November 2004

Key Steps And Major Challenges in Improving Customer Satisfaction

By Mark Smith, Ph.D., Quadstone

In spring 2004, Quadstone commissioned a study of the approach that large consumer enterprises are taking to improve customer service experiences. The research mainly consisted of in-depth interviews with executives in the financial services and telecommunications sectors, but it also included an e-mail questionnaire with consumers and a “mystery shopping” investigation into customer service centers.

The study finds that improving customers’ satisfaction with service is a rapidly rising corporate priority and companies are increasing investment in tracking customer satisfaction and what drives it. While the majority of companies are beginning to understand aggregate-level trends in customer satisfaction, only a few companies are able to systematically identify how to change service delivery processes for the better — yet this is what all of the interviewed companies most want to do.

Additionally, the study defines a success model for embracing and driving change based on customer satisfaction metrics, and it lays out the capabilities that companies must develop to fully leverage customer satisfaction data in driving change across the organization. The survey finds that telecommunications companies are, in general, more committed and sophisticated in their approach to customer satisfaction than financial services companies. Fundamentally, organizations are striving for a level of understanding that is deeper and more specific than general customer feedback (which is typically that the customers would like service to be delivered faster and more courteously).
Business Context

It is not surprising that executives have recently focused much more attention on the issue of customer experience. In the 1990s, the main priority in customer service was increased efficiency. Companies have now found that the customer experience must also be effective. Customers’ opinions matter, and sometimes those opinions directly drive loyalty and other behavior. Many factors are pushing this change in strategy: consumer financial services and telecommunications markets have become increasingly saturated and commoditized and, as a result, the majority of companies are seeking to maintain value by delivering differentiated customer service. Customers have become more demanding and savvy in the way they deal with large organizations. It has become easier for them to vote with their feet and switch suppliers, thanks to the Internet and intensified regulation.

Organizations are also aware that the wholesale shift from retail outlets to call centers (which are now being offshored) has been alienating for customers; CRM automation and other customer-hostile systems have, in many cases, made this situation worse.

As a result, internal investment has swung from market share-led initiatives to driving profit from existing customers through retention and cross-selling. While some money has long gone into surveying customer opinion, activity has stepped up significantly and organizations are getting more serious about actually using the survey data (along with the mountains of data available internally) as a key driver of change. Improving the customer service experience is thus the new frontier of customer value exploitation and differentiation.

Key Findings In The Survey
Between March and May 2004, Collaborative Insight, a research company based in Boston, conducted in-depth interviews with executives from large consumer businesses in the U.S. and the UK about their approach to improving customer satisfaction. There was an even split between financial services and telecommunications, as well as between territories.

The research was not intended to be comprehensive or statistically robust; it has, however, revealed the following suggestive results about how progress is being made in a world that is increasingly focused on the customer experience. Key findings in the survey include the following:

• Customer satisfaction is a rapidly rising and high-ranking corporate priority: 8 out of 10 organizations reported that customer satisfaction is a top-three business issue.
• All interviewed companies set out to understand more about the service experiences they deliver by doing customer satisfaction surveys: 7 out of 10 companies survey customers on a non-anonymous basis and as frequently as every month.
• Six out of 10 companies have two years’ worth or more of survey history.
• Nearly all interviewed companies use survey data to calculate their own customer service satisfaction metrics to focus and motivate staff: 9 out of 10 have a formal, established metric for satisfaction with service; 8 out of 10 have specific companywide targets for this metric over time; and 8 out of 10 linked the performance of this metric to senior management’s compensation.
• Most organizations are interested in the extremes of satisfaction and dissatisfaction — the general belief is that only the most delighted customers buy more or become advocates, and only the most disappointed customers leave, usually following a catastrophic experience: 8 out of 10 companies talked about improving overall scores or the numbers of extremely or very satisfied customers (either driven by revenue/profit per customer or the effect of advocacy).
• The area of analyzing current trends and the causes of satisfaction and dissatisfaction is an area where the survey found a much broader spread of practice: 8 out of 10 companies use a balanced scorecard to observe trends over time; 6 out of 10 perform analysis that links survey responses to segment behavior data; 2 out of 10 match service delivery process data with the corresponding surveys — these two companies were noticeably more able to identify specific changes that will improve the customer experience.
• All interviewees saw multiple challenges on their horizons, and the survey recorded the top issues that each company mentioned and then classified them broadly into organizational challenges and technical challenges: only 2 out of 10 expressed a need to improve the survey process or clarify metric definition (technical); 4 out of 10 were focused on gaining management sponsorship or companywide understanding of the importance of satisfaction with service (organizational); 7 out of 10, the mainstream, wanted to enhance their analysis approach so that they could clearly identify what changes to make to service delivery processes (technical); only the 4 out of 10 that were beginning to surmount the analysis challenge were concerned with the practicalities of getting the organization to implement the recommended changes (organizational); and 4 out of 10 talked about the challenge of measuring ROI on the changes (technical).

