Friday, September 20, 2013

Handle Customer Satisfaction As Relative

How to explain that the higher the degree of customer satisfaction with a store, the lower the share that store has of the marketplace’s expenditures? It would seem that to grow revenues, the retailer should aim for low customer satisfaction.
     Scientists at Indiana University and University of Michigan set out to thoroughly investigate the puzzle. What distinguishes their study is the breadth of U.S. consumer markets they included and the long time period covered by the data they analyzed. Both these factors make the conclusions of the study more believable.
     Here’s my interpretation of the findings:
  • When a store has a high share of the market, that store becomes less likely to continue to give excellent customer service. This might be because the retail business is struggling to keep up with all the business they’re doing. It might be because they figure they no longer need to dazzle the consumers. In any case, this negative relationship between market share and customer service quality provides an opportunity for the smaller retailer to make inroads. Distinguish yourself by the high quality of customer service you give. 
  • High customer satisfaction is not closely correlated—either negatively or positively—with gaining market share. When this finding is put together with the first finding, it explains why statistical analyses show that the higher the degree of customer satisfaction with a store, the lower the share that store has of the customer’s expenditures. 
  • However, there’s an exception to this: When a store’s customer satisfaction score is significantly higher than that of other stores easily available to the shoppers, then market share does usually grow. Because continuing to maintain outstanding customer service costs money, the path to high net profitability is to give outstanding service only to the degree that you separate yourself from the competition. 
     To check where you stand relative to the competition, you could use what researchers at Ipsos Loyalty, Fordham University, and Vanderbilt University call the “Wallet Allocation Rule.”
     Ask your customers about where else they shop and their degree of satisfaction with each of the alternatives to shopping with you. Then look at where you rank compared to the others and plug the numbers into the WAR formula for each customer surveyed:
     To calculate your overall WAR score, average the results obtained from the customers surveyed. Calculate the WAR score for each of the other stores in the same way.

Click below for more: 
Assess the Costs of Customer Satisfaction 
Declare WAR on Customer Loyalty Measures 
Dazzle Your Customers

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