A White Paper on

BEYOND CUSTOMER SATISFACTION

By Paul Hague, Managing Director, B2B International Ltd &
Daniel Park, Associate Consultant, B2BInternational Ltd
INTRODUCTION
Recently, when preparing for a presentation, Dan was re-reading some material that suddenly
struck him in a different way compared with his preious reading of it! Drawing on original U"#
research from customer satisfaction sureys the #merican marketing specialist $ack Trout makes
the following points!
% &ore than '( per cent of customers who claimed to )e satisfied switched suppliers without looking )ack! *"o many
choices, so little time!+
% ,ighty nine per cent of people who owned cars from a certain manufacturer said they were ery satisfied and -. per
cent said that they intended to purchase another car from that manufacturer!
% /ewer than 0( per cent actually did so!
Source: Trout (2000) p 33.
Clearly the a)oe raises interesting 1uestions a)out the su)2ect of customer satisfaction and it
has prompted a ery liely e3change of thoughts )etween the two authors named a)oe! Out of
this came the decision to write this short 404 5hite 6aper 2ointly!
Common sense tells us that if )usinesses fail to satisfy customers they are unlikely to stay in
)usiness ery long, unless either *a+ they are in a monopoly position with no cost-compara)le
su)stitutes or *)+ they are the final choice supplier in a sector where eery other supplier is
e3periencing fully utilised capacity that is contractually committed and therefore cannot )e
released at higher, market-clearing prices! /ew organisations nowadays find themseles in this
lu3urious position! Conse1uently, as Trout illustrates, the achieement of measured customer
satisfaction may not always translate directly into customer retention and profit oer time!
I" ,7,R84OD8 9#668:
#s a )ackcloth to this discussion, it is helpful to consider e3actly what satisfaction means! If
someone asks you if you are ery satisfied or 1uite satisfied with your car, e3actly what would )e
in your mind: #lthough we all hae a general iew of what satisfaction means, we know that it
means different things to different people! To some it may mean, ;it<s O=>? to others it may mean
;it fully meets all my e3pectations>! The word satisfaction is like happiness @ it is something we
are all interested in and would like to measure )ut it is a soft factor @ one that is hard to 1uantify!
#nother point to )ear in mind a)out these measures of ;soft> issues such as satisfaction and
happiness is that different groups of people could hae different iews! 5e see this in glo)al
sureys of happiness! &ost Nigerians say that they are happy een though it seems that )y
comparison to us, theirs is a pretty impoerished lot! #lso, when we are measuring soft issues
such as satisfaction and happiness, the game keeps moing on! The more we hae the more we
want! The first time we receied free )ottles of shampoo and conditioner in a hotel we were ery
satisfied! Now we take it for granted and e3pect a )owl of fruit and perhaps a )ottle of )u))ly!
9appiness leels across the world hae )een measured for some years and we hae seen a
steady decline in most countries! /or e3ample, in the early AB.(s in the U= we could e3pect
around 'CD of adults to say that they were ery happy! Today that proportion is only E(D!
9oweer, despite the rosy mists of the past, most of us would not want to turn the clock )ack and
lie without central heating, suffer cars that rust and constantly )reak down, and gie up our
electric windows! #ccording to 6rofessor Daniel =ahneman of 6rinceton Uniersity, measuring
happiness is not to )e fully trusted! 9e proposes the concept of ;o)2ectie happiness> in which he
A
measures happiness regardless of what people say! This is something for us to )ear in mind in
customer satisfaction sureys @ can we find measures that indicate satisfaction without
necessarily asking if people are satisfied!
FO8#FT8 I" "TRONG,R IN &O"T 404 &#R=,T"
Fet us turn the discussion to )usiness to )usiness customer satisfaction! 5e can recognise that
the a)oe forces are also at work here! "uppliers are getting )etter and )etter in eery way!
Delieries arrie fast and on time, prices are falling, products are more relia)le - and yet customer
satisfaction leels are stuck at scores of around H out of A( for most companies!
The good news is that the lack of loyalty and degree of supplier switching referred to )y Trout is
not fully eident *yet+ in )usiness to )usiness markets! There are three good reasons for this!
