Customer satisfaction is arguably the most important statistic you can measure for your business. Above all else, nothing directly affects profits more so than customer satisfaction. Satisfied customers are more loyal, they buy more frequently, they are less price sensitive, and they offer good word of mouth. If you choose to do any market research whatsoever, choose to at least measure your customer satisfaction.
Very simply, customer satisfaction is measuring the performance of a product or service against their performance expectations. How do buyers form these expectations? They form them through past experience, advice, and advertising. If expectations are too high, the buyer is likely to be disappointed, if expectations are too low it won’t attract enough buyers.
Now, we all like to think that companies are in business to please all of their customers…right? However, new age Customer Relationship Marketing (CRM) teaches us that not all customers can be treated equally. “Best” customers outperform others by 16:1 in retail, 13:1 in restaurants, 12:1 in airlines, and 5:1 in hotels. Clearly your most loyal customers are the ones constituting for the majority of your revenues. We’ve all heard the age-old “80-20” rule where 80% of your business comes from 20% of your customers. My market research experience tends to gravitate more to the lesser known “80-20-30” rule, which adds that ½ of your profits can be lost on resources spent on the bottom 30% of your customers. CRM speaks to this: focus your efforts and resources on your truly loyal customers. Find out what they like, what they dislike, what you do well, and what you need to fix. The worst thing to do is to not measure this loyal audience in order to limit customer churn.
Companies spend a lot of time and effort trying to develop new sales rather than strengthening the relationship with existing clients, or preselling and selling and not as much time on focusing on follow-up activities post-sale. Statistics show 96% of dissatisfied customers do not complain, they simply stop buying. If you are not following-up with your customers through various market research techniques and giving them an avenue to be heard, you will never find out how to stop this customer turnover. The best thing a company can do (or use RMS to do – shameless plug) is to ASK, LISTEN, and SOLVE problems presented by their customers – our motto for the RMS Analytics team (tattoos coming soon; just kidding.) From there, our clients can respond quickly and constructively to the feedback. Between 54% and 70% of customers will buy again if their complaint is resolved. The statistic rises to a staggering 95% if it is resolved quickly.
What does it all mean?
Market research helps you address the stability of your customer base. These customer loyalty measurements can be tracked longitudinally over time to understand the ebbs and flows in your numbers (click here to read an article on the importance of benchmarking.) In addition, surveys can be completed with those customers who defected to other competitors to help minimize future churn. The opportunities are endless regarding market research around customer loyalty. We hear from a lot of our prospects, “we know our customers and they’re satisfied, so we don’t need market research,” which is all well and good. You have a successful business and profits are up, so in most circumstances, you are correct. But customer loyalty research is designed to find out why they are satisfied and even more importantly, why they are not satisfied.
Limited excerpts and statistics taken from A Framework for Marketing Management by Philip Kotler, 2003.
Interesting post on building customer loyalty. Utilizing market research may aid in understanding what clients generally want from a particular vendor and act on growing the business relationship.
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