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Table of Contents
CHAPTER 1: 10 FACTORS THAT AFFECT CUSTOMER SATISFACTION……………………………………………….…..2
CHAPTER 2: GPS FOR BUSINESS SUCCESS……………….………………………..……………………….……………….….…..6
CHAPTER 3: HOW TO AVOID DESTRUCTION…………………………..………………………………………….…....……...10
CHAPTER 4: HOW TO EXPERIENCE BUSINESS GROWTH IN TOUGH ECONOMIC TIMES……………………..14
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CHAPTER 1: 10 FACTORS THAT AFFECT CUSTOMER SATISFACTION
There’s more to customer satisfaction than customer service. The most pleasant experience with a person can’t make
up for bad food, faulty products or shipping delays. There are several factors – 10 of which are outlined here – that
influence a customer’s decision to return or move on.
The customer is always right, right? Well, that’s what the playbook for any successful business says. Satisfying
customers may seem like a no-brainer, but the methods and psychology behind securing a loyal following takes more
than discount coupons and free balloons.
There are many entry points when examining customer satisfaction–10 of which are discussed in this article.
But the jumping off point for customer satisfaction doesn’t start with the customer at all. It actually starts in-house,
with the employee.
“The single most important factor that affects customer satisfaction is employee satisfaction,” says Howard J. Ross,
president of a Maryland-based consulting firm. “Employees who feel satisfied and happy at their jobs naturally tend
to be more helpful and considerate toward customers. It’s simple logic. If I like my job and the company I work for,
I’m going to communicate to customers that we have a good product.”
Once the employees are in a company’s corner, if the following 10 areas are incorporated into a business plan, it will
be smooth sailing towards big financial returns from high customer satisfaction.
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Can’t Get No Satisfaction? Here are 10 Ways to Please the Customer
1. Quality is Never an Accident
If you have a lousy product or service, good luck selling it. There’s a reason the AMC Pacer and Chevy Vega
aren’t around anymore. No amount of aggressive PR or marketing can save a product or service that just plain
stinks.
2. Separation Anxiety
In any market, there’s usually more than one of the same products, perhaps dozens. Tide, Biz, Cheer, Gain.
The grocery store laundry aisle is stocked with laundry detergents, all seemingly the same product in a
different package. Customer service may not work when choosing detergent, but word of mouth certainly
plays into customer satisfaction. If a product is the best one among several identical products, then it’s
necessary to separate it from the rest, through marketing, customer service and good-old fashioned product
quality.
3. Access 2.0
No website? No contact information? No search engine optimization? No business, then. The age of the
Internet has made finding products and services a snap. What used to take minutes of flipping through a
phone book now takes seconds on the Web. Emailing and searching for products and services on the Internet
has become such a central reference point, companies have invested millions in making sure access is
extremely easy. Because, if it takes a Web surfer more than a few frustrating minutes to maneuver a site,
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they’re gone. Customers are satisfied when there are no barriers, or at the very least, limited barriers to
access a service. Remember the phrase, “banking hours?” The competition made the banks step up and stay
open later on weekdays and even open their doors on weekends. Work weekends? That’s something that
would have made the banking industry shudder 20 years ago.
4. At Face Value
When a product or service costs more, but is worth it, its value becomes acceptable to the consumer. When a
consumer always buys Nike, Sony or goes for the $100 massage over the $35 one, the positive features of the
products or service should outweigh the cost, creating a strong sense of good value.” I would happily pay
more if necessary to have great customer service,” said Barry L. Brown, President of a Florida-based consulting
firm. “Great customer service is rare these days. I drive 30 minutes to a particular location for a car wash and
oil change when there are several within five minutes of my house. The difference? Great customer service.”
5. A Nice Atmosphere
Ask any sensible person and they’ll tell you that given the same product or service, they would rather shop at
the place that offers a clean, safe and well-organized environment. Lowe’s knew this and capitalized on it
when going up against hardware’s 2,000-pound gorilla, Home Depot. The North Carolina chain carried out
extensive customer research and discovered that women initiate 80% of home-improvement decisions. So
Lowe’s decided to do what Home Depot wasn’t doing, make its stores brighter, cleaner and more shopper-
friendly. When you need a power drill that’s the same brand and the same price, the store that’s
psychologically more inviting will win out every time. That’s why Lowe’s now has 1,375 stores in 49 states, and
ranks 42nd on the Fortune 500 list.
6. The Waiting Game
When it takes 20 minutes to get your Bloomin’ Onion at Outback, or the Christmas Amazon delivery comes on
Dec. 27, the timing aspect of customer satisfaction is shot. When products and services miss their delivery
milestones, customers start to see red. If they’re waiting at the restaurant, they tend to think there’s not
enough staff working. If their products are late in the mail, then someone mishandled their order. Excuses
don’t fly when customers are counting on a service. One example is the dreaded time window. When the
cable/repair guy says he will be there between 9 and 1, and doesn’t show, that tends to boil the blood of any
customer. In a society that demands instant results for everything from food to foreign policy, a good business
has to keep the wait time to a minimum.
7. The one “R”: Responsibility
A company has a commitment to tell the truth. Hiding facts, figures and excessive small print doesn’t go far
when it comes to customer satisfaction. If a company doesn’t stand by its product, or hassles the customer
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when a refund or exchange is in order, that will stick. When something goes wrong with a product or service, if
the supplier goes above and beyond the call of duty in taking responsibility, the end result is often that the
customer is so impressed with the supplier’s response, it negates the original problem.
8. Hold On to What You’ve Got
Repetition when it comes to customers is a good thing. When a company keeps a customer, it’s more
profitable than finding a new one. As early as the 1980s, the American Consumer Association found that it was
five times more expensive to win a new customer than to keep an existing one. That’s a major windfall for
companies. Brands like Apple and Starbucks know that the stronger the bond customers have with their
products, the longer the relationship will last.
9. You’re in Good Hands, Hopefully
There’s a reason Allstate’s “You’re In Good Hands” slogan has worked for so long. Customers like to know that
a company cares. Corporations face a constant image problem, being portrayed as soulless fat cats interested
in squeezing out as much profit as possible. When oil companies, drug makers and insurers reap billions in
profits while consumers pay more and more for their products it makes people mad. Campaigns to show that
the company cares are critical to keep customers satisfied. When customers are informed, and feel that their
opinion matters, they are more satisfied.
10. Tech Isn’t Just for Geeks
Technology means more than a fancy Flash website. In order to satisfy customers, companies have to keep up
with the latest technological advances or suffer the consequences. Change is never easy, but business as usual
isn’t a viable alternative anymore. Technology can help small and mid-size companies look like big companies
by improving the quality of the purchasing experience without adding staff to the payroll.
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CHAPTER 2: A GPS FOR BUSINESS SUCCESS
Have you ever been lost or unsure of which direction to take? In today’s technologically savvy world, we are less likely
to find ourselves in this situation. We have cellular phones on which we can call and ask for directions or log on to the
Internet and look up our destination on a map. Many vehicles are now equipped with a Global Positioning System
(GPS) that takes the guesswork out of finding our destination. We simply enter the address of the place we want to go
and follow the verbal prompts of the computer. If we fail to obey the prompts, the system will announce
“recalculating” and begin to give us new directions. The only way it could get any easier is if the GPS would drive the
vehicle for us
Wouldn’t it be great if we had a GPS for business success? If it existed, what kind of information would such a system
provide? In an article published in the Journal of Service Research, Gary W. Loveman provides empirical evidence of
the service profit chain in a retail setting.
