Why You Must Measure Customer Satisfaction

The last phase of the service profit chain focuses on the linkage between customer satisfaction and loyalty and organizational growth and profit. Many executives (especially those in Finance) dismiss customer satisfaction as a “soft metric” that should not be considered in resource allocation or investment decisions. 

The reality is that there are many, many statistics that prove the linkage between customers satisfaction and profit/growth not only exists, but can be accurately measured and proactively managed. Here are some examples:

  • 78% of consumers have bailed on a transaction or not made an intended purchase because of a poor service experience. (Source: American Express)
  • On average, loyal customers are worth up to 10 times as much as their first purchase. (Source: White House Office of Consumer Affairs)
  • Probability of selling to a new prospect: 5% – 20%. Probability of selling to an existing customer: 60% – 70%. (Source: Marketing Metrics)
  • 3 in 5 Americans would try a new brand or company for a better service experience. (Source: American Express Survey)
  • 70% of buying experiences are based on how the customer feels they are being treated. (Source: McKinsey)

But simply measuring customer satisfaction is not enough. Using customer satisfaction as a metric to identify and address weakness in products, services, systems and processes is the only way to increase organizational profitability and growth. So if your company is one of those who conducts customer satisfaction measurement, but never uses it to drive action, here are six ways to use of customer satisfaction metrics more effectively:

  1. Identify ‘at risk’ customers who may be unhappy with your product/service and potentially going to cancel. Step in to address customer dissatisfaction – before they defect.
  2. Verify happy customers who become your advocates that can drive new business referrals and grow your business. Proactively ask for testimonials and referrals to grow your business.
  3. Identify trends to make better business decisions to improve the overall customer experience. Understanding customer satisfaction over time can tell you what types of actions and initiatives are most effective – for employees and customers.
  4. Use intelligence to proactively prevent problems happening again which leads to a better experience for customers. Not only do problems negatively impact the customer experience, they cost you money! Identify where problems exist and find ways to eliminate them.
  5. Hold employees accountable for the level of service they are delivering. We have written previously about the linkage between employee engagement and customer satisfaction.  By evaluating this relationship, employee actions can be linked to incentive plans.
  6. Encourage a ‘customer first’ culture within your company. A culture that embraces and commits to delivering excellent customer service can actually form a strong competitive advantage – and one that is not easy for your competitors to copy. As Kate Zabriskie, of Business Training Works, said “Although your customers won’t love you if you give bad service, your competitors will.”

Customer satisfaction and loyalty metrics are the lifeblood of successful businesses, large and small. To make the most out of the Service Profit Chain, in addition to your operational and financial measurements, you must measure customer satisfaction in a way that links to your employee engagement metrics. By closing the loop with these measurement programs, you are well positioned to grow your business.

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