How to Measure Customer Satisfaction

Nigel Hill, John Brierley

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351930048
• Edition: 2
• Topic: Business
• Subtopic: Customer Relations
• Index: Business

Customer satisfaction and loyalty are key differentiators between the better and poorer performing businesses in most markets. Satisfaction drives loyalty and loyalty drives business performance. This new edition of How to Measure Customer Satisfaction takes readers step-by-step through designing and implementing a CSM survey, highlighting blunders that are commonly made and explaining how to make sure that the measures produced are accurate and credible. It also covers ways of gaining understanding and ownership of the CSM programme throughout the organization and clarifies the business case for customer satisfaction. If you are committed to the future of your company, the ability to measure what your customers think of you is essential - and so is this book!

1 Introduction

Contrast most markets today with their equivalents even a few decades ago. Τoday's markets are characterised by:

1. Oversupply
   Advances in productivity due to new technology, investment in new production capability driven by the need for quoted companies to continually grow profits and the ease of supplying products globally have all led to a huge increase in output, especially of products but of most services too. In many markets the world is awash with products. Buyers are spoilt for choice.
2. High quality
   Along with the increase in supply, we have also seen a massive improvement in quality, driven once more by new technology but also by better management systems such as ISO 9000 and Six Sigma. As recently as two decades ago it came as little surprise when manufactured goods proved unreliable. Now fitness for purpose and total reliability in use have become givens. In a growing number of industries, quality has virtually disappeared as a differentiator.
3. Commoditisation
   The over supply of high quality, largely undifferentiated products and services is reducing most companies to suppliers of commodities. This ha been exacerbated in many markets by the growing power of retailers who are driving prices down and reducing differentiation further with own label products.
4. Information
   Compared with historical markets, where buyers often had to make decisions based on imperfect information, today's customers know virtually everything. They can compare prices for most products and services instantly over the Internet. They can also compare specifications and other relevant information (for example, delivery times) and reach knowledgeable value for money judgements for most purchases.
5. Education
   Around the world people are being educated to ever higher levels. Moreover, they have continually expanding life experiences, whether first hand through travel or second hand via the media. These have been the main drivers of consumerism - confident and selective customers who car
   see through false advertising or selling claims and can make rational judgements about the products and services that will provide them with best value. If they don't receive the value they were promised, or had expected, they are confident about complaining and/or changing their supplier.
6. Balance of power
   Added together these trends have produced a huge shift in the balance of power between suppliers and customers. Not only do suppliers face intense competition for every sale, they have to work increasingly hard to meet the customer's requirements. To gain and even to maintain share in today's crowded markets, a supplier has to be very, very good.

By contrast, customers have never had it so good. They have a huge choice of high quality products and services at exceptionally competitive prices. The customer really is king, so it pays to keep them happy.

Most organisations do now accept the importance of customer focus. Certainly, all pay lip service to the concept. Finding a Chief Executive Officer of a quoted company who does not say that customers are crucial to the success of their business is very difficult. However, some 'walk the talk' more than others. MBNA (one of the most successful financial services companies in the world over the last two decades), measures customer satisfaction daily and rewards its staff monthly for exceeding customer satisfaction targets. Others are less inclined to put their money where their mouth is. Short term cost reduction and profit maximisation decisions often outweigh investment in service levels and customer satisfaction. This is a short sighted view. There is growing evidence that customer satisfaction pays, as we will demonstrate in Chapter 14.

Even if you accept the financial benefits of satisfied customers, why measure customer satisfaction? You could just work very hard to deliver the kind of results that you would want if you were a customer. This would be a good start. However, tests have shown that suppliers' knowledge of customers' requirements is usually far from complete. Their understanding of the customer experience and the extent to which that experience meets their expectations is usually even less accurate. If you are serious about the importance of satisfied customers, you've got to have objective measures of the extent to which you are succeeding. Feedback from customer contact staff is very useful, but it won't be objective. Monitoring complaints is essential, but it won't be representative. Not all dissatisfied customers complain, and even if they did, a complaints measure provides no indication of the extent to which you are satisfying and retaining the customers who are not complaining. It is well established that satisfied customers do defect. Due to all the reasons outlined at the beginning of this chapter, being a good supplier that merely satisfies its customers is no longer enough. Today's confident consumers will decide whether the value delivered by your business is better than they could get elsewhere. It's only by offering best value, by making your customers very satisfied, that you can be sure of retaining their loyalty.

Objective and accurate measures of customer satisfaction provide the best lead indicator of future loyalty. A customer satisfaction measurement programme will enable you to:

• Understand how customers perceive your organisation and whether your performance meets their expectations.
• Identify PFIs (priorities for improvement) - areas where improvements in performance will produce the greatest gain in customer satisfaction.
• Undertake a cost-benefit analysis to assess the overall business impact of addressing the PFIs.
• Pinpoint 'understanding gaps' where your own staff have a misunderstanding of customers' priorities or their ability to meet customers' needs.
• Set goals for service improvement and monitor progress against a customer satisfaction index.
• Benchmark your performance against that of other organisations.
• Increase profits through improved customer loyalty and retention.