The service profit chain is a conceptual framework that links employee satisfaction and loyalty, customer satisfaction
and loyalty, and financial performance. This model has been widely used by practitioners however, prior to Loveman’s
research it had not been rigorously tested by using data that spanned all of the components in the model. Loveman’s
study provided this rigorous testing and found support for the service profit chain model. Since the financial success
of any business depends on people, specifically employees and customers, a GPS for business success should give us
vital information about these two groups.
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Of course, Loveman’s findings represent only one study and in science we know that one study is never the final word
on anything. Just as we would not want to try an experimental drug that had only been tested on one small group of
people, we should be skeptical of any research findings that have not been replicated. So let’s look at a few other
studies regarding the importance of employees and customers.
While many studies have examined the relationship between job satisfaction, job attitudes, and job performance, few
studies have investigated these relationships at an organizational level of analysis. One such groundbreaking study
was conducted by C. Ostroff and published in the Journal of Applied Psychology. In this study Ostroff investigated the
relationship between employee satisfaction, other job-related attitudes (commitment, adjustment, and psychological
stress), and organizational performance. Organizational performance data were collected from almost 300
businesses; and employee satisfaction and attitude data were collected from 13,808 employees within these
businesses. The data confirmed Ostroff’s hypothesis that employee satisfaction and attitudes have a strong impact on
organizational performance, thus providing evidence that employee attitudes do affect the bottom line.
Customer attitudes are equally vital to business success. The average business loses between 10 and 30 percent of its
customers each year.
Nigel Hill and Jim Alexander in their Handbook of Customer Satisfaction and Loyalty Measurement, Second Edition,
state that often businesses do not know which customers they have lost, when they were lost, why they were lost, or
how much sales revenue and profit this customer decay has cost them.
Their research has revealed that many of these companies do not even worry about the customers they are losing,
but rather place more emphasis on winning new customers.
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The authors compare such companies to a bucket with a hole in the bottom: their customers drain away but the
company managers, instead of concentrating on fixing the hole, devote resources to pouring more and more new
customers into the top.
Dissatisfaction is a fundamental reason for customer decay, but to address the problem you have to know why
customers are dissatisfied. Specifically, you need knowledge of the service quality gap. This is the difference between
customers’ expectations of a service and their perceptions of the actual service delivered by the organization. You
also need to know what contributes to the satisfaction of your existing customers in order to keep them. Research
has demonstrated that it is much more costly to win one new customer than it is to keep an existing customer. Now
back to the question posed earlier:
Q: “Wouldn’t it be great if we had a GPS for business success?”
A: Yes, and it does exist!
It exists in the form of research. Just as navigational methods have evolved over time, research and statistical
methods have evolved over time and today they can be used to clearly mark the path to business success. Several
decades ago, we did not have cellular phones and GPS devices to help us find our way. We had to rely on getting
directions ahead of time, either from a person or by studying a map. If we got lost along the way, we had to stop and
ask for directions or use a pay phone (remember those?) to call someone for assistance. Alternatively, we could
continue driving aimlessly about hoping to find our destination by happenstance. Similarly, there was a time when
research methods and statistical techniques were quite primitive compared to the methods available today. Scientists
relied heavily on observations and simple correlational techniques. We could determine if two phenomenons were
related but determining exactly how they were related was a different matter.
The research methods and statistical techniques available today have tremendous predictive power and can be used
as a GPS for business success. These techniques allow organizational psychologists to identify the drivers of your
employee’s and customer’s perceptions. This knowledge equals power. Once these drivers have been identified, you
have clear directions regarding the road you should take to success. Let’s look at how one private club has used
customer surveys to develop customer perceptions well above the national average and to operate a successful
business. A few years ago, a private club with a coastal location, hired the National Business Research Institute (NBRI)
to begin conducting research on their very elite customer base.
The management of this club was keenly cognizant of the importance of keeping their customers satisfied in order to
decrease costs related to customer loss and the recruitment of new customers. NBRI developed a comprehensive
customer survey to identify customer perceptions regarding the many products and services provided by the club
including their inn and vacation rentals, marina facilities, restaurants, banquet and catering services, gift shop, golf
operations, salon and spa, and many others.
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When the most recent customer survey results were analyzed, this private club was provided with a topic analysis of
the 29 topics their survey addressed. The analysis identified topics as either Best in Class, Strengths, Opportunities,
Weaknesses, or Threats. A topic is considered Best in Class if it scores at or above the 90th percentile when compared
to benchmarking data. The benchmarking data collected and used for comparison by NBRI includes billions of
responses.
The score for a topic is considered a Strength if it is at the 75th percentile up to the 89th percentile, and an
Opportunity if it scores between the 50th and 74th percentiles, inclusive. Weaknesses include scores between the
25th and 49th percentiles and Threats fall from the 1st to 24th percentiles, inclusive. The club management was
pleased to learn their surveying efforts over the past few years were paying off and that none of their topics scored in
the Weakness or Threat ranges. Nine of the topics in the club’s survey scored in the Strengths category and 20 in the
Opportunities category meaning that every single topic scored above the national average, which falls at the 50th
percentile.
While these results are very good, they could be better. The club did not have any topics scoring in the Best in Class
category. In addition, the club management would like to see many of the topics move from the Opportunities
category to the Strengths category by the end of the next survey period.
Q: So how do they accomplish this?
A: Rely on their GPS!
Fortunately, the club management was provided with a list of drivers of their customer perceptions on two important
items: Overall Guest Satisfaction and Intent to Return. These two items are the keys to business success. The NBRI
analysis revealed two drivers for each of these items. For Overall Guest Satisfaction the two drivers were the
customers’ overall satisfaction with the club’s restaurants and their perceived value of their membership relative to
the cost of their membership and/or dues. The two drivers of Intent to Return included the customer’s perceptions of
the professionalism of the club’s management and their perceptions regarding the overall friendliness and
helpfulness of the club’s staff. The club management now has a clear path to continued improvement and success.
They need only to take action to improve customer perceptions on those four items and they will see improvement in
a majority of the items on their next survey. However, just as we have to heed the instructions of our vehicle’s GPS
system to get to our destination, it is vital that the management at this club take quick action to address these drivers
in order to see improvement in their next survey cycle. Just as the GPS will not drive the vehicle for us (at least not
yet!), knowing the drivers will not help this club improve its scores if they do not take action to improve customer
perceptions.
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CHAPTER 3: HOW TO AVOID DESTRUCTION
In Irving, Texas on April 7, 2010, Texas Stadium, home of the Dallas Cowboys for 38 seasons, was destroyed. More
than 20,000 people came to watch the implosion that demolished the stadium. Many more watched on television and
online. The Cowboys moved to their new state-of-the-art facility in Arlington, Texas after the 2008 season. After their
move, Irving officials decided that the land the stadium sat on was more valuable than the stadium itself and the
decision was made to tear Texas Stadium down. While many fans were saddened by its demise, the fact was that the
stadium no longer met the needs of consumers so it was destroyed and the fans, like the players, have moved on.
Moving on is a part of life. Every day people discard and destroy objects that are no longer meeting their needs;
things that have outlived their usefulness. Our possessions are not the only things vulnerable to being discarded or
destroyed; businesses are at risk as well. If enough of our customers perceive that the products or services we
provide are not meeting their needs, they will turn elsewhere and we can find ourselves in an inescapable position. Of
course, this is something we all want to avoid and the good news is that it is not difficult to determine whether our
customers believe we are adequately meeting their needs. Through customer surveys, we can gain information about
what our customers want and also discover the key drivers of their behavior.
