Dealing with service failures and customer complaints requires more than just fixing the immediate problem. The key for companies is to ensure that they capture and manage the full range of customer complaints and ensure that processes are incorporated, that fix the root causes of the customer complaints.

An article in the Wall Street Journal from September 2008 titled “Making the Most of Customer Complaints” from Prof. Stefan Michel, IMD Lausanne, David Bowen, Thunderbird School of Global Management and Robert Johnston, Warwick Business School summarizes challenges and strategies to ensure the successful management of customer complaints.

Here is an excerpt:

Nobody’s perfect. That’s a fact, not an excuse. Which is why it’s crucial for companies to realize that the way they handle customer complaints is every bit as important as trying to provide great service in the first place. Because things happen.

Customers are constantly judging companies for service failures large and small, from a glitch-ridden business-software program to a hamburger served cold. They judge the company first on how it handles the problem, then on its willingness to make sure similar problems don’t happen in the future. And they are far less forgiving when it comes to the latter. Fixing breakdowns in service — we call this service recovery — has enormous impact on customer satisfaction, repeat business, and, ultimately, profits and growth.

But unfortunately, most companies limit service recovery to the staff who deal directly with customers. All too often, companies have customer service sort out the immediate problem, offer an apology or some compensation, and then assume all is well. This approach is particularly damaging because it does nothing to address the underlying problem, practically guaranteeing similar failures and complaints.

Read the full article “Making the Most of Customer Complaints”.

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Everybody talks about it, but we hardly have any good examples of the relationship between customer satisfaction, loyalty and repurchase behavior – especially examples that businesses like to share. I just found one of these examples that give an idea about the relationship between customer satisfaction and loyalty. Maybe it is helpful to you the next time you need a practical example.

[…] for several years, Xerox has polled 480,000 customers per year regarding product and service satisfaction using a five-point scale from 5 (high) to 1 (low). Until two years ago, Xerox’s goal was to achieve 100% 4s (satisfied) and 5s (very satisfied) by the end of 1993. But in 1991, an analysis of customers who gave Xerox 4s and 5s on satisfaction found that the relationship between the scores and actual loyalty differed greatly depending on whether the customers were very satisfied or satisfied. Customers giving Xerox 5s were six times more likely to repurchase Xerox equipment than those giving 4s.

This analysis led Xerox to extend its efforts to create apostles – a term coined by Scott D. Cook, CEO of software producer and distributor Intuit, describing customers so satisfied that they convert the uninitiated to a product or service.

Found in Putting the service-profit chain to work by JL Heskett, LA Schlesinger, Harvard Business Review, 1994,

Alternative download link: http://www.favaneves.org/arquivos/artigoextra6-5.pdf

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Job-cutting, cost-cutting and other profit- enhancing measures are too often used as the silver bullet to increase shareholder value. If you have been working in a field, where you have been involved with customers (customer relationship management, customer experience, customer service), you have probably experienced situations where you had to find arguments, why you should invest in a certain program to improve customer satisfaction and loyalty when everything that counts is shareholder value.

Fortunately some research has been done on the impact of customer satisfaction on shareholder value and stock prices respectively which should help to strengthen your arguments next time.

The authors of the study “Customer Satisfaction and Stock Prices” have analyzed the top 20% companies of the American Customer Satisfaction Index (ACSI) and found that their performance greatly outperformed the stock market, generating a 40% return.

From Consumerist:

From 1996-2003, the portfolio outperformed the Dow Jones Industrial Average by 93%, the S&P 500 by 201%, and NASDAQ by 335%.

Past performance doesn’t indicate future results. ACSI only goes back to 1994. However, these startling findings help vindicate one of our central claims: investing in customer service and satisfaction is good for your bottom line.

You can download the full article or read more at Consumerist.

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One common practice when testing the marketing potential of a product is to ask customers if they are satisfied with a product or service. Focus groups are the favorite method to invite customers to provide feedback. One should think customers will buy your products or services because they are satisfied with them, right? Well, not really.

I have already written about the challenge of asking customers if they are satisfied with your products or services. But asking customers whether they are satisfied or not is not really helpful either. Everyone using a five blade shaver is probably satisfied with the results compared to a four blade shaver but how many would really buy a five blade shaver?

What questions do we need to ask in order to get an answer that predicts the probability that customers will buy? In order to predict whether anyone will buy your products, you have to find out if your products or services provide any value to the customer. If they do provide value, is this value unique and you are not facing other competitors?

Buying is an exchange of value and a customer is only willing to buy your product if you are providing value. So even though customers might be satisfied with your products or services, they still might not be interested in buying it because they do not provide value.

Why do I blog this? A quick reminder that customer satisfaction is a valuable tool to answer the right set of questions. But one has to understand more aspects than just customer satisfaction to fully describe the success of a new product or service. Of course we can extend the meaning of the word “satisfaction” but at the end you will always end up referring to (perceived) customer value.

Photo courtesy of lyricsboy

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Creating questionnaires is an art in itself; an even higher art is creating questionnaires about customer satisfaction. A recent experience with a satisfaction survey during a train ride reminds me that it is important to understand customer satisfaction in order to be able to create a questionnaire about customer satisfaction.

The questionnaire included questions regarding my satisfaction with the cabin, services and food on the train. The biggest challenge is to understand that customers are not just satisfied or dissatisfied. Your customers can also feel indifferent about your products and services.

It is essential to understand that satisfaction or dissatisfaction is the result of a confirmation or disconfirmation of the expected brand performance with the actual brand performance.

Following this logic, customers evaluate an encounter with a product or service and if the perceived brand performance matches the expected brand performance, the customers have neutral feelings (The Zone of Indifference). If the actual brand performance is less than the expected, customers feel dissatisfied. Only if the perceived performance of that experience is better than expected, customers will feel satisfied.

Asking a customer how he feels about the encounter when he has neutral feelings should allow him to answer that he feels indifferent. Companies have to realize that customers don’t feel satisfied just because their customers experienced everything as expected!

The challenge with surveying customer satisfaction is to ask about the elements that cause satisfaction not about satisfaction itself. It is impossible to conclude that your customers are satisfied when they are asked if they are satisfied with a product or service. If customers say they are satisfied, are they really satisfied (meaning that their expectations where exceeded) or are they just indifferent but feel that since their expectations have been met, that they should be satisfied? During my travel on the train I have experienced nothing extraordinary, just a normal journey and basically I felt indifferent.

Customer don’t know if they should feel satisfied when everything was just as expected or if they are also “allowed” to feel indifferent.

 

So instead of asking “Are you satisfied with our products/services?” and rating the satisfaction with a service on a scale, one should actually ask:

“Have we been able to fulfill your expectations?”

“Have we been able to exceed your expectations/surprise you with our products or services?”

The goal is to have customer’s that don’t feel indifferent about your services, but customers that care and are satisfied. This requires that the delivered experience exceeds their expectations which is a difficult task, but the only possible way to ensure that you have loyal customers who care.

The only way for a business to survive, is to have customers who care.

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