Connecting customer loyalty to the bottom line.

HAPPY CUSTOMERS DON'T KEEP YOU IN BUSINESS, LOYAL ONES DO

Nowadays, most large Canadian companies are engaged in some form of activity to measure customer satisfaction. The problem for most companies is that customer satisfaction measurement is seen only as an activity or a series of activities: send a survey to your customers, report on data and (if you're really advanced), act on it. By some miraculous means, these activities are supposed to translate into increased profitability and market share.

A recent study by the Juran Institute found that fewer than 30 per cent of the 200 respondents surveyed believed their customer satisfaction "management" efforts added economic value to their bottom line, and fewer than 2 per cent were able to measure a bottom-line improvement as a result of increased customer satisfaction levels.

Our belief is that most organizations set themselves up for failure in this area. Management is looking for good news, and consequently asks what we call "how much do you love us?" questions. Unwittingly, these organizations use surveys that lead the respondent to positive answers, both in the way questions are phrased and in the way rating scales are presented. Nor are the questions designed to help these organizations understand how customers will behave as a result of how they are treated. If you do not know whether a customer intends to continue to buy from you, then you cannot possibly measure the bottom-line impact of improved customer service. If you measure only customer satisfaction and not loyalty, there's no wonder you have difficulty translating your results into bottom-line benefits. It doesn't pay to have satisfied customers; it pays to have loyal ones.

KNOW THE $ VALUE OF YOUR CUSTOMER

In order to move customer satisfaction measurement from simply an activity to a strategy that connects your customers to your bottom line, it must be managed to the same degree as your sales strategy: regularly and in dollar terms. Most companies know how to calculate the revenue or profit associated with an average customer, but few are able to measure an increase in their bottom line as a result of either increased customer loyalty or customer satisfaction. While it's true that you can …