Frederick Reichheld, in an article published in the Harvard Business Review, stated that on average, companies in the
United States lose approximately half of their customers every five years. Unfortunately, many businesses do not
have insight into why these customers leave. In a way, some executives do not want to know because it can be
unpleasant to study failure. Some companies simply aren’t concerned about customer dissatisfaction, or they become
concerned too late, because they do not understand the causal relationship between customer loyalty and profits.
Some executives realize that being knowledgeable about customer dissatisfaction and defection is important, but
they mistakenly believe that it is extremely difficult to reveal the root causes of customer behavior. Other executives
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find it problematic to conceptualize and set up a system for analyzing customer perceptions as part of an ongoing
strategic system.
This lack of knowledge of customer perceptions is a crucial problem because it is a direct cause of diminishing cash
flow from customers. Even if lost customers are replaced, it costs money to acquire new customers and they do not
produce as much profit as older customers. Customers are worth more to a business the longer they stay because
long-term customers tend to buy more, bring in new customers, are less sensitive to price, and take less of a
company’s time. Decreasing customer defections by as little as five points per year has doubled profits in some
industries.
Becoming aware of customer perceptions and making a significant decrease in customer defections are attainable
goals as evidenced by Deere & Company (makers of John Deere tractors) and USAA, an insurance and financial
services company. Deere & Company uses retired employees to interview defectors and customers. They have
attained a customer loyalty rate of almost 98% in some product areas! Of all the companies in the United States,
USAA has come the closest to eliminating customer defections. Most of the customers they lose are due to people
who die! The company treats customer defection very seriously and has an ongoing system in place to
prevent customer loss.
Most CEOs believe that customer loyalty is important and would prefer to have loyal customers, but many do not
perform the calculations to determine just how much a loyal customer is worth over the customer life cycle. Without
information on the net present value of the company’s present customer base, numerous CEOs judge the company’s
performance on the basis of cash flow and profit. Some CEOs rarely study the only statistic that indicates how much
real value the company is creating and the only statistic with predictive power: customer intent to return. Reichheld
asserts that discovering the root causes of customer behavior can help companies identify business practices that
need changing, enabling them to retain more customers.
What keeps customers coming back? One key to our customer’s intent to return is their perceived value of our
product or service. Many businesses fail because they spend too much time studying profit margins and not enough
time measuring customer’s perceived value. When this approach is taken, CEOs become aware of problems only after
profits start to fall. Once profits begin to decrease, the focus becomes the symptom rather than the underlying
problem: the breakdown in perceived value.
Q: So, where do you start if you want to put a system in place to learn about customer perceptions and prevent
customer defection?
A: Find a consulting firm to do the work for you.
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While it is possible to have an in-house system for customer surveys, it is not cost effective unless you already have
employees trained at the doctoral level in organizational behavior, research methodology, and statistics. I
recommend that you hire an experienced firm (one that has been around for at least 20 years) with research
associates and statisticians trained at the doctoral level. In addition, the firm should provide benchmarking and root
cause analyses. Look for a firm that has a benchmarking database of at least several million scores and one that will
provide root cause analyses of both customer satisfaction and intent to return.
To see how the survey process can provide the information needed to prevent customer loss, let’s look at the process
in a case study. Recently, a healthcare communications company retained the services of the National Business
Research Institute (NBRI), a business research firm, to conduct their customer surveys, analyze the data, and provide
benchmarking statistics. Once the company decided on the topics they wanted to include in their instrument, the
survey was deployed by the research firm. In just 16 days the firm was able to collect data from nearly 17,500
customers. After the data collection period ended, the research firm conducted the data analyses and benchmarking
and presented the findings to the communications company.
The first score provided to the healthcare communications company was an overall performance score. This
benchmarked score compares an individual company’s overall score with the average for their industry and is
reported by percentile ranking. Each industry’s average is at the 50th percentile. Scores falling between the 75th and
89th percentiles are rated as “stretch performance” and scores at the 90th percentile and above are rated as “best in
class.” The communications company had an overall performance score at the 63rd percentile, putting them 13
percentiles above the industry average.
The survey report also provided analyses by each survey topic and each survey item. Topics and individual items are
also benchmarked with other companies in the industry and given a percentile ranking. A ranking from the 75th to
100th percentiles is a “strength;” from the 50th to the 74th is an “opportunity;” from the 25th to the 49th is a
“weakness;” and rankings between the first and 24th percentiles are “threats.” The survey for the healthcare
communications company included 13 topics. Only one ranked in the “strengths” category, nine ranked as
“opportunities” and three ranked as weaknesses. Those topics ranking as weaknesses included control systems,
product delivery, and customer service.
The 13 topics were measured by 29 individual items. Three items ranked as “strengths,” 19 as “opportunities” and
seven as weaknesses. The seven items scoring as weaknesses were:
1. The company’s customer service representatives resolve my issues in a timely manner.
2. The company’s customer service representatives understand customer needs.
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3. The company’s hours of operation are satisfactory.
4. The company improves my office’s referral/pre-certification process.
5. I am able to speak to a customer service representative when I need assistance.
6. I would recommend the company to others.|
7. The company’s customer service representatives are courteous.
With seven weaknesses, where do you begin? It is obvious that there are issues with customer service since half of
the weaknesses are related to it, but just because these items scored as weaknesses does not mean they are driving
customer behavior. While some research firms do not provide any information beyond topic and item scores, NBRI
provided the communications company with a root cause analysis for intent to return. The root cause analysis
identified just two items that were driving customer intent to return. These items were:
• The company has improved staff satisfaction at my office.
• I can easily find help on the company’s website when I need it.
Notice that these items are different from the items that ranked as weaknesses. Taking action to attempt to improve
weaknesses will not necessarily improve customer perceptions and prevent loss. The key drivers of customer
perceptions must be addressed and in this case, makes the task of improving perceptions much easier. Improving
customer perceptions on just these two items (rather than the seven that scored as weaknesses), will impact
numerous other survey items in a positive way and will help the company retain valuable customers.
In order to benefit from customer surveys, a company must commit to make surveying an ongoing process. Customer
behavior is dynamic and if customers are not surveyed often you will not have the knowledge you need to prevent
loss. At a bare minimum, I recommend surveying customers at least once a year, but quarterly is even better. Some
companies make it an ongoing process and continuously collect data from customers. The cost of surveying pays for
itself many times over via the increased profits from customer loyalty.
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CHAPTER 4: HOW TO EXPERIENCE BUSINESS GROWTH IN TOUGH ECONOMIC TIMES
I live in an area of the country that compared to some regions, experiences fairly mild winters. Our winters are mild,
not nonexistent. We experience below freezing temperatures and lawns, trees, and other outdoor plants go dormant.
I happen to love roses and enjoy the long blooming season here. My roses usually begin blooming in March and
continue to bloom until early December.
As I am writing this paper it is winter. The thermometer has already dipped below the freezing mark and all plant life
is dormant…almost. Recently I was in my yard and I happened to glance at one of my rose bushes expecting to see
nothing but dead leaves and spent blooms. Instead, much to my surprise, I saw life…several clusters of tiny new
leaves were growing on that rose bush…in the winter! That rose bush has overcome the odds. In spite of cold
temperatures and a lack of any attention from me, it is growing.
