Customer Satisfaction Surveys
The Impact of the Surveys on Business Profit & Operations
February 27, 2011
Customer Satisfaction Surveys
The Impact of the Surveys on Business Profit & Operations
As a consumer, most of us have been exposed to a Customer Satisfaction Survey. We either receive a questionnaire in the mail, or receive a phone call as a result of a product that we have purchased or a service that we have utilized. What most of us do not realize; however, is exactly what data is compiled from this survey and what it means to the business entity that receives it. This essay will stress the importance of the data contained in these surveys and how various business and governmental entities utilize this data to improve performance and implement changes in their daily operations.
Imagine that you are the owner of a company. It is obvious that you would want to provide excellent service to your customers; after all, a happy customer is bound to return and tell their friends, family, and co-workers what a great place your company is. Just how do you go about determining if your business is meeting the needs of your customers One obvious determination factor would be the number of customer complaints that you receive. However, consider the possibility that dissatisfied customers may not contact you with their complaints and simply discontinue doing business with your company. The best way to determine if your business is achieving a high level of customer satisfaction is by conducting a survey.
Customer satisfaction levels have a direct influence on the profitability of a business. Repeat customer business, as well as ???word of mouth??? to increase your customer base are two important factors in any business entity??™s bottom line profit margin. In an article in the Journal of Marketing (2007), authors Xueming Luo and Christian Homburg explain one way that customer satisfaction can affect a company??™s profit. Their report states:
Can Customer Satisfaction Affect Future Advertising and Promotion
We first address the suggested effects of customer satisfaction on advertising and promotion efficiency. We define the dependent variable, advertising and promotion efficiency, as the optimized conversion ration of a firm??™s marketing costs (advertising and promotion investments) to its sales performance, or the
firm??™s deployment ability to convert marketing communications costs into
results (Bucklin 1978; Luo and Donthu 2006; Vorhies and Morgan (2003). It
is a measure of a firm??™s marketing productivity (Rust et al. 2004) and an important marketing dashboard metric.
We expect that customer satisfaction induces behaviors (free advertising, loyalty, willingness to pay) that should help the firm become more efficient in its future communication activities. For example, better customer satisfaction can lead to positive word-of-mouth communication, which is free advertising for the firm (see Brown et al. 2005; Ranaweera and Prabhu 2003; Szymanski and Henard 2001), and free advertising reduces the necessity for the company to conduct expensive communication programs to attract new customers. (p. 135)
In essence, a high customer satisfaction level can promote repeat business and word-of-mouth advertising, thus reducing a company??™s advertising expense which results in an increased bottom line profit.. In this study by Luo and Homburg,, they utilized various existing statistical data to support their hypothesis that customer satisfaction
levels can affect future advertising and promotion efficiencies. Luo and Homburg state:
We measured advertising and promotion efficiency with the DEA approach. Developed by operations research scholars (Banker, Charnes, and Cooper 1984; Charnes Cooper, and Rhoses 1978), DEA is a mathematical programming technique that asses the efficiency of resource utilization. Luo (2004) provides a comprehensive review of DEA applications is consumer research, advertising, retailing, and personal selling, among other areas. (p. 138)
Because DEA-based advertising and promotion efficiency results are censored
with an upper bound of 1 and a lower bound of 0, the traditional ordinary least squares cannot parcel out this sample censoring bias. As a result, we employ the two-limit Tobit model (Heckman 1979). Datar and colleagues (1997) apply this type of Tobit modeling in their investigation of time-based new product development. (p. 141)
The following table is the result of Luo and Homburg??™s hypothesis test:
They conclude that:
The impact of customer satisfaction on advertising and promotion efficiency. In H?, we predict that there is a positive impact of customer satisfaction on future advertising and promotion efficiency. As Table 3 reports, the Tobit modeling results indicate that customer satisfaction at Time 1 is positively and significantly related to advertising and promotion efficiency at Time 2 (b=.29, p ? .05). Therefore, the data support H? . (p. 142)
Luo and Homburg??™s study involved surveys of both product-based and service-based sales, and was representative of approximately 43 percent of the United States economy base.
The next section will cover the aspect of customer referrals and customer satisfaction. The Institute of Management and Administration (IOMA) is an organization that is an independent source of information for business professionals. They conducted a survey to entitled CPA Firm Client Satisfaction Report. (2009) In the introduction of this survey, the IOMA emphasizes the importance of recognizing and maintaining customer satisfaction. The report states:
If you have even one unhappy client, watch out. On average, one unhappy client will voice dissatisfaction to ten potential clients who, in turn, tell at least five other people. Thus, about 60 others eventually learn of the complaint. Eighty percent of all unhappy clients will never do business with the firm again. Only 4 percent of all dissatisfied clients bother to let the firm know about their displeasure. (p. 7)
Just as Luo and Homburg??™s study implied that word of mouth is a great advertiser, this report emphasizes that it can also be a company??™s worst enemy. Just imagine what sort of impact that would have on a company??™s bottom line. The entire survey is not available in its from the IOMA without purchasing it; however, a monthly newsletter provided some insightful information regarding this survey. The IOMA newsletter, Issue 09-12 in December of 2009, reports that one of the sections of their survey involved client referrals. The clients were asked if they had received referral requests from their CPA firms. They also asked if they would provide referrals if they were asked to. The compilation of the responses resulted in the fact that most CPA firms did not actively seek client referrals. In this issue of the IOMA newsletter, an article entitled Which Clients Are Being Asked for Referrals??”and What They Are Saying, the results of the survey reported only a dismal 22.4 percent of CPA firms actually request a referral from their clients. The article states:
???If you don??™t ask, you don??™t get??”or so an old saying goes. While this may not always be true when it comes to client referrals??”some clients may voluntarily send business to your firm without even a hint that you??™d appreciate this??”the odds of obtaining referrals are much higher when CPA firms ask outright from their clients.
