as published on January 27, 2012 by the Dallas Business Journal
Customer satisfaction and customer retention, although correlated sometimes, don’t have a straightforward relation.
Customers may continue buying your products and services because of:
- Habit or inertia when the cost and risk of changing is perceived to be higher than the benefits and the customer experience may be “good enough.”
- Competing alternatives are as good or nonexistent.
- Clearly superior products and services as well as excellent customer experience.
In customer satisfaction research, we typically ask about overall satisfaction with products or services. When inertia, lack of competition, price and partially good offerings are the main reasons why customers continue patronizing a product or service, an overall customer satisfaction score may be misleading.
To avoid being misguided by an overall customer satisfaction metric, you should include other metrics, such as likelihood to continue being a customer and likelihood to recommend the products and services to others. The fact is that no single customer satisfaction metric alone will be accurate enough.
Before putting a lot of weight on a single satisfaction score, making business decisions or basing employee compensation on it, design a customer satisfaction research plan with metrics that reflect the performance of your business in key areas, customer touch points and how you stand against the competition. Consider monitoring:
- Product/service design and performance
- Customer experience with your product or service
- Customer service
- Usage and satisfaction with competing alternatives
- Price sensitivity
When it comes to customer retention, adopt a holistic approach, use more than one metric and focus on key drivers.