We are all keenly aware of the difficult economic times we are currently living in. It seems that every week or so we
hear about a company closing its doors for good; another one is filing bankruptcy; massive layoffs at another. I have
spoken to many people who have experienced drastic downturns in their businesses. In spite of all this, there are also
businesses that are actually still growing. Just like my rose bush, in spite of difficult conditions, against all odds “new
leaves” are sprouting. How is this possible?
A study published in Strategy and Leadership addressed this issue. The study examined the tools used by
management for the purpose of making headway in tough financial times. Findings revealed a clear bias toward
growth over cost cutting indicating that moving ahead, not retrenching, is critical to control a company’s destiny.
Unfortunately, unlike my rose bush, our businesses will not thrive if we do not take action.
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Among the tools used by most (more than 75%) of the managers in the study were surveying and benchmarking.
Recently a vice president of marketing told one of my colleagues that although his company was cutting back on some
expenses, eliminating their surveys has not even been mentioned, much less discussed. This VP realizes that
employee and customer surveys are vital to business survival and growth during difficult economic times.
Business growth is possible even in tough economic times if you have knowledge of the drivers of employee and
customer behavior. You need to know what influences their perceptions, attitudes, and behaviors in order to be
successful. It is imperative to be knowledgeable of both employees and customers because the attitudes and
behaviors of your employees affect the perceptions, attitudes, and behaviors of customers. Think about some of the
organizations you have done business with recently. Most likely you have interacted with employees with good
attitudes and others with bad attitudes. Some were probably very eager to be helpful, others may have ignored you.
Which type of employee makes you want to conduct further business with those companies?
The relationship between employees, customers, and profits is no secret. A recent article in the Harvard Business
Review discussed how a major retailer went from experiencing big losses (a net loss of $3.9 billion in one year) to big
profits (a net income of $752 million) in just one year by making a strategic shift to a business model that tracked
employee attitudes to customer satisfaction and financial performance, an employee-customer-profit model. This
retailer began an ongoing process of data collection, modeling, and experimentation in order to obtain knowledge
about employee and customer attitudes.
The retailer hired statisticians to analyze the data collected from employees, customers, and financial records in order
to identify drivers of perceptions and behaviors and to investigate whether these were directly related to profits –
they were. Not only has this strategy of continuous survey research enabled this retailer to go from big losses to big
profits, but it has also enabled them to experience an increase in customer satisfaction during a period in which
independent surveys showed that national retail customer satisfaction had fallen for several consecutive years.
During that period not only did this retailer’s customer satisfaction increase by almost 4%, but employee satisfaction
rose by 4% as well. This may sound like an insignificant increase; however, statistical analyses indicated this small
increase in satisfaction translated into more than $200 million in additional revenues during a 12-month period!
How can we know what truly drives the behavior of our employees and customers? Learning about their attitudes
and perceptions is the first step.
It is important to know the right questions to ask because many of our cognitive processes occur on an unconscious
level. Thus, we do not always know ourselves what drives our own behavior. Take a piece of art, for example. We may
look at a painting and have an immediate positive or negative reaction to it. But when asked to describe what we like
or dislike about it, some will find they just can’t answer that question. We may also experience this when judging food
or beverages; we may know what we do and do not like, but the explanation of why we like or dislike it may elude us.
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Thus, survey design is very important. An article by Valarie A. Zeithaml, published in the Journal of the Academy of
Marketing Science, emphasizes this point. If you know the right questions to ask, statistical analyses can tell you what
employees and customers cannot; the actual drivers of their behavior; that is, what makes them “tick.” Let’s look at a
couple of case studies of companies from two industries that are applying survey research and statistical analyses to
thrive in difficult economic times.
The first company is in the financial services industry and has been conducting employee surveys for years. A business
research firm, The National Business Research Institute, Inc. (NBRI) has been deploying and analyzing their surveys as
well as benchmarking them against other companies in their industry. The benchmarking provides this financial
services firm with precise knowledge of how their employee’s responses compare with a national average, which is
set at the 50th percentile.
Obviously, no company strives to be average. We would all like for our company’s performance to be above average.
Not only is this financial company well above the national average (ranking above the 75th percentile), but for each of
the last several surveys, they have steadily increased their overall rating. In addition to increases in their overall
ratings, they have also seen numerous positive trends in survey topics including job satisfaction, benefits, and
communications. During a time when many financial institutions are seeking a government bailout, this company is
experiencing a steady improvement in employee perceptions as well as profits. How is this possible? One important
factor contributing to their success is that this institution is knowledgeable about the drivers of their employee’s
behaviors.
In their most recent survey, a Root Cause Analysis (RCA) identified three survey items that were influencing employee
perceptions and attitudes and driving 62% of the items on the survey. The primary driver identified was, “My
supervisor is an effective communicator.” This item was driving 26% of the survey items. The secondary root cause,
driving 23% of the survey items was, “Corporate executive management values the company’s employees.” Driving
13% of the survey items was the tertiary root cause, “Major divisions of the company work well together.” Now that
this company has knowledge of the root causes driving employee perceptions and attitudes, they can take action to
improve perceptions in these areas. By so doing, they will increase scores on over half of their survey items; an
increase that influences customer perceptions and leads to higher profits. As previously mentioned, action is
necessary. If you survey your employees but do not take action to improve perceptions, employee perceptions are
likely to become more negative rather than more positive. Action should also be taken quickly. Behavior is dynamic; it
is always changing. If you sit on survey results for 18 months, the identified drivers will be out of date and any action
taken based on those results is unlikely to bring about the desired outcome. This financial services company has a
history of taking quick action based on survey results and they are reaping the rewards.
The second case study involves a company in the hospitality and gaming industry. This company also utilized NBRI for
their survey deployment, benchmarking, and root cause analyses. For most of us, when we begin to feel the effects of
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a downturn in the economy, optional expenditures are the first to go. For example, many people cut back on
entertainment expenses. This presents a challenge for those in the gaming industry. However, this particular
company has remained profitable and experienced steady increases in overall guest satisfaction and intent to return.
Over the last year, overall guest satisfaction has increased by 8 percentiles and intent to return has increased by 10
percentiles. In the second quarter of last year, NBRI identified three drivers of overall guest satisfaction including:
Overall impression of the service at the casino, a good mix of slot denominations, and overall cleanliness of the
casino. The company took quick action to improve perceptions of these items and all showed improvement on the
survey conducted in the third quarter. The second quarter survey also identified four drivers of intent to return.
These drivers were all unique from those driving overall satisfaction. They included: cleanliness of the hotel rooms,
wait time for service from cocktail servers, wait time for service from bell staff, and wait time for service at one of the
hotel’s cafes. While one item showed no change in ranking on the third quarter survey, the remaining three items all
showed an increase in ranking due to the action taken as a result of the research findings. This company can expect
continued improvement in survey scores, as well as continued financial growth, as long as they continue to take
action to improve the survey items driving their customer’s perceptions.
Looking at the results seen by the companies discussed in this paper, the keys to experiencing business growth in
tough economic times are no mystery. They include:
1. Survey both employees and customers for maximum results;
2. Utilize benchmarking: this enables you to know how you compare to other companies in your industry and
allows you to track improvements;
3. Conduct root cause analyses to identify the drivers of your employees’ and customers’ perceptions and
behaviors;
4. Take action on your survey results aimed at improving perceptions of these drivers;
5. Regularly repeat the cycle to measure improvement and identify new drivers.
Employing these steps on a continual cycle will provide the impetus your company needs to not only survive, but
thrive in tough economic times.
