Why customer satisfaction surveys are essential

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By: Wise Marketer Staff |

Posted on August 11, 2010

Why customer satisfaction surveys are essential

With today's marketplace being increasingly driven by customer needs and opinions, there are a number of reasons behind an increasing focus on customer satisfaction surveys, according to John Coldwell of B2B satisfaction survey experts InfoQuest.

The company has compiled a compelling list of factors that explain not only why but how customer satisfaction surveys are helping marketers and business managers adapt and develop their offerings to ensure greater satisfaction, loyalty, and incremental spending.

Among the driving factors observed:

  1. To avoid preventable losses There are three operating areas in which most customers will openly express displeasure if you fail to perform to expectations: price, quality and on-time delivery. The problem is that there are dozens, and sometimes hundreds, of additional touch-points in the average customer relationship in which customers can bottle up their displeasure.

    For example, according to Tom Peters in 'The Pursuit of Wow', the Forum Corporation of America analysed the causes of customer migration in 14 major manufacturing and service companies and found that 15% migrated because of quality issues, and another 15% changed supplier because of price issues. The remainder (70%) churned because "they didn't like the human side of doing business with the prior provider of the product or service". And additional studies have consistently found that the typical dissatisfied customer will also tell 8 - 10 others about their problems and bad experiences.

    However, research also finds that some 70% of complaining customers will not defect to a competitor if their complaint is resolved to their satisfaction. While this may seem encouraging, many studies have found that around 27 customer complaints go unreported for every one that is heard. Put simply, an average of 960 out of 1,000 customer complaints go unheard until it's too late, and only 28 of the remaining 40 complaints will not result in churn, assuming a 100% rate of success in resolving complaints.

    In order to bring this problem into line, it is therefore necessary to check customer satisfaction at least once before every interaction is concluded. In this way, 700 of every 1,000 complaints can potentially be prevented from turning into defections, instead of only 28.  

  2. To drive continuous improvement An old truism suggests that it's far easier for great service to overcome a second-rate product than it is for a great product to overcome second-rate service. Within that truism lies the simple reality that many business operators fail to recognise: your customers know your company's strengths and weaknesses - and usually better than you do. There are things that only customers really know about every company they deal with. For example:
    • They know what it's like to buy your products and services, from placing an order to having it delivered.  
    • They know how well you solve problems.  
    • They know how responsive you are to questions or special needs.  
    • They know if you make it easy to conduct business with you, or if it's a painful process that's wrapped up in red tape.  
    • They know if your employees are competent and courteous.  
    • They know if you keep promises or return phone calls.  
    • They know if you value their business - and prove it to them - or if they are simply taken for granted.  
    • They know if your products or services represent value for money, and they know why - or why not.  

    In fact, not only can customers tell you where you're going wrong, but they can also often tell you what else you could be doing right. Customers can sometimes be the best source of innovative new ideas. Throughout history, in all sectors, it's often customers who come up with new ideas for improving an old product or launching a new one.  

  3. To build market share The economics of customer satisfaction speak for themselves. According to InfoQuest, "totally satisfied" customers have a repurchase rate that is 3 - 10 times higher than that of "somewhat satisfied" customers (as documented by research at Xerox, as well as in other industry studies). In fact, in the B2B arena, Johnson Controls found that a one point increase in its overall satisfaction rate was worth a US$13 million increase in service contract renewals annually.

    At the same time, there is an old adage (and arguably a truism) that marketers have heard and lived by for many years: that it costs six times more to attract a new customer than it does to retain an existing one.  

  4. To create checks and balances Various studies over the years, beginning with one conducted by Xerox in the early 1990s, have consistently shown that a totally satisfied customer is 3 - 10 times more likely to repurchase from the same company than one who is simply somewhat satisfied. But more recent studies by InfoQuest developed a statistical model that found that the financial relationship between customer satisfaction and revenues is both measurable and predictable.

    When it comes to satisfied and dissatisfied customers, the company's model found that, over time:

    1. A totally satisfied customer contributes 2.6 times as much revenue to a company as a somewhat satisfied customer;  
    2. A totally satisfied customer contributes 14 times as much revenue as a somewhat dissatisfied customer;  
    3. A totally dissatisfied customer decreases revenue at a rate equal to twice what a totally satisfied customer contributes to the business.  

    The third finding is particularly noteworthy in that it highlights that you can have twice as many satisfied customers as dissatisfied customers and still be losing ground. As a result, marketers need to do everything possible to turn dissatisfied customers into somewhat satisfied customers, and turn somewhat satisfied customers into totally satisfied customers, while at the same time avoiding making any changes that will interfere with those who are already totally satisfied.

    That's where the checks and balances come in. For example, there are several questions you need to ask on a regular basis, such as:

    1. Do you know which of your best customers are dissatisfied, and why?  
    2. Are any initiatives aimed at improving customer satisfaction widely understood company-wide, universally pursued, and routinely measured?  
    3. Is everyone in the company, in all departments and at all levels, hearing and focusing on the same things?  
    4. When key decision-makers look at the business, do they see the same things that customers see, and do they really know what customers see?  
    5. Does everyone understand who the best customers are, and what needs to be done to keep them?  

    In many companies, purely informal means are employed to try to maintain a sense of 'customer need'. Using a combination of in-house metrics, anecdotal tales, passive data collection, and an abundance of hindsight, these companies attempt to keep their fingers on the pulse of customer sentiment, often collecting information with one hand while fighting fires with the other.

    Of course, bad news does not usually travel up the corporate hierarchy very well (if indeed at all) and the majority of customer complaints are never openly voiced, which means that such an informal way of gathering 'voice of the customer' insights are highly ineffective. Add to this the effects of unproven preconceptions, wishful thinking, attitudinal biases, and even an occasionally fragile corporate ego, and it is clear why customer satisfaction surveys have become more of a necessity than an option in today's consumer-driven marketplace.

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