The impact of a referral is undeniably strong: A happy client may be your firm??™s best marketing resource to obtain new clients. However, a lot of partners would
like to ask for a referral, but aren??™t quite sure how to raise the subject. (p. 1)
The article continues on to offer suggestions on the best way to ask for a referral from a current client. The study shows that a client who is confident in the CPA firm??™s knowledge and ability, is likely to refer new clients to the firm if they are asked to. The following tables are taken directly from the CPA Firm Client Satisfaction Survey:
The decline in the economy has been a major factor in the realization of most business entities that it is time to ???wake up and smell the coffee??? when it comes to customer satisfaction. Times are definitely tough, consumers are looking for a bargain, and competition in the retail business is brutal. If two competing companies are selling the same product, for the same price, the company that excels in customer satisfaction and service is more than likely to win the sale. That great ???advertiser??? mentioned before, ???word of mouth???, is going to spread the news that ???Company A??? bends over backwards for their customers, while ???Company B??? just rings the sale up in the register. Christopher Musico writes, ???According to statistics from a newly published study, organizations are realizing that ???customer satisfaction??? means far more than just ???happy customers??? (p. 1).
Musico discloses facts about a new study released by the Gantry Group, a Massachusetts-based strategic consulting firm that shows a definite movement towards focusing on customer satisfaction. He states, ???According to the study, 79 percent of respondents are searching for customer satisfaction solutions that can detect and pinpoint exactly where to focus efforts for greatest impact??? (p. 1).
Any business involved in selling a product or service for a fee is obviously concerned with keeping their present clientele as well as increasing their customer base. An interesting point to present is that even governmental agencies are concerned with customer satisfaction. The American Customer Satisfaction Index (ACSI) reports scores for federal, state, and local government agencies. In 1999, the federal government selected ACSI to be a standard metric for measuring satisfaction among ???we, the people.??? The ACSI explains their role and purpose on their website:
ACSI measures government agencies, companies, industries, and sectors annually, with new data replacing data from prior years. This allows government entities to track user satisfaction with the quality of their services over time and compare these results to other organizations in both the private and public spheres.
For both government and private-sector measurement, ACSI uses customer interviews as input to a multi-equation econometric model. Customers??™ responses about a government agency are aggregated to produce its ACSI score, thus results are specific to each individually measured organization. Because most agencies do not deal in economic transactions in a strict sense, the ACSI government model includes outcomes appropriate to the public sector in lieu of price-related measures. (p. 1)
The following is the latest report compiled by the ACSI:
One government entity that conducts a monthly survey for customer satisfaction is the Bureau of Labor Statistics. Catherine M. Kazanowski (2008) produced a report entitled Measuring Customer Service At The Bureau of Labor Statistics. In this report, Kazanowski explains that the survey was constructed as a direct result of President??™s Executive Order No. 12862, which issued all federal agencies to implement definitive customer service standards. This report defines the design of the survey, the questions included in the survey, the ratings scales utilized, and the processes used to conduct the survey. The most important factor in this report is the conclusion:
The BLS Customer Service Survey, in conjunction with program specific surveys and dialogs with our customers, will provide us with the needed feedback to improve the products and services of the Bureau. Through the use of this information by employee-driven work improvement teams, the Bureau will continue to serve our customers well. (p. 7)
Even the Internal Revenue Service (IRS) is taking positive steps to improve customer satisfaction. The Statistical Information Services (SIS) office was established in 1989 in an effort to provide excellent customer support and technical guidance. The first customer satisfaction survey was implemented in 2003, and the survey has been modified and improved over the years. Ruth Schwartz and Beth Kilss (2006) published an IRS report entitled Customer Satisfaction Initiatives at IRS??™s Statistics of Income: Using Surveys To Improve Customer Service. In this report, Schwartz and Kilss conclude, ???As discussed, the Statistics of Income Division is using surveys to improve the methods of conducting business, with the emphasis on providing top-quality to its customers??? (p. 7).
There are numerous ways to measure the customer satisfaction levels of a business entity. However, I think the best way to describe customer satisfaction has been stated by some of the most successful and revered businessmen in the United States:
???Do what you do so well that they will want to see it again and bring their friends.???
???Your most unhappy customers are your greatest source of learning.???
Quotations taken from the introduction of the IOMA??™s CPA Firm Client Satisfaction Report (2009).
American Customer Satisfaction Index (2011). Retrieved February 27, 2011, from
Anonymous,. Which Clients Are Being Asked for Referrals-and What They Are Saying. (2009, December) Accounting Office Management & Administration Report, 09(12), 1,7,10,11. Retrieved February 27, 2011 from Accounting & Tax Periodicals
Institute of Management and Administration (2009). CPA Firm Client Satisfaction Report. 7. Retrieved February 27, 2011 from www.ioma.com/issues/SPCRPT/
Kazanowski, C.M. (2008). Measuring customer service at the Bureau of Labor Statistics.
Washington, DC: US Bureau of Labor Statistics.
Xueming Luo,? &? Christian Homburg.? (2007). Neglected Outcomes of Customer Satisfaction.? Journal of Marketing,? 71(2),? 133.? Retrieved February 28, 2011, from ABI/INFORM Global.
Musico, Christopher. (2008). Customer satisfaction is just the beginning. Retrieved February 27, 2011 from http:www.destinationcrm.com/Articles
Schwartz, R. & Kilss, B. (2006). Customer satisfaction initiatives at IRS??™s statistics of
income: Using surveys to improve customer service. Internal Revenue Service,
Statistics of Income Division.