/irstly, )usiness to )usiness )uyers *remem)er there is seldom 2ust one person inoled @ usually
a decision making unit+ hae all to agree in their decision to change their supplier! The ;2ury>
effect of the comple3 D&U restrains the impulsie actions that we can more easily take as
consumers! /or us as $oe 6u)lic, does it really matter if we )uy one )rand of shampoo rather
than another @ )ut it could matter if we change the )rand of lu)ricating oil in the cutting tool!
4uyers are reluctant to make a change to another supplier, eer sceptical that the initial lower
prices and promise of )etter serice may eaporate within months! Of course, much depends on
the type of product that is )eing sold @ how critical is it to the running of the )usiness: 4usiness
to )usiness )uyers hae some sort of map in their minds that positions the products and serices
they are )uying as critical *or not+ to their )usiness! They know when they can chop and change
suppliers and when it isn<t worth the risk!
Loyalty Map For Business To Business Produts
The second factor that ensures greater loyalty in )usiness to )usiness markets is the ;relationship
lock-in>! &any of the products that are supplied to )usinesses inole personal contact with the
supplier! 5e find in surey after surey that customer satisfaction is drien largely )y people
factors! /riendly, knowledgea)le and attentie staff add considera)le points to the customer
satisfaction score! 5e hae more to say on this later )ecause this is most certainly something
that we can influence greatly!
The third factor that ensures relatiely high leels of loyalty in )usiness to )usiness markets is
inertia! #n incum)ent supplier to a )usiness has a good chance of keeping that )usiness *unless
they screw up )adly or if a significantly )etter offer is made )y someone else+ )ecause it is 2ust
too much trou)le to change! Companies, unlike the general pu)lic, hae a we) of knots that tie
them into their suppliers! &ost suppliers hae to go through an approal procedure )efore they
can )egin delieries! Terms of payment and supply agreements hae to )e set up! "aed dialling
num)ers to the incum)ent supplier simply make it easier to place the order! Getting the
paperwork in place is for some companies a sufficient deterrent to leae )usiness where it is
unless there is good reason to change!
0
5hat does all this mean to us in )usiness to )usiness markets: It seems to us that it poses two
important 1uestionsI
A! #re customer satisfaction scores alid in the form we know them today:
0! 9ow can we measure loyalty and use those measures to produce een greater lock in for
our customers:
&,#"URING CU"TO&,R "#TI"/#CTION
In the thousands of studies that hae )een carried out measuring customer satisfaction in
)usiness to )usiness markets, we hae learned that there are no magic )ullet 1uestions! This is
)ecause the answers people gie are not always the ones we can )eliee *remem)er 6rofessor
=ahneman+ and the interpretation we make a)out the answers )y relating one to the other can )e
far more enlightening! In a typical customer satisfaction surey there could )e as many as thirty
to fifty different rating 1uestions on all the aspects of product, serice, alue and deliery!
9oweer, there are eight 1uestions that seem to )e central to the study *with o)ious
modifications to suit+! These 1uestions areI
A! 9ow satisfied are you with the 1uality of the products from #4C Ftd:
0! 9ow satisfied are you with the relia)ility of products from #4C Ftd:
E! 9ow satisfied are you with the alue for money of products from #4C Ftd:
'! 9ow satisfied are you with the sales serice from #4C Ftd:
C! 9ow satisfied are you with the speed of deliery from #4C Ftd:
-! 9ow satisfied are you with the relia)ility of deliery from #4C Ftd:
.! 9ow likely or unlikely are would you )e to recommend #4C Ftd:
H! 9ow satisfied are you oerall with #4C Ftd:
In order that we can relate one 1uestion to another and keep a score for )enchmarking purposes,
we hae to record the answers to these 1uestions on a rating scale of one kind or another!
,eryone reading this in )usiness to )usiness markets will also see the need for o)taining free
ranging responses that help us get )ehind the num)ers!
Juestion H is a ital 1uestion as it proides a )enchmark for comparing with other suppliers and
)ecause we can correlate the answers from the other 1uestions with this score to work out the
key driers of satisfaction! #nswers to Juestion . show a strong link with loyalty and propensity
to )uy in the future!
