white paper - beyond customer satisfaction

8/11/2019 White Paper - Beyond Customer Satisfaction

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A White Paper on

BEYOND CUSTOMER SATISFACTION

By Paul Hague, Managing Director, B2B International Ltd &

Daniel Park, Associate Consultant, B2BInternational Ltd

INTRODUCTION

Recently, when preparing for a presentation, Dan was re-reading some material that suddenlystruck him in a different way compared with his preious reading of it! Drawing on original U"#research from customer satisfaction sureys the #merican marketing specialist $ack Trout makesthe following points!

% &ore than '( per cent of customers who claimed to )e satisfied switched suppliers without looking )ack! *"o manychoices, so little time!+

% ighty nine per cent of people who owned cars from a certain manufacturer said they were ery satisfied and . percent said that they intended to purchase another car from that manufacturer!

% /ewer than 0( per cent actually did so!

Source: Trout (2000) p 33.

Clearly the a)oe raises interesting 1uestions a)out the su)2ect of customer satisfaction and ithas prompted a ery liely e3change of thoughts )etween the two authors named a)oe! Out ofthis came the decision to write this short 404 5hite 6aper 2ointly!

Common sense tells us that if )usinesses fail to satisfy customers they are unlikely to stay in)usiness ery long, unless either *a+ they are in a monopoly position with no cost-compara)lesu)stitutes or *)+ they are the final choice supplier in a sector where eery other supplier ise3periencing fully utilised capacity that is contractually committed and therefore cannot )e

released at higher, market-clearing prices! /ew organisations nowadays find themseles in thislu3urious position! Conse1uently, as Trout illustrates, the achieement of measured customersatisfaction may not always translate directly into customer retention and profit oer time!

I" 7R84OD8 9#668:

#s a )ackcloth to this discussion, it is helpful to consider e3actly what satisfaction means! Ifsomeone asks you if you are ery satisfied or 1uite satisfied with your car, e3actly what would )ein your mind: #lthough we all hae a general iew of what satisfaction means, we know that itmeans different things to different people! To some it may mean, ;it? to others it may mean;it fully meets all my e3pectations>! The word satisfaction is like happiness @ it is something weare all interested in and would like to measure )ut it is a soft factor @ one that is hard to 1uantify!

#nother point to )ear in mind a)out these measures of ;soft> issues such as satisfaction andhappiness is that different groups of people could hae different iews! 5e see this in glo)alsureys of happiness! &ost Nigerians say that they are happy een though it seems that )ycomparison to us, theirs is a pretty impoerished lot! #lso, when we are measuring soft issuessuch as satisfaction and happiness, the game keeps moing on! The more we hae the more wewant! The first time we receied free )ottles of shampoo and conditioner in a hotel we were erysatisfied! Now we take it for granted and e3pect a )owl of fruit and perhaps a )ottle of )u))ly!

9appiness leels across the world hae )een measured for some years and we hae seen asteady decline in most countries! /or e3ample, in the early AB.(s in the U= we could e3pectaround ' of adults to say that they were ery happy! Today that proportion is only E(!

9oweer, despite the rosy mists of the past, most of us would not want to turn the clock )ack and

lie without central heating, suffer cars that rust and constantly )reak down, and gie up ourelectric windows! #ccording to 6rofessor Daniel =ahneman of 6rinceton Uniersity, measuringhappiness is not to )e fully trusted! 9e proposes the concept of ;o)2ectie happiness> in which he

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measures happiness regardless of what people say! This is something for us to )ear in mind incustomer satisfaction sureys @ can we find measures that indicate satisfaction withoutnecessarily asking if people are satisfied!

FO8#FT8 I" "TRONGR IN &O"T 404 R=T"

Fet us turn the discussion to )usiness to )usiness customer satisfaction! 5e can recognise thatthe a)oe forces are also at work here! "uppliers are getting )etter and )etter in eery way!Delieries arrie fast and on time, prices are falling, products are more relia)le - and yet customersatisfaction leels are stuck at scores of around H out of A( for most companies!

The good news is that the lack of loyalty and degree of supplier switching referred to )y Trout isnot fully eident *yet+ in )usiness to )usiness markets! There are three good reasons for this!/irstly, )usiness to )usiness )uyers *remem)er there is seldom 2ust one person inoled @ usuallya decision making unit+ hae all to agree in their decision to change their supplier! The ;2ury>effect of the comple3 D&U restrains the impulsie actions that we can more easily take asconsumers! /or us as $oe 6u)lic, does it really matter if we )uy one )rand of shampoo ratherthan another @ )ut it could matter if we change the )rand of lu)ricating oil in the cutting tool!4uyers are reluctant to make a change to another supplier, eer sceptical that the initial lower

prices and promise of )etter serice may eaporate within months! Of course, much depends onthe type of product that is )eing sold @ how critical is it to the running of the )usiness: 4usinessto )usiness )uyers hae some sort of map in their minds that positions the products and sericesthey are )uying as critical *or not+ to their )usiness! They know when they can chop and changesuppliers and when it isn! &any of the products that are supplied to )usinesses inole personal contact with the

supplier! 5e find in surey after surey that customer satisfaction is drien largely )y peoplefactors! /riendly, knowledgea)le and attentie staff add considera)le points to the customersatisfaction score! 5e hae more to say on this later )ecause this is most certainly somethingthat we can influence greatly!

