Customer satisfaction

UNIT 2

• Customer satisfaction refers to the extent to which customers are happy and satisfied with the products and services provided by a business. Consumer satisfaction is important because when a customer is happy with a service or goods provider, they are most likely to be loyal and to make repeat orders and to use a wide range of services offered by a business. This will boost business sales.

• Customer satisfaction is the key aim in selling process. It is estimated that it costs five times as much to attract new customers as to retain an existing one. The relationship between the customer and the organisation is very important.

• The level of satisfaction a customer has with a company has profound effects. Studies have found that the level of customer’s satisfaction has a positive effect on profitability:

• A totally satisfied customer contributes 2.6 times as much revenue to a company as a somewhat satisfied customer.

• A totally satisfied customer contributes 17 times as much revenue as a somewhat dissatisfied customer.

• A totally dissatisfied customer decreases revenue at a rate equal to 18 times what a totally satisfied customer contributes to a company.

• Research has shown that when a person is satisfied with a company or service they are likely to share their experience with other people to the order of perhaps five or six people. However, dissatisfied customers are likely to tell another ten people of their unfortunate experience. With social media readily available for consumers to tell their story to all of those online, you can easily go to Twitter or Facebook and read about someone’s experience with a company or service.

• Customer loyalty is much harder to obtain than satisfaction. Even though customers are satisfied with the company there are several factors that could cause the customer to defect to the competition, such as finding a better value or the competitor is more convenient. With that said, having high levels of customer satisfaction does not always lead to customer loyalty. However, a company cannot achieve customer loyalty without having customer satisfaction.

• Creating loyalty among customers can help the company to increase purchases of existing products, charge premium prices for appreciation of your added-value services, and create positive word-of-mouth promotion for your company, which is the core marketing objective for companies.

• Thus, though customer satisfaction does not guarantee the repurchase from a company but it does play a very important role in achieving customer loyalty. Conducting customer satisfaction research will provide your company with the necessary insight it needs to make informed decisions in order to retain and increase your customer base and improve customer relationships.

“Another satisfied customer!”

• Think of an incident in which you were “surprised and delighted” as a satisfied customer. How did that happen?

• Think of another situation where you were very disappointed as a customer, and you did not return or you told others about your negative experience. How did that happen?

Customer Satisfaction

Customer satisfaction means money!

• A study in the Harvard Business Review showed that just a 5 percent increase in customer retention boosts profits by 25 percent to 125 percent.

• Winners of the Malcolm Baldrige National Quality Award ( heavily oriented toward customer satisfaction) outperform the Standard & Poor's 500-stock index by 3:1 in ROI

• Sears, Roebuck operates on a financial model which shows that a 5 point improvement in employee attitudes will drive a 1.3 point improvement in customer satisfaction, which in turn will drive a 0.5 percent improvement in revenue growth. The model also established that 4 percent improvement in customer satisfaction translates into more than $200 million in additional revenues.

• The lifetime value of a supermarket customer is estimated at $250,000

• IBM in Rochester, Minn., calculates that a 1 percent increase in customer satisfaction is worth $257 million in additional revenues over five years.

• Marriott found that each percentage point increased in the customer-wide satisfaction measure of intent-to-return was worth some $50 million in revenues.

Customer (dis)satisfaction

• 96% of dissatisfied customers never complain to the business, but 91% will not make return purchases

• 70-85% of dissatisfaction is due to customer service not product; 68% of customers who stop buying do so because they perceive an employee as discourteous or indifferent

• dissatisfied customers on average tell 12 friends of the poor service; satisfied people tell 5 friends (2:1 ratio)

• 70% will return if complaint is resolved, and 95% of customers would do business again if a problem is resolved quickly and effectively

• highly effective companies spend 10% of their operations budget on fixing problems related to customer complaints; ineffective ones spend 40%

• the average business loses 10-30% of its customers each year (without knowing which, when or why lost)

• it’s more costly to win a new customer than to lose an existing one (5-7 times greater); it takes 12 positive incidents to make up for a negative one

• Customers are three times more likely than service providers to recall the quality of the personal element in a transaction

More (dis)satisfaction Facts

People who complain are generally younger, have higher incomes, are better educated, have more experience with the product, are less brand loyal, and may have higher expectations

• For every complaint there are an estimated 25 unnoted complaints

• 75% of complaints reported to front line person do not get reported to management

• Only 20% of complaints are directed to the manager by customers

• 800# doubles calls to corporate, but only 1 per 100/500 get addressed by a senior executive

• Quick resolution results in higher satisfaction & loyalty than multiple contacts

• losing customers is strongly related to employee turnover; Fortune magazine found that the companies with the happiest employees also produced the highest returns to shareholders by a substantial margin, 27.5 percent vs. 17.3 percent for run-of-the-mill companies.

