improve the product or service
• Concrete recommendations should be offered for the actions to be taken to increase customer satisfaction
• It should be measurable at regular intervals through tracking studies
Current Customer Satisfaction Research Methods
Customer satisfaction research conducted with traditional methods, to which different research firms add their own interpretation through various models, consists of an overall satisfaction score for the company's products and services and satisfaction scores for the sub-criteria that may affect that score. Customers rate based on their past experience with the company. In this way, areas of dissatisfaction experienced on a process basis can be identified and corrective action plans developed. Depending on the length and scope of the questionnaire, such studies can be conducted by telephone or online, or (particularly when long forms are used) face to face.
From time to time we come across research that asks how satisfied customers are with a single question. In single-question studies, satisfaction performance can be obtained through questions such as “how satisfied/dissatisfied are you?”, while questions such as “how likely are you to recommend our company?” (NPS) or “how much effort did you have to put in to complete this transaction?” (CES) make it possible to measure recommendation or the degree of effort the customer experienced. Compared with traditional satisfaction research, studies such as Net Promoter Score (NPS) or Customer Effort Score (CES) fall short in revealing development areas, because they do not sufficiently probe which criteria create dissatisfaction or what customers expect.
Mystery shopping is a method that can be used as support in measuring customer satisfaction. In this research, real customers purchase a product or service through constructed scenarios and evaluate the experience they have during the process. While customer satisfaction research rests on past experience, mystery shopping can capture the negatives and positives in the experience as they happen.
Where sufficient resources are available, the ideal is to understand customer expectations through detailed customer satisfaction research, measure the company's performance on the relevant criteria, and implement action plans using the results. To observe whether these actions are implemented by company staff, simultaneous checks should be made through mystery shopping, and if no change in performance is observed, different actions should be taken.
In conclusion, dissatisfied customers whose complaints are not resolved effectively show their reaction by not buying again, by communicating negatively, by boycotting the business and by taking the matter to legal authorities. This is why identifying the negative experiences customers have and improving processes is critical to a company's fate. But having satisfied customers before a complaint even arises — increasing the number of satisfied customers by managing expectations correctly — is a cheaper method. And doing that means creating and implementing action plans for the improvement and development areas revealed by satisfaction research. To run a profitable business you first need to invest the right amount in the right place. Companies that approach the right customer in the right way will be more profitable in every case.