The third factor that ensures relatiely high leels of loyalty in )usiness to )usiness markets isinertia! #n incum)ent supplier to a )usiness has a good chance of keeping that )usiness *unlessthey screw up )adly or if a significantly )etter offer is made )y someone else+ )ecause it is 2usttoo much trou)le to change! Companies, unlike the general pu)lic, hae a we) of knots that tiethem into their suppliers! &ost suppliers hae to go through an approal procedure )efore theycan )egin delieries! Terms of payment and supply agreements hae to )e set up! "aed diallingnum)ers to the incum)ent supplier simply make it easier to place the order! Getting thepaperwork in place is for some companies a sufficient deterrent to leae )usiness where it is

unless there is good reason to change!

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5hat does all this mean to us in )usiness to )usiness markets: It seems to us that it poses twoimportant 1uestions

A! #re customer satisfaction scores alid in the form we know them today:0! 9ow can we measure loyalty and use those measures to produce een greater lock in for

our customers:

"URING CU"TO&R "#TI"/#CTION

In the thousands of studies that hae )een carried out measuring customer satisfaction in)usiness to )usiness markets, we hae learned that there are no magic )ullet 1uestions! This is)ecause the answers people gie are not always the ones we can )eliee *remem)er 6rofessor=ahneman+ and the interpretation we make a)out the answers )y relating one to the other can )efar more enlightening! In a typical customer satisfaction surey there could )e as many as thirtyto fifty different rating 1uestions on all the aspects of product, serice, alue and deliery!9oweer, there are eight 1uestions that seem to )e central to the study *with o)iousmodifications to suit+! These 1uestions are

A! 9ow satisfied are you with the 1uality of the products from #4C Ftd:

0! 9ow satisfied are you with the relia)ility of products from #4C Ftd:E! 9ow satisfied are you with the alue for money of products from #4C Ftd:'! 9ow satisfied are you with the sales serice from #4C Ftd:! 9ow satisfied are you with the speed of deliery from #4C Ftd:! 9ow satisfied are you with the relia)ility of deliery from #4C Ftd:.! 9ow likely or unlikely are would you )e to recommend #4C Ftd:H! 9ow satisfied are you oerall with #4C Ftd:

In order that we can relate one 1uestion to another and keep a score for )enchmarking purposes,we hae to record the answers to these 1uestions on a rating scale of one kind or another!eryone reading this in )usiness to )usiness markets will also see the need for o)taining freeranging responses that help us get )ehind the num)ers!

Juestion H is a ital 1uestion as it proides a )enchmark for comparing with other suppliers and)ecause we can correlate the answers from the other 1uestions with this score to work out thekey driers of satisfaction! #nswers to Juestion . show a strong link with loyalty and propensityto )uy in the future!

"o, at this point of time we hae to say that the 1uestions we are asking are pro)a)ly the rightones )ut we must make sure that we leae room for 1uestions that measure loyalty since asatisfied customer can still )e at risk from a competitie supplier with a seductie lure!

"URING FO8#FT8

In addition to 1uestion ., that determines the likelihood of recommendation, we can ask othersimple 1uestions to measure loyalty such ;how likely are you to )uy from #4C Ftd in the future:>

9oweer, we would like to push the loyalty discussion further as it seems to us that for loyalty toreally matter, it should )e robust and durable! # supplier with robustloyalty would hae forcesin place that resist other suppliers )reaking in! /or e3ample, a good rep who has )uilt strongrelationships with all the decision makers in the company may )e ro)ust enough to head offthreats from competition! # supplier with durableloyalty will keep the )usiness for a long periodof time! It seems to us that the achieement of ro)ustness is to do with communication and thatthe creation of dura)ility relates to alignment with customers< re1uirements and their identifia)lefuture needs!

Fet us look at the two elements, ro)ustness and dura)ility, in turn!

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RO4U"T FO8#FT8

Ro!ustness is achieed )y e3celling on the soft issues that can sometimes )e oerlooked!4randing and positioning play a key role here een though they may not show up as key driers inthe selection of a supplier! They are not the sort of things that )usiness to )usiness )uyersacknowledge )ut we know that they are ital in ensuring a fit )etween two companies! #s

customers )ecome more discerning and su)2ected to more fre1uent marketing messages, theneed for identifia)le uni1ueness increases, otherwise the outcome is that products and serices -and een the organisation itself - )ecome ;commoditised>! The essence of a commodity is that itis readily interchangea)le with other similar commodities! Therefore the logical conse1uence ofthis process is that communicating alues that resonate with customers is ital to achieing arobustposition!