10 Factors That Improve Customer Satisfaction E-Book

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10 Factors That Improve Customer Satisfaction E-Book

  • 1.
  • 2. Table of Contents CHAPTER 1: 10 FACTORS THAT AFFECT CUSTOMER SATISFACTION……………………………………………….…..2 CHAPTER 2: GPS FOR BUSINESS SUCCESS……………….………………………..……………………….……………….….…..6 CHAPTER 3: HOW TO AVOID DESTRUCTION…………………………..………………………………………….…....……...10 CHAPTER 4: HOW TO EXPERIENCE BUSINESS GROWTH IN TOUGH ECONOMIC TIMES……………………..14
  • 3. 2 CHAPTER 1: 10 FACTORS THAT AFFECT CUSTOMER SATISFACTION There’s more to customer satisfaction than customer service. The most pleasant experience with a person can’t make up for bad food, faulty products or shipping delays. There are several factors – 10 of which are outlined here – that influence a customer’s decision to return or move on. The customer is always right, right? Well, that’s what the playbook for any successful business says. Satisfying customers may seem like a no-brainer, but the methods and psychology behind securing a loyal following takes more than discount coupons and free balloons. There are many entry points when examining customer satisfaction–10 of which are discussed in this article. But the jumping off point for customer satisfaction doesn’t start with the customer at all. It actually starts in-house, with the employee. “The single most important factor that affects customer satisfaction is employee satisfaction,” says Howard J. Ross, president of a Maryland-based consulting firm. “Employees who feel satisfied and happy at their jobs naturally tend to be more helpful and considerate toward customers. It’s simple logic. If I like my job and the company I work for, I’m going to communicate to customers that we have a good product.” Once the employees are in a company’s corner, if the following 10 areas are incorporated into a business plan, it will be smooth sailing towards big financial returns from high customer satisfaction.
  • 4. 3 Can’t Get No Satisfaction? Here are 10 Ways to Please the Customer 1. Quality is Never an Accident If you have a lousy product or service, good luck selling it. There’s a reason the AMC Pacer and Chevy Vega aren’t around anymore. No amount of aggressive PR or marketing can save a product or service that just plain stinks. 2. Separation Anxiety In any market, there’s usually more than one of the same products, perhaps dozens. Tide, Biz, Cheer, Gain. The grocery store laundry aisle is stocked with laundry detergents, all seemingly the same product in a different package. Customer service may not work when choosing detergent, but word of mouth certainly plays into customer satisfaction. If a product is the best one among several identical products, then it’s necessary to separate it from the rest, through marketing, customer service and good-old fashioned product quality. 3. Access 2.0 No website? No contact information? No search engine optimization? No business, then. The age of the Internet has made finding products and services a snap. What used to take minutes of flipping through a phone book now takes seconds on the Web. Emailing and searching for products and services on the Internet has become such a central reference point, companies have invested millions in making sure access is extremely easy. Because, if it takes a Web surfer more than a few frustrating minutes to maneuver a site,
  • 5. 4 they’re gone. Customers are satisfied when there are no barriers, or at the very least, limited barriers to access a service. Remember the phrase, “banking hours?” The competition made the banks step up and stay open later on weekdays and even open their doors on weekends. Work weekends? That’s something that would have made the banking industry shudder 20 years ago. 4. At Face Value When a product or service costs more, but is worth it, its value becomes acceptable to the consumer. When a consumer always buys Nike, Sony or goes for the $100 massage over the $35 one, the positive features of the products or service should outweigh the cost, creating a strong sense of good value.” I would happily pay more if necessary to have great customer service,” said Barry L. Brown, President of a Florida-based consulting firm. “Great customer service is rare these days. I drive 30 minutes to a particular location for a car wash and oil change when there are several within five minutes of my house. The difference? Great customer service.” 5. A Nice Atmosphere Ask any sensible person and they’ll tell you that given the same product or service, they would rather shop at the place that offers a clean, safe and well-organized environment. Lowe’s knew this and capitalized on it when going up against hardware’s 2,000-pound gorilla, Home Depot. The North Carolina chain carried out extensive customer research and discovered that women initiate 80% of home-improvement decisions. So Lowe’s decided to do what Home Depot wasn’t doing, make its stores brighter, cleaner and more shopper- friendly. When you need a power drill that’s the same brand and the same price, the store that’s psychologically more inviting will win out every time. That’s why Lowe’s now has 1,375 stores in 49 states, and ranks 42nd on the Fortune 500 list. 6. The Waiting Game When it takes 20 minutes to get your Bloomin’ Onion at Outback, or the Christmas Amazon delivery comes on Dec. 27, the timing aspect of customer satisfaction is shot. When products and services miss their delivery milestones, customers start to see red. If they’re waiting at the restaurant, they tend to think there’s not enough staff working. If their products are late in the mail, then someone mishandled their order. Excuses don’t fly when customers are counting on a service. One example is the dreaded time window. When the cable/repair guy says he will be there between 9 and 1, and doesn’t show, that tends to boil the blood of any customer. In a society that demands instant results for everything from food to foreign policy, a good business has to keep the wait time to a minimum. 7. The one “R”: Responsibility A company has a commitment to tell the truth. Hiding facts, figures and excessive small print doesn’t go far when it comes to customer satisfaction. If a company doesn’t stand by its product, or hassles the customer
  • 6. 5 when a refund or exchange is in order, that will stick. When something goes wrong with a product or service, if the supplier goes above and beyond the call of duty in taking responsibility, the end result is often that the customer is so impressed with the supplier’s response, it negates the original problem. 8. Hold On to What You’ve Got Repetition when it comes to customers is a good thing. When a company keeps a customer, it’s more profitable than finding a new one. As early as the 1980s, the American Consumer Association found that it was five times more expensive to win a new customer than to keep an existing one. That’s a major windfall for companies. Brands like Apple and Starbucks know that the stronger the bond customers have with their products, the longer the relationship will last. 9. You’re in Good Hands, Hopefully There’s a reason Allstate’s “You’re In Good Hands” slogan has worked for so long. Customers like to know that a company cares. Corporations face a constant image problem, being portrayed as soulless fat cats interested in squeezing out as much profit as possible. When oil companies, drug makers and insurers reap billions in profits while consumers pay more and more for their products it makes people mad. Campaigns to show that the company cares are critical to keep customers satisfied. When customers are informed, and feel that their opinion matters, they are more satisfied. 10. Tech Isn’t Just for Geeks Technology means more than a fancy Flash website. In order to satisfy customers, companies have to keep up with the latest technological advances or suffer the consequences. Change is never easy, but business as usual isn’t a viable alternative anymore. Technology can help small and mid-size companies look like big companies by improving the quality of the purchasing experience without adding staff to the payroll.