The Capability Model: Building On Experience
The study draws three key conclusions for large, customer-centric organizations:

1. There is a wide spectrum of sophistication among companies in their capability to understand and leverage customer satisfaction data. This spectrum spans three equally divided groupings, which we have labeled “laggards,” “followers” and “leaders.”
2. The majority of companies are beginning to understand aggregate-level trends in customer satisfaction. Only a few leading companies are able to systematically identify how to change service delivery processes for the better, yet this is what all the interviewed companies most want to do.
3. Companies face a definable sequence of challenges to increase the sophistication and efficacy of their approach in utilizing customer satisfaction metrics to drive change through their organizations. That set of challenges divides into five categories of increasing difficulty and complexity: 1) improving surveys and clarifying metrics; 2) gaining management sponsorship or company understanding; 3) better identifying changes through in-depth analysis; 4) getting the organization to carry out the recommended changes; and 5) measuring ROI on the changes delivered. Laggards generally were focused on challenges 1 through 3; followers, on 2 through 4; and leaders, on 3 through 5.

The study defines a capability model for companies to understand these stages, to identify the stage they are at and to build a plan for how to increase their own capabilities based on what more advanced organizations have already done.

Figure 1 is a schematic of the capability model — the major barriers to progress. Although there is some degree of overlap in the way companies address the sequential challenges, we generally found that companies are particularly preoccupied with one challenge at a time.

Implications For Large Consumer Businesses
The findings from the Quadstone study have clearly highlighted that customer satisfaction is of rising importance and that, not surprisingly, significant resources are being invested in trying to improve the experience customers receive. Once engaged in the quest to improve satisfaction, organizations must focus on how to turn the investment in tracking satisfaction into decisions on what to change.

Companies are constantly making changes to service delivery processes, but they clearly need to be able to prioritize them based on evidence.

Many organizations conclude that only by identifying linkages at an individual level between surveys and operational data can they identify the processes that are the root cause for dissatisfaction. One interview revealed, “We are moving on to connect specific customer responses with source data on a systematic basis,” the objective being to identify broken processes that, with an understanding of the customer view, can then be fixed.

The level of interest in identifying broken processes that companies are not aware of is high — “We’re particularly interested if something fails” was one pertinent comment. Comparing what the customer thought happened with what the company thought happened reveals the root cause for dissatisfaction, allowing it to be addressed. The cost of customer dissatisfaction at broken processes is acknowledged to be huge. The combined cost of replacing customers lost through churn, providing services that are not valued and resolving complaints — especially if they get to the regulator — is the driver for change. What companies are seeking is prioritization for these change programs; it appears that exploring the cause-and-effect linkages between survey data and operational data is considered the most effective way of doing this.

Mark Smith is a founder of Quadstone (www.quadstone.com) and president of its U.S. operations. He has over 12 years’ of experience in applying analytical solutions to real-world business problems. Quadstone is a provider of diagnostic customer analysis products that help enable analyst-users to work more collaboratively with business managers to improve their insight, decisions and time to results. Copies of the full study are available upon request. For more information, please visit: www.quadstone.com/info/whitepapers/.

If you are interested in purchasing reprints of this article (in either print or HTML format), please visit Reprint Management Services online at www.reprintbuyer.com or contact a representative via e-mail at reprints@tmcnet.com or by phone at 800-290-5460.