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December 18, 2012

Does 'Low Satisfaction' Cause Churn?

By Gary Kim, Contributing Editor

It is a reasonable assumption that most people think consumer satisfaction with any product has something to do with how much the product is purchased. The simple logic is that consumers will buy less of a product they find "unsatisfying," and possibly more of a product with "high satisfaction."

But the notion is not always completely correct, it seems. For decades, cable TV, for example, and airline travel have had relatively low satisfaction scores. But people still buy the products.

The issue, for subscription services, might be whether decreased satisfaction necessarily leads to churn. 

Image via Shutterstock

It is a complicated question, as perceived price, product necessity, performance of competing suppliers and reasonable or better substitutes all play a part in the overall purchase decision.

Fixed line telephone service routinely ranks among the U.S. industries with the lowest consumer satisfaction scores, as measured by the American Customer Satisfaction Index, for whatever reason. It simply is a fact that surveys of U.S. consumer satisfaction routinely show low scores for fixed line telephone service, compared to most other products people buy.

Subscription TV scores rank even lower, but at least those typical scores have risen since 1994. Likewise, reported satisfaction with mobile phone service has risen since 2004.

Reported satisfaction with phone services has fallen 13.6 percent since 1994, the greatest drop for products in any industry, followed by newspapers, which have seen an 11 percent drop since 1994. 

Industry executives might not like the comparison, since, by most accounts, the U.S. newspaper industry has been shrinking for decades, with economics that grow worse over time. 

Other surveys
might provide more comfort. Network issues appear to play a role as well, as subscribers to optical fiber Internet access services are happier than those buying services using digital subscriber lines or cable modem services, for example. 

To be sure, all such data has to be evaluated, as the business implications might not always be so clear. Some of us would argue that high satisfaction scores do not necessarily and automatically lead to high customer loyalty, for example.On the other hand, low satisfaction scores do not necessarily lead to product abandonment, either. 

Airlines routinely get low satisfaction score, but people continue to buy airline tickets. But all might agree that, low satisfaction is a potential problem, and high satisfaction is the preferred outcome of business operations. 

On the other hand, some industries might simply face structural problems. Some might argue that U.S. domestic airlines cannot simultaneously provide “high quality, highly-satisfying service” and also offer customers the lower fares they prefer. 

Some might argue that fixed network communications providers are in something of a similar situation. With customers abandoning the product, it is more difficult every year to raise investment in service attributes that might boost satisfaction. 

In fact, some might argue that even giving the product away for free would not boost satisfaction all that much, as consumers simply are voting with their wallets in favor of mobile phones as the preferred way of using voice services.

Satisfaction with fixed network voice services, as such, might not be as big an issue as preference for alternative products. In other words, even "satisfied" customers might abandon fixed line voice.

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Edited by Brooke Neuman
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