  • 7. 6 CHAPTER 2: A GPS FOR BUSINESS SUCCESS Have you ever been lost or unsure of which direction to take? In today’s technologically savvy world, we are less likely to find ourselves in this situation. We have cellular phones on which we can call and ask for directions or log on to the Internet and look up our destination on a map. Many vehicles are now equipped with a Global Positioning System (GPS) that takes the guesswork out of finding our destination. We simply enter the address of the place we want to go and follow the verbal prompts of the computer. If we fail to obey the prompts, the system will announce “recalculating” and begin to give us new directions. The only way it could get any easier is if the GPS would drive the vehicle for us Wouldn’t it be great if we had a GPS for business success? If it existed, what kind of information would such a system provide? In an article published in the Journal of Service Research, Gary W. Loveman provides empirical evidence of the service profit chain in a retail setting. The service profit chain is a conceptual framework that links employee satisfaction and loyalty, customer satisfaction and loyalty, and financial performance. This model has been widely used by practitioners however, prior to Loveman’s research it had not been rigorously tested by using data that spanned all of the components in the model. Loveman’s study provided this rigorous testing and found support for the service profit chain model. Since the financial success of any business depends on people, specifically employees and customers, a GPS for business success should give us vital information about these two groups.
  • 8. 7 Of course, Loveman’s findings represent only one study and in science we know that one study is never the final word on anything. Just as we would not want to try an experimental drug that had only been tested on one small group of people, we should be skeptical of any research findings that have not been replicated. So let’s look at a few other studies regarding the importance of employees and customers. While many studies have examined the relationship between job satisfaction, job attitudes, and job performance, few studies have investigated these relationships at an organizational level of analysis. One such groundbreaking study was conducted by C. Ostroff and published in the Journal of Applied Psychology. In this study Ostroff investigated the relationship between employee satisfaction, other job-related attitudes (commitment, adjustment, and psychological stress), and organizational performance. Organizational performance data were collected from almost 300 businesses; and employee satisfaction and attitude data were collected from 13,808 employees within these businesses. The data confirmed Ostroff’s hypothesis that employee satisfaction and attitudes have a strong impact on organizational performance, thus providing evidence that employee attitudes do affect the bottom line. Customer attitudes are equally vital to business success. The average business loses between 10 and 30 percent of its customers each year. Nigel Hill and Jim Alexander in their Handbook of Customer Satisfaction and Loyalty Measurement, Second Edition, state that often businesses do not know which customers they have lost, when they were lost, why they were lost, or how much sales revenue and profit this customer decay has cost them. Their research has revealed that many of these companies do not even worry about the customers they are losing, but rather place more emphasis on winning new customers.
  • 9. 8 The authors compare such companies to a bucket with a hole in the bottom: their customers drain away but the company managers, instead of concentrating on fixing the hole, devote resources to pouring more and more new customers into the top. Dissatisfaction is a fundamental reason for customer decay, but to address the problem you have to know why customers are dissatisfied. Specifically, you need knowledge of the service quality gap. This is the difference between customers’ expectations of a service and their perceptions of the actual service delivered by the organization. You also need to know what contributes to the satisfaction of your existing customers in order to keep them. Research has demonstrated that it is much more costly to win one new customer than it is to keep an existing customer. Now back to the question posed earlier: Q: “Wouldn’t it be great if we had a GPS for business success?” A: Yes, and it does exist! It exists in the form of research. Just as navigational methods have evolved over time, research and statistical methods have evolved over time and today they can be used to clearly mark the path to business success. Several decades ago, we did not have cellular phones and GPS devices to help us find our way. We had to rely on getting directions ahead of time, either from a person or by studying a map. If we got lost along the way, we had to stop and ask for directions or use a pay phone (remember those?) to call someone for assistance. Alternatively, we could continue driving aimlessly about hoping to find our destination by happenstance. Similarly, there was a time when research methods and statistical techniques were quite primitive compared to the methods available today. Scientists relied heavily on observations and simple correlational techniques. We could determine if two phenomenons were related but determining exactly how they were related was a different matter. The research methods and statistical techniques available today have tremendous predictive power and can be used as a GPS for business success. These techniques allow organizational psychologists to identify the drivers of your employee’s and customer’s perceptions. This knowledge equals power. Once these drivers have been identified, you have clear directions regarding the road you should take to success. Let’s look at how one private club has used customer surveys to develop customer perceptions well above the national average and to operate a successful business. A few years ago, a private club with a coastal location, hired the National Business Research Institute (NBRI) to begin conducting research on their very elite customer base. The management of this club was keenly cognizant of the importance of keeping their customers satisfied in order to decrease costs related to customer loss and the recruitment of new customers. NBRI developed a comprehensive customer survey to identify customer perceptions regarding the many products and services provided by the club including their inn and vacation rentals, marina facilities, restaurants, banquet and catering services, gift shop, golf operations, salon and spa, and many others.
  • 10. 9 When the most recent customer survey results were analyzed, this private club was provided with a topic analysis of the 29 topics their survey addressed. The analysis identified topics as either Best in Class, Strengths, Opportunities, Weaknesses, or Threats. A topic is considered Best in Class if it scores at or above the 90th percentile when compared to benchmarking data. The benchmarking data collected and used for comparison by NBRI includes billions of responses. The score for a topic is considered a Strength if it is at the 75th percentile up to the 89th percentile, and an Opportunity if it scores between the 50th and 74th percentiles, inclusive. Weaknesses include scores between the 25th and 49th percentiles and Threats fall from the 1st to 24th percentiles, inclusive. The club management was pleased to learn their surveying efforts over the past few years were paying off and that none of their topics scored in the Weakness or Threat ranges. Nine of the topics in the club’s survey scored in the Strengths category and 20 in the Opportunities category meaning that every single topic scored above the national average, which falls at the 50th percentile. While these results are very good, they could be better. The club did not have any topics scoring in the Best in Class category. In addition, the club management would like to see many of the topics move from the Opportunities category to the Strengths category by the end of the next survey period. Q: So how do they accomplish this? A: Rely on their GPS! Fortunately, the club management was provided with a list of drivers of their customer perceptions on two important items: Overall Guest Satisfaction and Intent to Return. These two items are the keys to business success. The NBRI analysis revealed two drivers for each of these items. For Overall Guest Satisfaction the two drivers were the customers’ overall satisfaction with the club’s restaurants and their perceived value of their membership relative to the cost of their membership and/or dues. The two drivers of Intent to Return included the customer’s perceptions of the professionalism of the club’s management and their perceptions regarding the overall friendliness and helpfulness of the club’s staff. The club management now has a clear path to continued improvement and success. They need only to take action to improve customer perceptions on those four items and they will see improvement in a majority of the items on their next survey. However, just as we have to heed the instructions of our vehicle’s GPS system to get to our destination, it is vital that the management at this club take quick action to address these drivers in order to see improvement in their next survey cycle. Just as the GPS will not drive the vehicle for us (at least not yet!), knowing the drivers will not help this club improve its scores if they do not take action to improve customer perceptions.
