Wednesday, June 20, 2007

Measuring Customer Satisfaction

As the value of customer retention increases manifold and becomes as important as customer aquisition, measuring customer satisfaction has gained impetus 'coz the key to customer retention is customer satisfaction. A highly satisfied customer is likely not only to indulge in repeat purchases,recommend the company and it's products, have lesser problems with pricing fluctuations, gives feedback and may be easier to service.

Methodologies for Measuring customer satisfaction-

1.Complaint and suggestion systems.
2.Customer satisfaction surveys.
3.Ghost shopping.
4.Lost customer analysis.

As I studied a whitepaper on Customer satisfaction metrics from Netpromoter , the strategy corresponding to the second methodology of customer satisfaction survey was thoughtful. While collecting customer satisfaction data, it made sense to collect information corresponding to repurchase intentions and likelihood of a customer recommending the product and brand to another consumer.Analysing data for satisfied, dissatisfied customers and further taking a look at those dissatisfied customers who could pose as detractors and generate negative inputs about a company and it's products made thorough sense.

NPS-The Net Promoter Score
By simply querying consumers on
"How likely is it that you would recommend (Company X) to a friend or colleague? " the "Net Promoter Score" or NPS, can be calculated. The NPS is simply the percentage of customers whose answers identify them as promoters minus the percentage whose response indicates they are detractors.

Three Categories of Customers
NPS is based on the fundamental perspective that every company's customers can be divided into three categories. Customers can be categorized according to their answer to the above Question based on a 0-to-10 point rating scale with "0" representing the extreme negative and "10" representing the extreme positive end.

Promoters (those who answer 9 or 10) are loyal enthusiasts who keep buying from a company and urge their friends to do the same.
Passives (those who answer 7 or 8) are satisfied but unenthusiastic customers who can be easily wooed by the competition
Detractors (those who answer 0 through 6) are unhappy customers trapped in a bad relationship.

A proactive approach towards collecting and analysing this data appears mandatory in an age where customer complaints no longer are an index of a company's customer relationships. More than 96 percent of dissatisfied customers do not complain, most just stop purchasing from a company.

Understanding that a customer is not dependant on an organisation, but the organisation is dependant on him, appears to be the fundamental goal of any organisation.After all, Managing Customer Relationships towards more satisfied customers is the order of the day...

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