"o, at this point of time we hae to say that the 1uestions we are asking are pro)a)ly the right
ones )ut we must make sure that we leae room for 1uestions that measure loyalty since a
satisfied customer can still )e at risk from a competitie supplier with a seductie lure!
&,#"URING FO8#FT8
In addition to 1uestion ., that determines the likelihood of recommendation, we can ask other
simple 1uestions to measure loyalty such ;how likely are you to )uy from #4C Ftd in the future:>
9oweer, we would like to push the loyalty discussion further as it seems to us that for loyalty to
really matter, it should )e robust and durable! # supplier with robust loyalty would hae forces
in place that resist other suppliers )reaking in! /or e3ample, a good rep who has )uilt strong
relationships with all the decision makers in the company may )e ro)ust enough to head off
threats from competition! # supplier with durable loyalty will keep the )usiness for a long period
of time! It seems to us that the achieement of ro)ustness is to do with communication and that
the creation of dura)ility relates to alignment with customers< re1uirements and their identifia)le
future needs!
Fet us look at the two elements, ro)ustness and dura)ility, in turn!
E
RO4U"T FO8#FT8
Ro!ustness is achieed )y e3celling on the soft issues that can sometimes )e oerlooked!
4randing and positioning play a key role here een though they may not show up as key driers in
the selection of a supplier! They are not the sort of things that )usiness to )usiness )uyers
acknowledge )ut we know that they are ital in ensuring a fit )etween two companies! #s
customers )ecome more discerning and su)2ected to more fre1uent marketing messages, the
need for identifia)le uni1ueness increases, otherwise the outcome is that products and serices -
and een the organisation itself - )ecome ;commoditised>! The essence of a commodity is that it
is readily interchangea)le with other similar commodities! Therefore the logical conse1uence of
this process is that communicating alues that resonate with customers is ital to achieing a
robust position!
It can )e seen from the a)oe that the key to customer satisfaction oer time is to do with not only
the deal )ut also the relationship and that this is not achieed )y some static once-for-all set of
elements of the marketing mi3! It re1uires a more sophisticated approach! 4ut if this approach
can )e deised initially and managed against the dynamics of changing customer re1uirements
and competitie pressures, the result is sustaina)le satisfaction leading to reduction in selling
costs since, as marketing specialists are 1uick to point out, it costs seeral times less to gain
)usiness with the e3isting customer )ase than )y the constant addition of new customers for the
ones that desert!
Different customers feel comforta)le with different relationships! 5e can categorise these as
;relationship types>I they function independently of the product and serice offering, and this is
summarised )elow! 5hat constitutes customers< comfort can *indeed must+ get re-categorised
oer time as they themseles change under constantly eoling market- and competitor-drien
conditions!
This is summarised in a paper addressing a ery different su)2ect - logistics - written recently )y
Dr $ohn Gattorna, a recognised authority on supply chain design! It illustrates why the
technologies of Customer Relationship &anagement hae )ecome so significant, along with the
concept and practicalities of =ey #ccount &anagement!
Source: Gattorna 2003, p 13.
"ince we need to achiee what is e3plicit in the a)oe, we need to )e a)le to assess the e3tent to
which we meet customer re1uirements in terms of relationship at the moment!
'
Predictability of
Demand
Fow
9igh
Tight
Foose
Relationship with
Customer
Lean
Hedge and
Deploy
Continuous
Replenishment Agile
Demand predicta)le, *e!g! from
historic take-off+, )ut the loose
relationship does not
necessitate a high serice
leel! /ocus on lean and
efficient!
6redicta)le demand, easily
managed through tight
colla)oration with customer! 9igh
serice leel!
Respond opportunistically
and manage yield!
Unplanned or unforeseen
demand, )ut a tight
relationship with customer
demands a high serice
leel and agile response!
DUR#4F, FO8#FT8
Concerning durability and the 1uestion of meeting customers increasing demands, the key is to
moe in synchronisation with the customer! Offering a )etter product or a cheaper product is not
always the answer to meeting changing needs, especially if the adantages can )e 1uickly
copied! In this respect the tools and techni1ues of supply chain management, deeloped initially
for the logistics function of )usiness, hae a powerful impact on marketing! Competitie
adantage can )e deried from anywhere in the supply chain, and the )asis of competition is
moing to one of supply chain ersus supply chain rather than product ersus product!
