CUSTOMER
RESEARCH IS A WASTE OF MONEY.
Don't
waste your time and money doing customer satisfaction research. It won’t
tell you anything worthwhile and it’s not likely to change the way
your business operates.
Besides, there is a better way.
Companies typically spend large amounts of money and time every year
or two years constructing complex surveys involving countless questions.
But are they effective?
Customers today are so overwhelmed with requests to complete customer
satisfaction surveys that they either don’t respond, or they give
very little thought to what they put down. Even if customers do respond,
the company gets so overwhelmed with information that they don’t
know what to do with the results.
Frederick Reichheld, one of America’s leading experts on customer
loyalty, recently wrote in the Harvard Business Review that: “Most
customer satisfaction surveys aren’t very useful. They tend to be
long and complicated, yielding low response rates and ambiguous implications
that are difficult for operating managers to act on.”
I think he’s right. Besides, customer satisfaction isn’t
something that should be thought about only once a year. It is something
that everyone in the organisation needs to keep top of mind every day.
Staying in touch with customers needs to become a way of life.
The main problem, though, is that customer satisfaction research won’t
tell you what you need to know. The objective in business is to make a
profit, and the best way to do that is to have profitable customers who
stay with you for a long time. Think about it. If you made money on every
transaction you had with every one of your customers, and if they loved
you so much they wanted to come back again and again and again, wouldn’t
you have the kind of business you’ve always dreamed of having? Wouldn’t
you have a very saleable asset?
The trouble is, satisfied customers aren’t loyal customers! Research
shows that, depending upon the study, up to 86% of customers who switched
their business to another supplier were satisfied at the time they defected.
Satisfying customers is simply not enough to retain them. So what’s
the point of spending a lot of money to find out that your customers are
satisfied?
To make matters worse, when companies look at the overall results of
their surveys, they tend to over-estimate the upside and under-estimate
the downside. A CEO once proudly told me that their customer satisfaction
research revealed that 80% of their customers were satisfied. What he
didn’t grasp was that 20% were dissatisfied. In other words, 20
customers in every 100 believe his company is pretty useless. If each
one tells nine of their colleagues what they think of his company, then
for every 100 customers the company serves, 180 people will hear a bad
story. That doesn’t sound like a good way to build a brand! Of course,
far more customers were satisfied than dissatisfied but how many people
do satisfied customers tell about the experience they had?
The problem is further compounded by the way we analyse the data from
our customer surveys. Most customer satisfaction surveys give customers
an issue, such as on-time delivery, and ask them to indicate whether they
were very dissatisfied, dissatisfied, satisfied or very satisfied with
the company’s performance. The results are then analysed by adding
together then number of customers who chose very dissatisfied and dissatisfied,
and then comparing that number to the number who chose satisfied or very
satisfied. But there is a difference between customers who are very satisfied
and those who are satisfied. Moreover, there is no difference between
customers who are satisfied and those who are dissatisfied. Many years
ago, Xerox did a study that showed that very satisfied customers were
six times more likely to purchase again than customers who were simply
satisfied. Thus, those analysing customer satisfaction surveys should
combine all customers who chose very dissatisfied, dissatisfied and satisfied
and compare them with those who chose very satisfied. If they did, they
would find that their results dropped from 80% to only 12%!
But of course you have to keep in touch with your customers. Otherwise,
you won’t know how well you are doing in the eyes of the only people
who matter. So if you don’t do customer satisfaction surveys, what
will you do?
Reichheld has the answer: “If growth is what you’re after, … you
simply need to know what your friends tell their customers about you.” Specifically,
Reichheld says you should ask your customers this one question: “What
is the likelihood you would refer our company to a colleague or friend?” Then
ask them to score their answer out of 10, where 0 = not likely; 10 = very
likely and 5 = neutral. People who score your company six or less are
considered to be detractors, and those who score it nine and ten are promoters.
Reichheld’s approach is to calculate the percentage of detractors
and then the percentage of net promoters by subtracting the percentage
of detractors from the percentage of promoters. Reichheld’s research
suggests that companies with the highest net promoter scores have the
best growth. After studying more than 400 companies in 28 industries,
based on 130,000 customers surveyed over two years, Reichheld found the
median net promoter score was just 16%. Rapidly growing companies such
as eBay and Amazon had net promoter scores of 75% to 80%. In New Zealand
we have seen net promoter scores range from –32% to +56%.
The key advantages of Reichheld’s approach are:
· You are measuring customer retention.
· You get an indication of your growth potential.
· It requires little from the customer.
· It can be done daily, weekly or monthly.
· The results are available in real time and easy to interpret.
There is no need to waste your time or money on doing complex customer
satisfaction research. Just because you’ve surveyed your customers
the same way for the past 20 years doesn’t mean you need to do it
that way next year. A new approach will save you money and produce more
meaningful information. And that’s got to be good for your business.
For more information about another approach to customer satisfaction
surveys, visit www.customer1st.co.nz
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