  • 11. 10 CHAPTER 3: HOW TO AVOID DESTRUCTION In Irving, Texas on April 7, 2010, Texas Stadium, home of the Dallas Cowboys for 38 seasons, was destroyed. More than 20,000 people came to watch the implosion that demolished the stadium. Many more watched on television and online. The Cowboys moved to their new state-of-the-art facility in Arlington, Texas after the 2008 season. After their move, Irving officials decided that the land the stadium sat on was more valuable than the stadium itself and the decision was made to tear Texas Stadium down. While many fans were saddened by its demise, the fact was that the stadium no longer met the needs of consumers so it was destroyed and the fans, like the players, have moved on. Moving on is a part of life. Every day people discard and destroy objects that are no longer meeting their needs; things that have outlived their usefulness. Our possessions are not the only things vulnerable to being discarded or destroyed; businesses are at risk as well. If enough of our customers perceive that the products or services we provide are not meeting their needs, they will turn elsewhere and we can find ourselves in an inescapable position. Of course, this is something we all want to avoid and the good news is that it is not difficult to determine whether our customers believe we are adequately meeting their needs. Through customer surveys, we can gain information about what our customers want and also discover the key drivers of their behavior. Frederick Reichheld, in an article published in the Harvard Business Review, stated that on average, companies in the United States lose approximately half of their customers every five years. Unfortunately, many businesses do not have insight into why these customers leave. In a way, some executives do not want to know because it can be unpleasant to study failure. Some companies simply aren’t concerned about customer dissatisfaction, or they become concerned too late, because they do not understand the causal relationship between customer loyalty and profits. Some executives realize that being knowledgeable about customer dissatisfaction and defection is important, but they mistakenly believe that it is extremely difficult to reveal the root causes of customer behavior. Other executives
  • 12. 11 find it problematic to conceptualize and set up a system for analyzing customer perceptions as part of an ongoing strategic system. This lack of knowledge of customer perceptions is a crucial problem because it is a direct cause of diminishing cash flow from customers. Even if lost customers are replaced, it costs money to acquire new customers and they do not produce as much profit as older customers. Customers are worth more to a business the longer they stay because long-term customers tend to buy more, bring in new customers, are less sensitive to price, and take less of a company’s time. Decreasing customer defections by as little as five points per year has doubled profits in some industries. Becoming aware of customer perceptions and making a significant decrease in customer defections are attainable goals as evidenced by Deere & Company (makers of John Deere tractors) and USAA, an insurance and financial services company. Deere & Company uses retired employees to interview defectors and customers. They have attained a customer loyalty rate of almost 98% in some product areas! Of all the companies in the United States, USAA has come the closest to eliminating customer defections. Most of the customers they lose are due to people who die! The company treats customer defection very seriously and has an ongoing system in place to prevent customer loss. Most CEOs believe that customer loyalty is important and would prefer to have loyal customers, but many do not perform the calculations to determine just how much a loyal customer is worth over the customer life cycle. Without information on the net present value of the company’s present customer base, numerous CEOs judge the company’s performance on the basis of cash flow and profit. Some CEOs rarely study the only statistic that indicates how much real value the company is creating and the only statistic with predictive power: customer intent to return. Reichheld asserts that discovering the root causes of customer behavior can help companies identify business practices that need changing, enabling them to retain more customers. What keeps customers coming back? One key to our customer’s intent to return is their perceived value of our product or service. Many businesses fail because they spend too much time studying profit margins and not enough time measuring customer’s perceived value. When this approach is taken, CEOs become aware of problems only after profits start to fall. Once profits begin to decrease, the focus becomes the symptom rather than the underlying problem: the breakdown in perceived value. Q: So, where do you start if you want to put a system in place to learn about customer perceptions and prevent customer defection? A: Find a consulting firm to do the work for you.
  • 13. 12 While it is possible to have an in-house system for customer surveys, it is not cost effective unless you already have employees trained at the doctoral level in organizational behavior, research methodology, and statistics. I recommend that you hire an experienced firm (one that has been around for at least 20 years) with research associates and statisticians trained at the doctoral level. In addition, the firm should provide benchmarking and root cause analyses. Look for a firm that has a benchmarking database of at least several million scores and one that will provide root cause analyses of both customer satisfaction and intent to return. To see how the survey process can provide the information needed to prevent customer loss, let’s look at the process in a case study. Recently, a healthcare communications company retained the services of the National Business Research Institute (NBRI), a business research firm, to conduct their customer surveys, analyze the data, and provide benchmarking statistics. Once the company decided on the topics they wanted to include in their instrument, the survey was deployed by the research firm. In just 16 days the firm was able to collect data from nearly 17,500 customers. After the data collection period ended, the research firm conducted the data analyses and benchmarking and presented the findings to the communications company. The first score provided to the healthcare communications company was an overall performance score. This benchmarked score compares an individual company’s overall score with the average for their industry and is reported by percentile ranking. Each industry’s average is at the 50th percentile. Scores falling between the 75th and 89th percentiles are rated as “stretch performance” and scores at the 90th percentile and above are rated as “best in class.” The communications company had an overall performance score at the 63rd percentile, putting them 13 percentiles above the industry average. The survey report also provided analyses by each survey topic and each survey item. Topics and individual items are also benchmarked with other companies in the industry and given a percentile ranking. A ranking from the 75th to 100th percentiles is a “strength;” from the 50th to the 74th is an “opportunity;” from the 25th to the 49th is a “weakness;” and rankings between the first and 24th percentiles are “threats.” The survey for the healthcare communications company included 13 topics. Only one ranked in the “strengths” category, nine ranked as “opportunities” and three ranked as weaknesses. Those topics ranking as weaknesses included control systems, product delivery, and customer service. The 13 topics were measured by 29 individual items. Three items ranked as “strengths,” 19 as “opportunities” and seven as weaknesses. The seven items scoring as weaknesses were: 1. The company’s customer service representatives resolve my issues in a timely manner. 2. The company’s customer service representatives understand customer needs.
  • 14. 13 3. The company’s hours of operation are satisfactory. 4. The company improves my office’s referral/pre-certification process. 5. I am able to speak to a customer service representative when I need assistance. 6. I would recommend the company to others.| 7. The company’s customer service representatives are courteous. With seven weaknesses, where do you begin? It is obvious that there are issues with customer service since half of the weaknesses are related to it, but just because these items scored as weaknesses does not mean they are driving customer behavior. While some research firms do not provide any information beyond topic and item scores, NBRI provided the communications company with a root cause analysis for intent to return. The root cause analysis identified just two items that were driving customer intent to return. These items were: • The company has improved staff satisfaction at my office. • I can easily find help on the company’s website when I need it. Notice that these items are different from the items that ranked as weaknesses. Taking action to attempt to improve weaknesses will not necessarily improve customer perceptions and prevent loss. The key drivers of customer perceptions must be addressed and in this case, makes the task of improving perceptions much easier. Improving customer perceptions on just these two items (rather than the seven that scored as weaknesses), will impact numerous other survey items in a positive way and will help the company retain valuable customers. In order to benefit from customer surveys, a company must commit to make surveying an ongoing process. Customer behavior is dynamic and if customers are not surveyed often you will not have the knowledge you need to prevent loss. At a bare minimum, I recommend surveying customers at least once a year, but quarterly is even better. Some companies make it an ongoing process and continuously collect data from customers. The cost of surveying pays for itself many times over via the increased profits from customer loyalty.
  • 15. 14 CHAPTER 4: HOW TO EXPERIENCE BUSINESS GROWTH IN TOUGH ECONOMIC TIMES I live in an area of the country that compared to some regions, experiences fairly mild winters. Our winters are mild, not nonexistent. We experience below freezing temperatures and lawns, trees, and other outdoor plants go dormant. I happen to love roses and enjoy the long blooming season here. My roses usually begin blooming in March and continue to bloom until early December. As I am writing this paper it is winter. The thermometer has already dipped below the freezing mark and all plant life is dormant…almost. Recently I was in my yard and I happened to glance at one of my rose bushes expecting to see nothing but dead leaves and spent blooms. Instead, much to my surprise, I saw life…several clusters of tiny new leaves were growing on that rose bush…in the winter! That rose bush has overcome the odds. In spite of cold temperatures and a lack of any attention from me, it is growing. We are all keenly aware of the difficult economic times we are currently living in. It seems that every week or so we hear about a company closing its doors for good; another one is filing bankruptcy; massive layoffs at another. I have spoken to many people who have experienced drastic downturns in their businesses. In spite of all this, there are also businesses that are actually still growing. Just like my rose bush, in spite of difficult conditions, against all odds “new leaves” are sprouting. How is this possible? A study published in Strategy and Leadership addressed this issue. The study examined the tools used by management for the purpose of making headway in tough financial times. Findings revealed a clear bias toward growth over cost cutting indicating that moving ahead, not retrenching, is critical to control a company’s destiny. Unfortunately, unlike my rose bush, our businesses will not thrive if we do not take action.