Creating and managing the critical alue-adding parts of this set of relationships is central to
achieing dura)ility!
Dura)ility is not a)out )eing K)uilt to last<, )ut a)out haing the capa)ility to change whilst
continuing to perform at or prefera)ly a)oe the industry sector aerage! This is summed up
most conincingly in a recent article )y 6rofessor Gary 9amel *9amel 0((E+! #gain, his
perspectie is not specifically to do with marketing and selling, )ut what he has to say a)out the
)roader su)2ect of )usiness strategy has a alid message for marketers! 9amel<s )asic argument
is that alue is more eenly distri)uted than in the past due, inter alia, to ;technological
discontinuities, regulatory upheaals, geopolitical shocks, industry deerticalisation and
disintermediation, a)rupt shifts in consumer tastes and hordes of non-traditional competitors>! In
this the traditional functions of )rand, market share, )usiness model, channel to market, first-
moer adantage *we could add more+ are )ecoming less effectie, since the key to retaining
customers is not simply to do more of the same in a )etter manner )ut to do it different - as
9amel puts it, ;the a)ility to dynamically re-inent )usiness modelsLas circumstances change>!
5e would argue that the sustaina)ility of customer satisfaction is central to this!
In order to assess whether our organisation has the potential for dura)ility *assuming that, on a
snapshot iew, we are satisfying our customers in terms of product andMor serice+ we hae to
answer, 1uite simply and unemotionally, two 1uestions! The first is ;what is our alue to our
customer within the totality of the supply chain:> The second is ;how do we retain and improe
this alue faster than our competitors can catch up:>
CONCFUDING T9OUG9T"
Companies of all types and siNes need to take a hard look at their approach to analysing
customer satisfaction and to measure it in a more perceptie and holistic manner than )y asking
simplistic 1uestions that gie a snapshot iew of product and serice! /or this iew can get
outdated alarmingly 1uickly? and sustaina)le differentiation, as we hae argued in other 404
5hite 6apers, is deried increasingly from other parts of the supply chain!
"atisfying customers is a means to an end! The purpose and goal of customer retention are
clearly the important issues here! The key is in understanding the nature of the relationship and
in anticipating its potential! Not least, it has significant implications for ourseles in 404, and our
404 approach to analysing customer satisfaction on )ehalf of our clients and indeed for ourseles
is )eing continuously improed to take these dynamics into account! This puts any )usiness in a
)etter position to reinforce the triangle of satisfactionMro)ustnessMdura)ility, which in turn translates
into more effectie cost management and reenueMmargin growth!
"atisfaction is of limited alue if it does not lead to retention! 6roduct and serice are no longer
enoughI relationship is emerging as the )igger differentiator, supply chain lock-in leads to
dura)ility of loyalty! The customer satisfaction concept is oerdue for a product recall! #re we on
)oard with this:
C
Re"erenes
$ohn Gattorna K=eynote #ddress to Fogistics Ireland (E< &imeo! *Gattorna 0((E+
Gary 9amel ;The Juest /or Resilience> 9arard 4usiness Reiew, "eptem)er 0((E, pp C0--E!
*9amel 0((E+
Daniel =ahneman reference from ;9ow to )e happy> 4y ,d Crooks and "imon 4riscoe /inancial
Times Dec 0-, 0((E
$ack Trout ;Differentiate or Die> New 8orkI $ohn 5iley 0(((! *Trout 0(((+
6aul 9ague
Daniel 6ark
$anuary 0(('
Copyri#$t % P N &a#ue and ' D Par( )**+
Paul Hague is founder and Managing irector of !2! "nternational. He is t#e aut#or of 12 $or%s on &ar%et researc#. r
aniel Par% is an econo&ist, specialising in 'usiness strateg( and international &ar%eting. He is an )ssociate *onsultant
of !2! "nternational and #as aut#ored o+er 30 pu'lications on aspects of international econo&ics and 'usiness.
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