 Product Use•Frequency of product use •Primary use location •Primary precipitating events or situations for product use or need •Usage rates and trends

Product Familiarity •Degree of actual product use familiarity •Knowledge (read product information, read product label, etc.) •Knowledge and Involvement with product and the purchase process•Awareness of other brands•Reasons for original product purchase (selection reasons)•Primary benefits sought from the product

Product Evaluation•Attribute evaluation matrix: (quality, price, trust, importance, performance, value)•Perceived benefit associations matrix Importance, performance •Identification of primary benefits sought Comparison to other brands (better, worse) •What is the best thing about the brand, what could be done better

Message and Package Evaluation• Packaging size, design • Advertising Promise, message fulfillment

evaluation

Value Analysis• Expectation of price• Expectation of relative price (full price, on sale)• Current price paid

Satisfaction Measurements• Overall Satisfaction• Reasons for Satisfaction Evaluation• Satisfaction with attributes, features, benefits• Satisfaction with use• Expected and Ideal Satisfaction-Performance

Measures • Likelihood of recommending• Likelihood of repurchasing

General Measures in a Customer Satisfaction Survey

Meeting basic respect & courtesy needs; dissatisfaction if not met; indifference if met

Customer tells what is important; satisfaction vs. dissatisfaction if met

Customer hopes & asks but doesn’t expect; if met then delighted. Unlikely to cause dissatisfaction. Build customer loyalty

Benefits above & beyond expectations; identify and suggest innovations with new products

Some key points on developing loyalty

• Since what was once unexpected/unstated becomes expected/stated, you must keep innovating

• Performance excellence occurs by design, not default

• All parts of the organization are part of creating customer loyalty• Reliability: Keeping your promise, doing what you said you will do.

Doing things right the first time.

• Assurance: Making the customer feel safe in their dealings with you, being thoroughly professional and ethical.

• Tangibles: How the product/service looks to the client, the appearance of personnel and equipment, etc.

• Empathy: The degree to which the organization and service personnel understand the individual client and their needs, the ability to adapt the service to each client, the willingness to 'go the extra' for the client.

• Responsiveness: The availability, accessibility and timeliness of the service. The ability to respond to enquiries and complaints in a timely fashion.

Parasuraman, A., Zeithaml, V., & Berry L. (1984, August). A conceptual model of service quality and Its implications for future research. Cambridge, MA: Marketing Science Institute.

Proctor & Gamble's Pampers product had 13% market share in Hong Kong. They went on a massive campaign to gather the names and addresses of mothers and babies through highly successful cash back sales promotion activities. To get the cash back, mothers had to write in with full name and address details, as well as the babies birth date and sex. Using this information they wrote to the mothers on a quarterly basis, telling them of their babies growth and what to expect at the various stages. They also sent out discount vouchers when it was time to buy the next size up, so that the nappies always performed well.

Within 14 months (the fifth cycle of the ever-growing list of mothers) Pampers had moved to the number one position with 49% market share. Each percentage point was worth US$1million over the life usage of the product. That's $29mil just by staying in touch with the same base, within 3 months over and over.

Pampering Customer Loyalty

Customer Value Determination Process

Select TargetCustomers Identify Customer

Value Dimensions

Determine StrategicallyCritical Value Dimensions

Determine CustomerSatisfaction WithValue Delivery

Explore Causes of ValueDelivery Problems

Predict CustomerValueChange

Develop/ImplementAction Plans

Feedback (inc.

satisfaction)

Engagement (design)

Service data

Utilisation (analyse)

Classification groups

Segmentation (predict)

To close gap; prediction v realityEngage & involve;

service redesign

Expectations v predictions

CUSTOMER INSIGHT

•

customer satisfaction

Customer satisfaction measurement helps an organisation focus on its customers, and should galvanise service owners, customer-facing staff, policy, strategy, and research staff, as well as senior management, around the aim of improving the customer experience

(Cabinet Office)

Focusing on measurement is the wrong place to start. It’s not about data collection, it’s about changing what people think, so the challenge is how to create a shift in thinking in the organisation, not just to get customer information.

customer satisfaction

Delivery

Timeliness

Information

Professionalism

Staff attitude

Satisfaction with service

30%

24%

18%

16%

12%

5 Drivers

Final outcomeKept promise

Handled problems

Initial waitOverall time

Times to contact

AccurateComprehensiveKept informed

CompetentFair

Polite & friendlySympathetic

Contextualised customer satisfaction

Typical of what we do:

How do you rate the waiter? 5 Very satisfied4 Satisfied3 Neither satisfied nor dissatisfied2 Dissatisfied1 Very dissatisfied

How does this feel as a customer?

