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OPINION8 January 2015

A sense of satisfaction

Opinion

Customer satisfaction is not necessarily a meaningful metric – a customer can be satisfied but not inspired – so what can research do to better measure customer engagement? By Alison Blair, PwC r2i

For most CEOs, in most businesses, growing the number of customers that the business has, and then retaining those customers, is one of the greatest and most fundamental challenges.  In PwC’s most recent global survey of CEOs (our 17th) we conducted 1,344 interviews with CEOs in 68 countries.

More than 90% of CEOs who took part in the survey indicated that they recognise the need for change, are developing a strategy or have concrete plans for change – or have a change programme well under way. But, to what extent do CEOs know what has to be done, in terms of growing the customer base and retaining those customers?

From Customer Acquisition to Customer Retention

Customer acquisition and customer retention tend to reside in different parts of the organisation.

The sales function may be targeted on achieving certain levels of sales through existing customers – although that’s not quite the same thing as an overt customer retention programme. The CRM or customer care team may also have customer retention targets.

But, whatever the structure, it’s clear that customer retention is not really a clearly defined function within the business: so much for the Pareto law that 20% of customers tend to be responsible for 80% of business. 

A recent survey of marketing managers by Retention Science revealed that around 70% of respondents rated their retention efforts to be average or worse than average.  According to the book Marketing Metrics by Paul Farris, Neil Bendle, Phillip Pfeifer, and David Reibstein, “the probability of selling to an existing customer is 60 – 70%. The probability of selling to a new prospect is 5-20%.”

The Case for Retention

So there seems to be an obvious role for a customer retention focus for the business.  But how can retention work for the business if the nature of the relationship between business and customer is unknown?

More advanced customer engagement models go beyond the traditional measures of satisfaction, loyalty and advocacy to provide organisations with a comprehensive view of their customer relationships, including the emotional aspects that drive their experiences. They focus on measurable elements of engagement such as trust, rapport, emotion and value.

More granular engagement models are designed to provide a holistic view of engagement across multi-faceted aspects of the customer experience (relationship management, customer service and operations).

They also focuses on the customer’s ‘moments that matter’, assessing the entire relationship, across all touch-points. Therefore they more directly relate to the actuality of service provision.

Accountable Research, Accountable Marketing

The idea of embedding research processes at key junctures of actual customer experience makes research significantly more accountable. Customers don’t just buy into brands; they also enter into a relationship that evolves and changes depending on circumstance. 

Marketing that ignores the customer’s position on the experience journey fails to recognise that the customer can have different personas depending on the circumstances. In business to business contexts there are often complex chains of relationship and elements of the relationship between vendor and customer. 

Determining the nature of the relationship, from a research perspective, depends upon different respondents, with different perspectives of the relationship, helping to define it. Some respondents might have more strategic perspectives, others more operational.    

That’s why ‘customer satisfaction’ is becoming less meaningful as a metric that defines customer engagement.  A customer can be satisfied but uninspired. A customer can be dissatisfied but loyal for other reasons e.g. lack of choice or difficulty in switching. 

Customer engagement metrics allow us to understand the customer on their terms rather than our own pre-conceived notions of ‘satisfaction’. Engagement metrics allow us to put the customer at the centre of things – and provide diagnostics on the nature of engagement – for example, the impact on revenue of engagement improvement. 

The Bottom Line

Many types of business are making use of more sophisticated engagement measurements in order to profile their customers based on richer definitions of engagement. Retail banks, for example, now routinely measure customer experience at deeper levels than mere reported satisfaction.

Many businesses – and especially those that depend on extended and protracted customer experiences across a variety of retail and online touch-points – have embraced the concept of customer engagement measurement. This is a step in the direction of better understanding what makes customers engage for the long term. 

Alison Blair is a director in PwC’s Research to Insight Business.

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