  • 16. 15 Among the tools used by most (more than 75%) of the managers in the study were surveying and benchmarking. Recently a vice president of marketing told one of my colleagues that although his company was cutting back on some expenses, eliminating their surveys has not even been mentioned, much less discussed. This VP realizes that employee and customer surveys are vital to business survival and growth during difficult economic times. Business growth is possible even in tough economic times if you have knowledge of the drivers of employee and customer behavior. You need to know what influences their perceptions, attitudes, and behaviors in order to be successful. It is imperative to be knowledgeable of both employees and customers because the attitudes and behaviors of your employees affect the perceptions, attitudes, and behaviors of customers. Think about some of the organizations you have done business with recently. Most likely you have interacted with employees with good attitudes and others with bad attitudes. Some were probably very eager to be helpful, others may have ignored you. Which type of employee makes you want to conduct further business with those companies? The relationship between employees, customers, and profits is no secret. A recent article in the Harvard Business Review discussed how a major retailer went from experiencing big losses (a net loss of $3.9 billion in one year) to big profits (a net income of $752 million) in just one year by making a strategic shift to a business model that tracked employee attitudes to customer satisfaction and financial performance, an employee-customer-profit model. This retailer began an ongoing process of data collection, modeling, and experimentation in order to obtain knowledge about employee and customer attitudes. The retailer hired statisticians to analyze the data collected from employees, customers, and financial records in order to identify drivers of perceptions and behaviors and to investigate whether these were directly related to profits – they were. Not only has this strategy of continuous survey research enabled this retailer to go from big losses to big profits, but it has also enabled them to experience an increase in customer satisfaction during a period in which independent surveys showed that national retail customer satisfaction had fallen for several consecutive years. During that period not only did this retailer’s customer satisfaction increase by almost 4%, but employee satisfaction rose by 4% as well. This may sound like an insignificant increase; however, statistical analyses indicated this small increase in satisfaction translated into more than $200 million in additional revenues during a 12-month period! How can we know what truly drives the behavior of our employees and customers? Learning about their attitudes and perceptions is the first step. It is important to know the right questions to ask because many of our cognitive processes occur on an unconscious level. Thus, we do not always know ourselves what drives our own behavior. Take a piece of art, for example. We may look at a painting and have an immediate positive or negative reaction to it. But when asked to describe what we like or dislike about it, some will find they just can’t answer that question. We may also experience this when judging food or beverages; we may know what we do and do not like, but the explanation of why we like or dislike it may elude us.
  • 17. 16 Thus, survey design is very important. An article by Valarie A. Zeithaml, published in the Journal of the Academy of Marketing Science, emphasizes this point. If you know the right questions to ask, statistical analyses can tell you what employees and customers cannot; the actual drivers of their behavior; that is, what makes them “tick.” Let’s look at a couple of case studies of companies from two industries that are applying survey research and statistical analyses to thrive in difficult economic times. The first company is in the financial services industry and has been conducting employee surveys for years. A business research firm, The National Business Research Institute, Inc. (NBRI) has been deploying and analyzing their surveys as well as benchmarking them against other companies in their industry. The benchmarking provides this financial services firm with precise knowledge of how their employee’s responses compare with a national average, which is set at the 50th percentile. Obviously, no company strives to be average. We would all like for our company’s performance to be above average. Not only is this financial company well above the national average (ranking above the 75th percentile), but for each of the last several surveys, they have steadily increased their overall rating. In addition to increases in their overall ratings, they have also seen numerous positive trends in survey topics including job satisfaction, benefits, and communications. During a time when many financial institutions are seeking a government bailout, this company is experiencing a steady improvement in employee perceptions as well as profits. How is this possible? One important factor contributing to their success is that this institution is knowledgeable about the drivers of their employee’s behaviors. In their most recent survey, a Root Cause Analysis (RCA) identified three survey items that were influencing employee perceptions and attitudes and driving 62% of the items on the survey. The primary driver identified was, “My supervisor is an effective communicator.” This item was driving 26% of the survey items. The secondary root cause, driving 23% of the survey items was, “Corporate executive management values the company’s employees.” Driving 13% of the survey items was the tertiary root cause, “Major divisions of the company work well together.” Now that this company has knowledge of the root causes driving employee perceptions and attitudes, they can take action to improve perceptions in these areas. By so doing, they will increase scores on over half of their survey items; an increase that influences customer perceptions and leads to higher profits. As previously mentioned, action is necessary. If you survey your employees but do not take action to improve perceptions, employee perceptions are likely to become more negative rather than more positive. Action should also be taken quickly. Behavior is dynamic; it is always changing. If you sit on survey results for 18 months, the identified drivers will be out of date and any action taken based on those results is unlikely to bring about the desired outcome. This financial services company has a history of taking quick action based on survey results and they are reaping the rewards. The second case study involves a company in the hospitality and gaming industry. This company also utilized NBRI for their survey deployment, benchmarking, and root cause analyses. For most of us, when we begin to feel the effects of
  • 18. 17 a downturn in the economy, optional expenditures are the first to go. For example, many people cut back on entertainment expenses. This presents a challenge for those in the gaming industry. However, this particular company has remained profitable and experienced steady increases in overall guest satisfaction and intent to return. Over the last year, overall guest satisfaction has increased by 8 percentiles and intent to return has increased by 10 percentiles. In the second quarter of last year, NBRI identified three drivers of overall guest satisfaction including: Overall impression of the service at the casino, a good mix of slot denominations, and overall cleanliness of the casino. The company took quick action to improve perceptions of these items and all showed improvement on the survey conducted in the third quarter. The second quarter survey also identified four drivers of intent to return. These drivers were all unique from those driving overall satisfaction. They included: cleanliness of the hotel rooms, wait time for service from cocktail servers, wait time for service from bell staff, and wait time for service at one of the hotel’s cafes. While one item showed no change in ranking on the third quarter survey, the remaining three items all showed an increase in ranking due to the action taken as a result of the research findings. This company can expect continued improvement in survey scores, as well as continued financial growth, as long as they continue to take action to improve the survey items driving their customer’s perceptions. Looking at the results seen by the companies discussed in this paper, the keys to experiencing business growth in tough economic times are no mystery. They include: 1. Survey both employees and customers for maximum results; 2. Utilize benchmarking: this enables you to know how you compare to other companies in your industry and allows you to track improvements; 3. Conduct root cause analyses to identify the drivers of your employees’ and customers’ perceptions and behaviors; 4. Take action on your survey results aimed at improving perceptions of these drivers; 5. Regularly repeat the cycle to measure improvement and identify new drivers. Employing these steps on a continual cycle will provide the impetus your company needs to not only survive, but thrive in tough economic times.