What was important to you?

customer satisfaction

Customer defined criteria:Fast service Friendly atmosphereGood food Good musicValue for money Child-friendly

How do you find out?Individual interviewsFocus groupsStaff feedbackCustomer feedbackExpert views

3 questions:Score these out of 10 for importance

Rate these out of 10

If you didn’t give a 10, what can we do to make it a 10?

Customer satisfaction

4-step process:1. Identify what’s important

2. Compare expectation and experience

3. Gather opportunities for improvement

4. Address the biggest gap not the lowest score

Changes in expectation over time can be accommodated

Measuring customer satisfaction through mystery shopping

Mystery Shopping

• It is a form of Market Research where individuals are trained to • observe, • experience and • evaluate the customer service process of an

organization.

• WALK-IN SHOPPER

• A Shopper acts as a customer and undertakes a series of agreed tasks,

• These tasks monitor the quality of customer service.

• PHONE SHOPPING

• Monitor how long it took staff to answer, • how they were greeted, and how professionally your request was

handled • was the member of staff polite and informative? • Report back accurately and objectively by completing a

questionnaire.

• Service quality measurement

• General level of service delivery

• Test product knowledge

• Monitor turnaround time

• provide the bank with information on the quality of its current service.

• provide management information to the organization – your suggestions are welcome.

• Intended to assist the organization to focus on customer service improvements

• Efficiency and effectiveness of Telephone conversation

• • Environment (ACs, lighting, noise levels, flags, clean

desk etc)

• Facilities (washrooms, signages, suggestion boxes etc)

• Brochures and Slips

• Product Knowledge

• Staff Appearance

• Staff Attitude and service delivery

• Security

• Other customers’ views

• Overall satisfaction• How long it took you to get services.• Smartness of the attendant• Customer service professionalism

Kano Model of customer satisfaction

Origins of the Kano Model

• Noriaki Kano – Professor at Tokyo Rika University– International Consultant– Received individual Demming Prize in 1997

Origins of the Kano Model• Noriaki Kano

– Developed foundation for an approach on “Attractive Quality Creation” commonly referred to as the “Kano Model”

– Challenged traditional Customer Satisfaction Models that More is better, i.e. the more you perform on each service attribute the more satisfied the customers will be.

– Proposed new Customer Satisfaction model (Kano Model)• Performance on product and service attributes is not equal in the eyes of

the customers• Performance on certain categories attributes produces higher levels of

satisfaction than others.

When to use the Kano Model

• Project Selection• New Product Development• New Service Development• Determine Market Strategies

Key Elements• Identify the Voice of the Customer• Translate Voice of the Customer into Critical

to Quality Characteristics (CTQs)• Rank the CTQs into three categories:

– Dissatisfier - Must be’s – Cost of Entry– Satisfier – More is better – Competitive – Delighter – Latent Need – Differentiator

• Evaluate Current Performance

Kano Model

DelightersExcited Quality

DissatisfierMust-be

Expected Quality

“Didn’t know I wanted it but I

like it.”

“Cannot increase my satisfaction, but

can decrease.”

Dissatisfaction

Satisfaction

Service Performance

Service Performance

SatisfierOne DimensionalDesired Quality

Kano Model Process

Analyze & Brainstorm

Analyze & BrainstormResearchResearch Plot &

Diagram

Plot & Diagram Strategize Strategize

•Research available data sources

•Determine data collection strategy

•Design data collection instruments

•Collect and summarize data

•Analyze results from data collection

•Brainstorm list of features and functionality

•Develop Functional and Dysfunctional Questionnaire

•Distribute Questionnaire

•Develop Customer Requirement Matrix

•Record Questionnaire results in Matrix and Summarize

•Plot results on Kano Model

•Determine Project selection

•Product Development•Service Development•Identify Marketing Strategy

Research

• Must Be’s - Focus Groups, expert opinions, Buzz on Internet

• Satisfiers - Competitive Analysis, Interviews, Surveys, Search Logs, Usablity Testing, Customer Forums

• Delighters - Field Research, Marketing/Branding Vision, Industrial Design, Packaging, Call Center Data, Site Logs

Strategize

• Project Selection– Lean Six Sigma– Design for Six Sigma

• Organizational Strategy– Dissatisfier – Must be’s – Cost of Entry– Satisfier – More is better – Competitive – Delighter – Latent Need – Differentiator

Summary of Kano Model

• Analyze and rank the voice of the customer data

• Develop into Categories– Dissatisfier – Must be’s – Cost of Entry– Satisfier – More is better – Competitive – Delighter – Latent Need – Differentiator

• Identify and implement strategy