Assess the Costs of Customer Satisfaction

Are you wasting money building customer satisfaction? Research at University of Mannheim and University of Texas-Austin finds that compared to repeatedly satisfied customers, those who are repeatedly very highly satisfied will be willing to pay higher prices. They’ll shop at your store even when they realize they’re spending more for the same products than they have in the past.
     However, the researchers find that this is not true when comparing the customer who is barely satisfied with the customer who is adequately satisfied.
     Moving a customer from being dissatisfied to being repeatedly barely satisfied will lead to customer willingness to pay you more than loss leader prices. But once you get the customer to the barely satisfied level, you’d have to push hard to get the willingness climbing further. It stays level until you get to the range of very high satisfaction. And an assurance of payoff comes only when that high satisfaction comes from repeated experiences at your store.
     There are other advantages to customer satisfaction aside from customer willingness to pay higher prices, and some of those come even with a one-time experience. Some consumer behavior studies indicate that for routine purchases that don't cost a whole bunch, a customer who leaves your store at least adequately satisfied becomes more willing to return in the future. Research at University of Western Ontario and University of Alberta finds that much of what we think of as customer loyalty is really customer habit. Customers tend to come back as long as they’re not dissatisfied.
     In addition, many retailers take pride in satisfying their customers. Without the drive, running the business would be less fun for them. The payoff here comes from emotional satisfaction rather than sales revenues.
     But if you’re thinking that spending significant amounts of your money to build customer satisfaction to the point where customers will accept prices higher than that at the competition, you might be wasting your resources. The evidence is that this strategy will work only if you hold out for consistently very high levels of satisfaction.

For your profitability: Sell Well: What Really Moves Your Shoppers