October 1996 € Volume 6 € Number 10

The Customer Satisfaction Trap

By Tom Wallace

Back when I was young, many years ago, one of my first jobs was with a company that had no routine measures of customer satisfaction. It wasn't that the company didn't care, as much as it just never thought to ask the customers "how are we doing?". That company is no longer in business.

Another early employer of mine was General Motors. The corporation did a lot of market research, including extensive customer satisfaction studies. The problem was that nobody seemed to pay much attention to them. The prevailing mind-set went like this: "We've got all the answers; we know what the customers want better than they do; and if we don't do a great job with customer satisfaction, that's OK&emdash;they'll buy from us because we're GM and we're the best there is." Today, General Motors market share is approaching half of what it was then.

So the answer seems clear. Just satisfy your customers and everything will be fine, right? Customer satisfaction is the road to success and long-term growth, right? No, wrong. It's not that simple.

A few years ago, the phrase customer delight entered our business vocabulary. I remember thinking, "First we had customer satisfaction. Now we have customer delight. What comes next, customer ecstasy?" Customer delight carried with it an implication that the customers had to be continually "warm and giggly" over your wonderful product and service, but I don't think that's what's intended. I think it means&emdash;quite simply&emdash;totally satisfied. It's the difference between "your product and service are OK" versus "your product and service are excellent, and it's a real pleasure doing business with you."

So a lot of people tuned out customer delight. And that's too bad, because it's critically important. Customer delight (if delight bothers you, call it total customer satisfaction or complete customer satisfaction or whatever) is what's needed to retain customers over the long run.

Let's divide the universe of customers into three groups: unsatisfied, satisfied, delighted. Unsatisfied customers will leave at the drop of a hat, as soon as another alternative presents itself. Unless you have a monopoly or nearly so, you probably won't see those customers around for long.

On the other hand, delighted customers will be with you over the long run. Forever? Maybe not. Sometimes new technology forces a change. Sometimes the customer stops being totally satisfied. But, all things remaining equal, the loyalty of these delighted customers will stay very high.

It's the group in the middle&emdash;the satisfied customers&emdash;that represents both the biggest threat and the greatest opportunity. These are the ones on the bubble. They may not be actively looking to make a change, but will probably do so when an attractive alternative arises.

Thomas 0. Jones and W. Earl Sasser, Jr. addressed this phenomenon in their article "Why Satisfied Customers Defect" (Harvard Business Review, Nov.-Dec. 1995), which is based on extensive field research. The authors reference a company whose products most of us have used: "One discovery by Xerox completely shattered conventional wisdom: Its totally satisfied customers were six times more likely to repurchase Xerox products over the next 18 months than its satisfied customers." The authors then make what is the central point of their article: "Merely satisfying customers who have the freedom to make choices is not enough to keep them loyal. The only truly loyal customers are totally satisfied customers."

Jones and Sasser found in their research that the relationship between satisfaction and loyalty is not linear. In addition to the Xerox experience, they cite the auto industry, where "even a slight drop from complete satisfaction created an enormous drop in loyalty." I can relate to this. I've been a loyal Jeep owner for the last nine years, but I am not delighted with their current product and thus my next vehicle will not be a Jeep. That might seem unfair, but we customers can be a heartless bunch. In the authors' words, "What is the overarching lesson? Customers are reasonable, but they want to be completely satisfied; if they are not and have a choice, they can be lured away easily." Therefore, if most of your customers are in the satisfied category, you should not feel good. You should be worried as hell.

Yes, customers can be heartless, but most of them are reasonable. They don't expect perfection; they understand that mistakes happen. They do, however, have a very low tolerance for mistakes not being aggressively corrected. Here are Jones and Sasser again: "If a company excels in making amends&emdash;that is, in recovering&emdash;when such failures occur, customers' faith in the company is not just restored, it is deepened; and they become apostles, spreading the good word about the company to potential customers." And later they add: "The vast majority of companies that excel in satisfying customers rank the ability to react when something goes wrong as one of the most important factors in satisfying customers."

Here are a few questions for you:

1. Should you a) spend your limited resources of money and time to make unsatisfied customers satisfied, or b) spend those resources on delighting your satsified customers?
2. Can you totally satisfy all of your current and future customers? a) yes, or b) no?
3. Delighting customers is: a) financially impractical perhaps irresponsible or b) the best use of your money you can possibly make?

If you answered a) to question 1, please go back to the beginning and start over. For question 2 the answer a) is also incorrect: no, you can't totally satisfy everybody. Committing limited resources to move customers from chronically dissatisfied to satisfied may not gain you much. This implies that a company should select its customers with care. Some of them are, quite simply, not worth working with; you'll never make them happy. (See this column for July 1996: "Being A World-Class Customer.") Other difficult customers might be fine folks, but there may not be a fit between what they need and what you're geared up to do. Rather, target the customers you can delight, and then dedicate your time, money, effort, blood, sweat and tears to doing just that. There is far more to be gained by moving satisfied customers into the delighted category than by merely satisfying the unsatisfied.

Regarding the third question, here again a) is incorrect. Spending money&emdash;effectively&emdash;to generate customer delight is spending money very wisely. Jones and Sasser claim: "Except in a few rare instances, complete customer satisfaction is the key to securing complete customer loyalty and generating superior long-term financial performance."

Robert D. Buzzell and Bradley T. Gale in their book, The PIMS Principles, demonstrate conclusively that companies providing superior customer satisfaction ("perceived quality" is the authors' term) generate superior financial results. Their extensive database showed that the top 20 percent of companies in creating customer satisfaction are almost twice as profitable as the bottom 20 percent. They list the benefits that accrue to companies who deliver superior customer satisfaction: "stronger customer loyalty, more repeat purchases, less vulnerability to price wars, ability to command higher relative price without affecting share, lower marketing costs, and share improvements." Is it any wonder they're more profitable over the long run?

Let's wrap up with two more thoughts, these also from people who know about delighting customers. Scott Cook, co-founder and chairman of Intuit, producer of the hugely popular Quicken software, says, "When you treat a customer so well that he or she goes out and tells five friends how great it is to own your product&emdash;that's when you're doing it right."

Horst Schulze, president and COO of the Baldrige award-winning Ritz-Carlton hotel chain, claims, "Unless you have 100 percent customer satisfaction&emdash;and I don't mean that they are just satisfied, I mean that they are excited about what you are doing&emdash;you have to improve. And if you have 100 percent customer satisfaction, you have to make sure that you listen just in case they change ... so you can change with them." n

Tom Wallace is an independent consultant based in Cincinnati. He is the author of Customer Driven Strategy: Winning Throuqh Operational Excellence (1992) and editor/author of The Instant Access Guide to World Class Manufacturing (1994). Tom is codirector and a Distinguished Fellow of the Ohio State University's Center for Excellence in Manufacturing Management.

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