It can )e seen from the a)oe that the key to customer satisfaction oer time is to do with not onlythe deal)ut also the relationshipand that this is not achieed )y some static once-for-all set ofelements of the marketing mi3! It re1uires a more sophisticated approach! 4ut if this approachcan )e deised initially and managed against the dynamics of changing customer re1uirementsand competitie pressures, the result is sustaina)le satisfaction leading to reduction in sellingcosts since, as marketing specialists are 1uick to point out, it costs seeral times less to gain

)usiness with the e3isting customer )ase than )y the constant addition of new customers for theones that desert!

Different customers feel comforta)le with different relationships! 5e can categorise these as;relationship types> they function independently of the product and serice offering, and this issummarised )elow! 5hat constitutes customers< comfort can *indeed must+ get re-categorisedoer time as they themseles change under constantly eoling market- and competitor-drienconditions!

This is summarised in a paper addressing a ery different su)2ect - logistics - written recently )yDr $ohn Gattorna, a recognised authority on supply chain design! It illustrates why thetechnologies of Customer Relationship &anagement hae )ecome so significant, along with theconcept and practicalities of =ey #ccount &anagement!

Source: Gattorna 2003, p 13.

"ince we need to achiee what is e3plicit in the a)oe, we need to )e a)le to assess the e3tent to

which we meet customer re1uirements in terms of relationshipat the moment!

'

Predictability ofDemand

Fow9igh

Tight

Foose

Relationship withCustomer

LeanHedge and

Deploy

Continuous

Replenishment Agile

Demand predicta)le, *e!g! fromhistoric take-off+, )ut the looserelationship does notnecessitate a high sericeleel! /ocus on lean andefficient!

6redicta)le demand, easilymanaged through tight

colla)oration with customer! 9ighserice leel!

Respond opportunisticallyand manage yield!

Unplanned or unforeseendemand, )ut a tightrelationship with customer

demands a high sericeleel and agile response!


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DUR#4F FO8#FT8

Concerning durabilityand the 1uestion of meeting customers increasing demands, the key is tomoe in synchronisation with the customer! Offering a )etter product or a cheaper product is notalways the answer to meeting changing needs, especially if the adantages can )e 1uicklycopied! In this respect the tools and techni1ues of supply chain management, deeloped initially

for the logistics function of )usiness, hae a powerful impact on marketing! Competitieadantage can )e deried from anywhere in the supply chain, and the )asis of competition ismoing to one of supply chain ersus supply chain rather than product ersus product!

Creating and managing the critical alue-adding parts of this set of relationships is central toachieing dura)ility!

Dura)ility is not a)out )eing K)uilt to last!5e would argue that the sustaina)ility of customer satisfaction is central to this!

In order to assess whether our organisation has the potential for dura)ility *assuming that, on asnapshot iew, we are satisfying our customers in terms of product andMor serice+ we hae toanswer, 1uite simply and unemotionally, two 1uestions! The first is ;what is our alue to ourcustomer within the totality of the supply chain:> The second is ;how do we retain and improethis alue faster than our competitors can catch up:>

CONCFUDING T9OUG9T"

Companies of all types and sies need to take a hard look at their approach to analysingcustomer satisfaction and to measure it in a more perceptie and holistic manner than )y askingsimplistic 1uestions that gie a snapshot iew of product and serice! /or this iew can getoutdated alarmingly 1uickly? and sustaina)le differentiation, as we hae argued in other 4045hite 6apers, is deried increasingly from other parts of the supply chain!

"atisfying customers is a means to an end! The purpose and goal of customer retention areclearly the important issues here! The key is in understanding the nature of the relationship andin anticipating its potential! Not least, it has significant implications for ourseles in 404, and our404 approach to analysing customer satisfaction on )ehalf of our clients and indeed for ourseles

is )eing continuously improed to take these dynamics into account! This puts any )usiness in a)etter position to reinforce the triangle of satisfactionMro)ustnessMdura)ility, which in turn translatesinto more effectie cost management and reenueMmargin growth!

"atisfaction is of limited alue if it does not lead to retention! 6roduct and serice are no longerenough relationship is emerging as the )igger differentiator, supply chain lock-in leads todura)ility of loyalty! The customer satisfaction concept is oerdue for a product recall! #re we on)oard with this:


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Re"erenes

$ohn Gattorna K=eynote #ddress to Fogistics Ireland (E< &imeo! *Gattorna 0((E+

Gary 9amel ;The Juest /or Resilience> 9arard 4usiness Reiew, "eptem)er 0((E, pp 0-E!*9amel 0((E+

Daniel =ahneman reference from ;9ow to )e happy> 4y d Crooks and "imon 4riscoe /inancialTimes Dec 0, 0((E

$ack Trout ;Differentiate or Die> New 8ork $ohn 5iley 0(((! *Trout 0(((+

6aul 9agueDaniel 6ark$anuary 0(('Copyri#$t % P N &a#ue and ' D Par( )**+

Paul Hague is founder and Managing irector of !2! "nternational. He is t#e aut#or of 12 $or%s on &ar%et researc#. raniel Par% is an econo&ist, specialising in 'usiness strateg and international &ar%eting. He is an ssociate *onsultant

of !2! "nternational and #as aut#ored o+er 30 pu'lications on aspects of international econo&ics and 'usiness.

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