An overview of the customer satisfaction measurement process

This book will explain how to produce reliable measures of customer satisfaction and what needs to be done if those measures are to be successfully used as the basis for effective action. But first, an overview of the customer satisfaction measurement (CSM from now on) process (see Figure 1.1).

The starting point for any project is to set objectives and plan a detailed critical path for the exercise, and these will be covered in Chapter 2. The first stage of the research proper is to clarify with customers exactly what their requirements and supplier selection criteria are so that an appropriate questionnaire, which asks the right questions, can be designed. This is done through exploratory research using focus groups (typically in consumer markets) or one-to-one depth interviews (the norm in business markets). It is customers' most important requirements, as stated by the customers themselves, that must form the basis for a CSM questionnaire and not

Figure 1.1 An overview of the CSM process

assumptions you make in-house about what you think might be important to customers. The exploratory research process is covered in Chapter 3.

Two main factors determine the accuracy of a CSM study. The first is asking the right questions (hence the exploratory research); the second is asking them of the right people - a sample of customers that accurately reflects your customer base. Three things decide the accuracy of a sample. It must be representative, it must be randomly selected and it must be large enough. In Chapter 4 we examine the various sampling options.

Once you are confident that you will be asking the right questions of the right people, you can design the final questionnaire and begin the main survey. The first decision here is to determine how the survey will be carried out. It could be done using interviews or self-completion questionnaires, and the latter can come in a number of forms, including postal, point of sale and electronic. Chapter 5 outlines the survey options, together with their advantages and disadvantages. Whatever survey type you adopt, it will be important to maximise response rates and this topic is covered in Chapter 6.

Having determined the type of survey you will carry out, an appropriate questionnaire can be designed. Chapter 7 will examine general questionnaire design principles, whilst Chapter 8 will focus on the specific issue of rating scales. Even now one more step is necessary before launching into the survey. It must be properly introduced to customers. How this should be done is outlined in Chapter 9.

At this point the survey can finally be carried out, followed swiftly by an analysis of the results. Chapter 10 examines several analytical techniques and highlights some common mistakes to avoid. We also explain how to calculate an accurate customer satisfaction index. Having produced a set of results and established a satisfaction index, it is useful to know how your performance compares with that achieved by other organisations. Chapter 11 therefore covers the subject of satisfaction benchmarking.

A worthwhile addition to a CSM study is a mirror survey where the same set of questions is administered to your own employees to discover whether they understand what's important to customers and how closely they are meeting customers' requirements. Typically conducted using self-completion questionnaires, a mirror survey will often trace the origin of customer satisfaction problems to employees' inaccurate understanding of the customer perspective - the so-called 'understanding gaps'. Chapter 12 explains how to conduct and analyse a mirror survey.

After analysing the data and producing a report, feedback should be provided swiftly to employees and customers. Inadequate feedback is a common reason why some organisations fail to reap the full rewards of their CSM process. Only if employees fully understand the survey results and their implications will effective action be taken. Chapter 13 suggests how effective internal and external feedback can be provided.

The final chapter will return to the benefits of customer satisfaction and will recommend the key areas to focus on for an effective CSM process in your organisation.

2 Setting Objectives and Project Planning

Definition

If you want to measure customer satisfaction you need a very clear definition of exactly what you are measuring. Luckily, understanding the concept of customer satisfaction is easy. All you have to do is think how you feel when you're a customer - in the supermarket, on the train, having your car serviced - anywhere. Satisfaction is simple. If you get what you wanted, if your requirements are met, you are satisfied. If they're not met, you will not be satisfied. That simple definition (shown in Figure 2.1), tells us something fundamental about customer satisfaction it's not an absolute concept; it's a relative one. It's relative to what the customer expected in the first place. So to measure satisfaction you have to measure both sides of that equation - the expectation part, usually called importance ratings, and the satisfaction part, usually called satisfaction ratings, but sometimes referred to as performance ratings.

Figure 2.1 Customer satisfaction - a definition

Objectives

Figure 2.2 CSM objectives

The starting point for a CSM project must be to set objectives. There are a number of generic objectives that can be applied to virtually any CSM project. You will need to decide which are appropriate to your own organisation. They are listed in Figure 2.2. First, you have to identify customers' requirements - those things that are important to customers and will determine whether or not they are satisfied. Lots of things will be important to customers but some will be more important than others, so you have to measure the relative importance of customers' requirements.

Second, you have to measure satisfaction - how satisfied customers are with your organisation's performance on that same list of customer requirements. It is very useful, though not an essential part of measuring satisfaction, if you can go a step further and get a comparison with other organisations. This will give you a benchmark, because if you carry out a CSM study for your organisation in isolation, you may achieve an apparently satisfactory set of results and draw the conclusion that you are doing well. For example, a large proportion of your customers may have stated that they are 'satisfied'. But what if your main competitor is getting 'top-box' scores? One of the main principles underlying a reliable CSM study is that it should reflect as closely as possible the way that real customers make their satisfaction judgement, and they do not make that decision in isolation. When determining their satisfaction with your organisation, customers will compare you, consciously or subconsciously, with other organisations.

Once we mention the idea of comparisons, managers often want to compare their company with its direct competitors, but that may not be the most useful thing to do for CSM purposes. Consider for a moment how the customer's mind works in this situation. Most customers are not so-called 'promiscuous consumers', c...