By Debbie Depp
Most companies understand that customer satisfaction and loyalty are essential to their success. But few companies know exactly how to link their customers’ needs with the company’s processes to create the best customer experience possible.
The first step is to align your company’s activities to satisfy and retain customers. This is easier said than done. Why? Because figuring out exactly what those needs and desires are is an inexact science. But you can do it.
To start, you must analyze and understand your company’s entire system for generating profit.
Using a customer-oriented approach, you should focus on three key activities:
- Gathering customer information
- Spreading that information throughout the company
- Using the information gathered to maintain, improve and innovate in products and processes.
By focusing on these three key activities, you will come to understand what your customers want and why they want it. Once you understand that, you will be able to do much more than satisfy current customer demands. You will be able to predict what your customers want next.
Lots of organizations think they already know what their customers want. The problem is that often they’re viewing what their customers want through the lens of their own organization. As a result, their focus will be off and they’ll likely miss their mark.
Instead, learn to see what the customer wants through the lens the customer uses.
Take, for example, a chain of convenience stores. The chain manages its stores along typical business function lines that focus on providing customers with clerks to ring up sales, products like soft drinks and gasoline, and long store hours. Those are the things management thinks are important to its customers. But in reality, customers are looking for safety, convenience and cleanliness – benefits that cut across all business function lines.
Companies need to understand the links from internal quality to financial performance. The framework will let companies create models that can predict customer satisfaction and loyalty. The framework includes four general areas:
- Internal quality...including production and maintenance processes. If you’re selling a service, it includes the service offer, physical surroundings, employee satisfaction and the quality of the service provided by those employees. If you’re selling a physical product, it includes the manufacturing process and the physical characteristics and attributes of the product.
- External quality and satisfaction... including what customers see in the purchase, including the benefits and the cost, as well as the customer’s conclusions about the company.
- Customer loyalty and retention... with loyalty defined as the customer’s predisposition to buy, and retention defined as acting on that predisposition. A loyal customer is retained when he or she intends to come back to your company and does.
- Financial performance... is the result of the interaction of the first three frameworks. For instance, if satisfied employees sell a great product to customers who see the product’s value, and they in turn become loyal customers who don’t need special incentives to buy again, the company’s financial performance will be enhanced.
Sears has undergone a dramatic transformation in the last few years. Sears discovered that employee attitudes about their jobs and the company directly affected retention and employee behavior.
Employee behavior, in turn, affected its customers’ perception of the help they received at Sears, as well as the value Sears merchandise represented. These customer perceptions, in turn, affect overall customer satisfaction, what customers told others about Sears, customer loyalty levels and profitability.
How did Sears get to understand the interconnection between employee attitude and its bottom line? Through the use of quantitative methods applied to data it had gathered and analyzed.
For example, Sears was able to predict (correctly) that a five-point improvement in employee attitude on a scale of 1 to 100 drives a 1.3 percent improvement in customer satisfaction, which, in turn, drives a 0.5 percent improvement in revenue growth.
If you want to create an effective customer measurement and management system, you need a process model. The model is really a continuous circle of planning, research, analysis, decision-making, implementation and learning. (See Kathryn Korostoff’s, Sage Research, article in the Summer 2001 issue of Profit from the Process).
Customer satisfaction and loyalty are not just some warm, fuzzy concept. This is an area for competitive advantage, directly linked to the top and bottom lines. After years of creating and sustaining a commitment to increasing quality and satisfaction, Volvo executives began to look for proof that their efforts had a bottom-line impact. They wanted to see exactly how much money they were making by improving their quality.
Volvo uses three different satisfaction studies for Swedish customers. These measure customer satisfaction with the dealer, the vehicle after two months of ownership and the repair and maintenance shop. The database includes information on 25,000 customers who bought a Volvo in 1994 and again in 1997.
Using the information, Volvo looked at a sample of those who bought another Volvo and for whom profit data was available. When their satisfaction index was calculated, it was higher than that of the total population of original Volvo buyers in the database (8.73 on 10-point scale vs. 8.56). Analysis showed that vehicle performance measured shortly after purchase had the highest impact on performance, followed by how well Volvo employees performed their jobs and how the vehicle was delivered. Clearly, customer experience early after the first purchase had an influence on later repurchase.
Next, Volvo connected improvements in the quality of the products and services that predicted greater likelihood of a future purchase. The question asked was, “What happens if the customer’s perception of the sales process improves by one point?” The answer was that a one-point improvement in the quality of the sales process would yield a 4 percent increase in profit on the next purchase.
Of course, you should not stop here. Assessing and responding to customer needs and wants are a continuous process. It never ends, and neither will your rewards.
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