Measuring customer satisfaction and loyalty properly

Satisfaction is generally understood as the result of a comparison: the original expectation is set against the actual experience of use. In 1981, Meffert and Bruhn described consumer satisfaction as the match between subjective expectations and the actual experience of having one's motives satisfied. A widespread assumption is that future purchasing behaviour can be predicted from satisfaction scores. For many companies, satisfaction analysis is therefore an established management instrument.

There is no uniform procedure. Questionnaires, online surveys and interviews are used, often with a five-point Likert scale. Either satisfaction is asked about directly, or values such as expectation, impression, experience of use and importance are collected and condensed into a satisfaction index.

Various studies suggest that the relationship between customer satisfaction and long-term customer loyalty is usually only weak (Keiningham et al. 2008, Jones and Sasser 1995, Gitomer 1998). As a rule, only completely satisfied, truly enthusiastic customers are statistically significantly loyal. Nerdinger and Neumann note that some customers switch provider despite being satisfied, while others stay despite being dissatisfied.

A customer is usually already satisfied when they have nothing fundamental to complain about. That does not make them loyal. They may switch to a competitor at the first minor dissatisfaction.

Satisfaction is a concept that is difficult to define and unstable, highly subjective and shaped by external influences. Experience shows that scores are generally high, partly because expectations are corrected downwards after the fact and dissatisfied customers often do not take part in standardised surveys.

In addition, it is usually impossible to distinguish between factors that are relevant in the long term and temporary ones. A short-term price reduction raises satisfaction just as much as a long-term focus on customer value. Lasting loyalty only arises from a focus on customer value.

The results often lead only to generic recommendations that are hard to act on operationally. Good scores lull senior management into a false sense of security. The natural focus is on pleasing every dissatisfied customer, although these customers do not always belong to the relevant target group. Their importance is easily overestimated, while satisfied customers are neglected and drift away in the medium to long term.

Satisfaction analyses evaluate past performance. They are only of indirect significance for the future, and only if external circumstances have remained the same. Armin Töpfer used the image of looking in the rear-view mirror for this, whereas customer loyalty, as a requirement for the future, calls for looking through the windscreen. As a rule, satisfaction is not suitable for assessing purchasing decisions that are still to come.

What is decisive for future direction is the value a customer derives from a service. Studies describe customer value as the decisive factor for long-term business success (Jaruzelski, Staack and Goehle 2014). A threshold and added-value analysis therefore directly identifies the factors that are relevant for future directional decisions.

The threshold value is a customer segment's minimum expectation of a value criterion. If it is not met, the customer is dissatisfied or ends the business relationship. If it is overestimated, the company wastes resources because customers do not appreciate the additional service. Threshold values differ from segment to segment and are not the same as a low level of service.

Seven value criteria are considered: product and service portfolio, time, quality, price, service, relationship and brand. An offering must meet the threshold value in all criteria. Differentiation and value creation arise when potential above the threshold is recognised and served precisely. Töpfer formulates the requirement in a similar way: in addition to basic and performance factors, the factors that delight the customer must be recognised and designed.

Measuring the degree of fulfilment shows the extent to which a company meets the identified expectations from the customers' perspective. This largely corresponds to the function of a satisfaction analysis but is based on solid factors relevant to business success. At the same time, it can be checked whether measures from earlier customer value analyses are having an operational effect.

In the evaluation, the segment's expectation for each service parameter (minimum expectation, additional expectation or no need) is set against the offering and its degree of fulfilment. A minimum expectation that is met must be maintained and secured. A minimum expectation that is not met means an urgent need for action.

If a service is offered but experienced as not fulfilled, the problem lies in the service itself or in how it is communicated. Services for which there is no need are discontinued and the resources shifted. How additional expectations are handled depends on the generic strategy.

The analysis builds on customer segmentation and proceeds in three phases. First, a group of five to ten key people from marketing, sales and management defines the relevant market segments in a two-day workshop and specifies the service parameters for the seven value criteria. Examples of such parameters are standard and customer-specific products, technical support, the delivery time for critical spare parts or the response time to complaints. In addition, there are behaviour- and needs-oriented criteria for distinguishing customers.

Parameters and criteria are then converted into a question-and-answer structure and made available on an online platform. The survey is tailored to the company, can be multilingual, is designed for any number of participants and takes each customer no more than 15 minutes. It runs for two to three weeks, accompanied by response monitoring and quality checks. Optionally, employees from marketing and sales assess customer expectations themselves in the same way.

The third phase comprises the evaluation, the determination of threshold values and value-creation potential per segment and service parameter, and discussion of the results and next steps in the steering team.

Classic satisfaction measurement validates past decisions and performance. Its results remain unspecific: quality is supposed to improve, but what exactly, for whom and how remains open. It does not measure potential, gives no indication of where services should be expanded or scaled back and tempts companies into expanding services without reflection. There is no concrete link to customers' expectations.

The analysis with determination of threshold values and potential aligns decisions with current and future customer expectations. It delivers results for each service parameter, separates threshold value from differentiation potential and distinguishes between customer groups. Degree of fulfilment and satisfaction are measured against concretely defined expectations.

The results answer the question of the extent to which the company meets value expectations from the customer's perspective and where previous assessments were right or wrong. Comparing the internal and external view reveals misjudgements and blind spots. This results in acute needs for action and indications of how offerings should be designed so that they meet minimum expectations and exploit value-creation potential.

On the basis of valid, specific customer data, three types of decision can be safeguarded: using business potential in a targeted way, reallocating resources and saving costs. In addition, there is the question of how internal processes, structures and resources should be developed in order to use market potential and meet market requirements from an integrated market and efficiency perspective.