Customer Satisfaction as a Primary KPI?
By: Turaj Seyrafiaan
There have always been a number of contact center efficiency and effectiveness indicators. While each has a certain and important role, it should always be emphasized that we cannot analyze these indicators in solitude and need to view them as part of a larger holistic picture. From time to time, however, I have been asked which one of these indicators is the most important measurement for the business? Is there one measurement that a contact center manager can / must follow?
Well, I don’t know if “Customer Satisfaction” should be the only measurement but I do know that it should be the primary measurement. You see, we are all in business because we are trying to generate revenue from our products and services. We are the “Providers” who offer those products and services to customers. Without customers there is nothing for us to offer! We need customers!!
As contact centers play a bigger and bigger role in today’s businesses, their impact on the customers, and as a result on their loyalty to a company, become more and more evident. In fact best-in-class contact centers pride themselves in making the difference and increasing the overall customer satisfaction. Many years ago while doing a benchmarking study; I had an opportunity of discussing the role of the contact center with a senior VP of a multi-million Dollar mail order company. Several of our questions were focused on the sales process at the center, but he simply pointed out that “the catalog does the selling; we are here to serve customers and are responsible for their satisfaction”!! He had clearly understood that without satisfied customers the business could not grow and had entrenched that as the main role for his centers. Don’t get me wrong! They did have all kind of efficiency and effectiveness measurements and he knew his operation in fine detail, but the goal of the operation was to increase Customer Satisfaction.
Impact on Business
In the past twenty years, there have been many studies trying to define the impact of customer satisfaction on long term revenue / profit in more tangible relationship in order to convince those skeptical executives who felt the cost of customer satisfaction would far over weigh its benefits. Majority of these studies pointed to the same conclusion that customer satisfaction matters and can increase both short-term and long-term revenue for the organization.
Here are three of the well known conclusions:
• It costs significantly more (6-12 times) to attract a new customer than keeping an existing customer (“Satisfied” or “Very Satisfied”).
• In a competitive environment, a company with “excellent customer satisfaction” can charge up to 10% premium for similar products and services than its competitor (in other words it take 10% price differential for a “Very Satisfied” customer to consider changing his provider). This premium drops to under 3% for “Satisfied” customers. On the other side, those customers who rate their satisfaction as “Poor” and “Very Poor” will consider a change as soon as similar products and services are available from a competitor.
• Companies that provide multiple products and services can have up to 60% higher revenue from “Very Satisfied” customers than from “Satisfied” customers.
As mentioned all these studies deliver the same conclusion: customer satisfaction is important to the long term survival and growth of an organization. So, if we agree that customer satisfaction is important, how do we achieve that and how do we measure our progress?
There have been many theories around what is it that customers value, and how to increase their satisfaction. In general there are many factors contributing to the customers’ overall satisfaction. These factors vary from customer to customer and from environment to environment but typically include factors such as product (functionality, quality), price, delivery and service. Contact centers don’t have much to contribute to the product itself, price or fulfillment but can have a major impact on the service and this is where contact centers can differentiate themselves while creating wealth for the organization.
Customer Satisfaction is an ART
As a rule, customers’ expectation of a contact center can be grouped into three major categories: Access, Resolution and Treatment (ART for short). “Access” defines how easy it is for customers to reach a center (long wait time or a convoluted IVR certainly does not help). “Resolution” deals with the solutions that were offered / delivered to the customers during their contacts and how easy or difficult was to obtain such solutions (FCR comes to mind). Finally “Treatment” describes how customers were treated during their contacts. Each of these three major categories can be linked back to one or more of the efficiency / effectiveness measurement. For example Access can be linked back to Service Level and ASA.
Customer Satisfaction Index
Having customer satisfaction defined around ART, makes its measurement a lot easier. Typically, contact centers develop a short survey (5 to 10 questions) around these three categories (plus one or two loyalty questions which we will discuss later in this article) in order to measure the overall satisfaction. At the same time a secondary (detailed) survey is developed around each of these categories. These surveys are only used if and when there is a need for more detailed analysis (such as an improvement initiative or investigation about certain category).
