Using Customer Satisfaction Research to Improve Financial Performance

One of the main benefits of customer satisfaction research is the capability to observe trends on indicators that are directly tied to financial performance. As a result, companies can use an ongoing measurement program as an early warning/detection system to monitor performance, detect drops and to determine how to take corrective action. While there are many factors affecting a company’s financial performance, observing ongoing service performance—e.g., employee satisfaction and engagement—in addition to customer satisfaction lends a fresh view regarding a firm’s overall financial performance.

Our perspective on improving financial performance closely follows two classic theories, Maslow's Hierarchy of Needs, and the Harvard Business Review's Service-Profit Chain.

The Business Performance Hierarchy

Everything we do at Feedback Systems is based on the simple premise of the Business Performance Hierarchy that the profitability and the value of a company are directly impacted by customer satisfaction, specifically loyalty.

Using Abraham Maslow's Hierarchy of Needs, we can show that cultivating business growth is directly related to meeting the needs of the customer in a hierarchal manner (see figure 1).Figure 1. Business Performance Hierarchy
Figure 1. Business Performance Hierarchy

In terms of Maslow's Hierarchy of Needs, the most basic need a business must meet is to produce a customer-centric culture. With the customer in mind, the business begins to put in place the necessary components to cultivate customer loyalty and employee engagement.

Moving up the hierarchy, the business eventually realizes its full potential demonstrated by increased profits and higher company value.

In other words, customers who are more satisfied with their experience stay longer, recommend more, and buy more—become loyal—compared to customers who are less satisfied. This is further evidenced in the Service-Profit Chain.

The Service-Profit Chain

The classic Harvard Business Review article "Putting the Service-Profit Chain to Work," Professors Heskett, Jones, Loveman, Sasser and Schlesinger describe a linked chain of effects that can be leveraged to improve financial performance.

The way we like to talk about the links of the Service-Profit Chain (see figure 2) is as follows:

  • a product or service is designed to meet customer needs
  • the right employees are hired and trained to promote the product/service and to serve the customer
  • employees become the conduit that forms the customer relationships by taking care of customer needs
  • customers realize the value provided
  • customers are satisfied
  • customers become loyal and continue the relationship, i.e., continue buying and making referrals
  • profits and revenue grow

Figure 2. The Links in the Service-Profit Chain
Figure 2. The Links in the Service-Profit Chain

The Bottom Line

Creating and maintaining a customer-centric culture takes considerable time and effort yet provides a business the best opportunity to realize its true potential.

Getting below the surface and measuring real customer sentiment with a scientific approach is essential to paint an objective and reliable picture that will hold up to scrutiny. Using objective, science-based research enables you to reduce risk and make more informed decisions to decrease costs and increase revenue and profitability.

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