Customer Satisfaction – Is it enough?

Gaining competitive advantage through customer satisfaction seems to be the mantra of organizations but do satisfied customers increase the economic value of the organization? Is the customer satisfied with the value created for himself/herself?

While organizations are busy in devising strategies for acquiring the new customers, they are not giving much attention to the retention of the customers. Sales strategies are largely driven by the acquisition of new customers. It is universally accepted that acquiring new customers costs (in terms of time, money and resources) more than five times that to retain the existing customers.

A satisfied customer is an asset to an organization. A satisfied customer spreads the positive words - of his experience with the organization. But is that enough? Does the satisfied customer really add economic value? Does satisfaction convert to loyalty, passion and influence?

There are various touch-points for customers to interact with the organization. Through these touch-points customers develop a relationship with the organization. Ironically these touch-points sometimes may become the reasons for customer defections. The reason customer goes to a vendor is that he has a problem and vendor has the solution to that problem. Most businesses focus on the quality, price and service element of the business solution. These are provided by most of the organizations and so the customer has many choices to choose a solution to his problem. These deliveries do not create a competitive edge for the organization because they are provided by all. The business needs to stand out in a market of “me too” marketing promises.

A satisfied customer need not be a repeat customer in the new competitive world. The customer is flooded with the offers by the competitors. So a satisfied customer might not be interested in the same company for too long. But there is one element which makes him/her stick to the organization for long time. It is the attitudinal element of the customer. The customer’s interactions would last for long with an organization if there is an emotional relationship with the organization. By engaging with the customers, an organization can understand the behavior of the customers – to understand the values that drive them to remain interested and engaged. The critical part for the organization is to understand the role of emotions in the customers’ decision making process. People remember the emotional experience better than any other experience with a brand. This translates to the attitudinal behavior towards the company itself. Customers remember either the most pleasant or the most awful experiences with a brand and these drive the retention or defection. Some trend in the retention and defection are given below.

60% of customers stop business with an organization because of perceived indifference on the part of an employee – Target Training International
70% of the reason for leaving the company has nothing to do with the product and 84% of customers leaving the company leave because of poor service – Forum Corp
Customer who experience mild or strong dissatisfaction influence 9 to 16 other people – Tarp worldwide
Up to 80% of defecting customers say “satisfied” or “very satisfied” just before they leave – Business Week, 2006

This explains why attitudinal element is important and organizations should understand the customer attitude and behavior. By understanding the attitudinal element through engagement with the aid of touch-points, an organization can score better than its rivals who do not.

Engagement is the emotional attachment that a customer develops through the interactions with the organization as a satisfied, loyal and influential customer. Engaged customers are passionate about the organization’s products and services and emotionally attached. (Is that the reason people line up through the midnight to buy Apple’s products?) So engagement as a core competence will form a key element for achieving competitive advantage. By deploying resources in the engagement process, an organization can develop this core competence which will not only help the organizations to retain the customers but also increase the economic value.

Engagement results in the co-creation of value for both customers and the organizations. In the traditional approach, firms create the value by producing the products and services and customers are treated as the demands for these products and services. In the new competitive world, as the customers are bombarded with different products and services, organizations alone can not create the value. By engaging the customers with the organizations, organizations need to co-create the value. C K Prahalad introduced 4 building blocks of co-creating the value – DART. Dialogue, Access, Risk Assessment and Transparency together create the value for the organizations and the customers. So the future of competition belongs to co-creation – what customers value and what organizations value.

-Deepak
(Courtesy: Allegiance & C K Prahalad’s Future of Competition)