Obviously different organizations use different scale for their survey measurement. These scales fall into two categories: Quantitative (such as 0 – 10) and Qualitative (such as Very Satisfied”, “Satisfied” and so on). Quantitative scale is more adaptable for numerical analysis, however, it makes it harder for customers to pick a number that represents their true feeling (for example what is the difference between a “6” vs. “7”). Qualitative scales, on the other hand, provide a better definition to the scale for customers to choose. Regardless of which scale you decide to use, the result can be presented as an index that combines all the results. An index is simply an average of all the numerical results. In case of qualitative scale each grade is given a numerical value in order to cover entire range (for example if the scale has only 4 options, then the lowest grade is 0, the highest grade is 100 and the other two are 33 and 66).
There are still a few organizations who report their result for top 1 or 2 grades only (for example “79% of customers rank their satisfaction as “Satisfied” and “Very Satisfied”). By choosing a specific grouping of the respondent, this method fails to provide a complete picture of what customers (all of them) think as we cannot tell if the majority of customers are “Very Satisfied” or just “Satisfied”. In addition there is no report about satisfaction of the other 21%.
Although it has been proven that customer satisfaction can and will lead to higher revenues, there is still the question of customer intention, especially when it comes to the large ticket items such as automobiles. Is the customer satisfaction a valid indicator of future revenues? Would a satisfied customer purchase the same brand when it is time for an upgrade? The problem here is that there are many other factors involved that will impact customers’ intention and as a result even a “Very Satisfied” customer may not become a repeat customer. (Although even in these situations, the probability of a customer becoming a repeat customer increases with the level of their satisfaction).
In order to gauge the likelihood of customers repeating their purchases and becoming repeat customers, many organization – large and small – have introduced one or two questions with regard to customer’s intention, loyalty and potential recommendation to others. When reviewing results from such surveys, we must keep in mind that: a) customers are evaluating the entire organization (including product features and quality, price, delivery and service); and b) customers provide their feelings at the moment of the survey which is highly influenced by their latest experience with the company. Such feelings may change over time depending on more recent interaction with the organization.
Over the years, loyalty questions have expanded from individual customer’s purchase intention (would you use us again?) to his or her willingness to recommend the company’s products and services (would you recommend us to your colleagues?). The idea here is based on the old adage that word of the mouth is the best advertising. By including the question about recommendation, organizations hope to capture a simple and accurate indicator for future growth.
In 2003 Bain & Company introduced a more formal / structured format for this question and the related analysis called Net Promoter. The survey simply asks about the likelihood of a customer recommending the product and/or service to others on a scale of 0 (not at all likely) to 10 (extremely likely). Customers with scores between 0 and 6 are considered to be ‘Detractors’ while those customers with scores of 9 and 10 are considered to be ‘Promoters’ (customers with scores of 7 and 8 are considered to be ‘Passive’). Net Promoter Score (or NPS) is the difference between the percentage of ‘Promoters’ and ‘Detractors’. A positive number indicates that there are more customers recommending the company than those who are denouncing it. Clearly a higher positive number indicates higher number of ‘Promoters’ and higher possibility of revenue growth.
Although Bain & Company introduced this metric as the “the one number you need to grow”, there is no statistical evidence that this indicator is more accurate than any other loyalty indicators or for that matter any typical customer satisfaction indicators already in place.
The Bottom Line
Regardless of which method is used to survey and report customers’ intention, there is no question that customer satisfaction has a major impact on future buying decisions either from current customers or their network of acquaintance. In many organizations contact centers are major source of providing services to customers which magnifies the impact of customer satisfaction with the center on the overall survival / growth of an organization. For these contact centers customer satisfaction must become a major goal (if not the only goal) for the operation.