In short, the answer is “No!” – to the question increasing customer satisfaction means increasing sales, one must do more than just increase customer satisfaction scores. Researchers at the Chartered Institute of Management Accountants, who have been delving into the customer service practices of a major US homebuilder, expected to find that impeccable customer service would make it easier to keep prices high, reduce marketing costs and improve customer satisfaction. brand loyalty, all of which would ultimately lead to strong financial performance. But that’s not how it works: what they actually found was that while keeping customers happy generally pays off financially, profits start to plummet once satisfaction levels of 90-95% are reached.
So what is going on? Well, simply put, good customer service is expensive. “Companies can spend too much on satisfaction,” says research expert Kenneth Merchant. ‘Moderate customer satisfaction may be good enough for many companies, given that there are diminishing returns on improvements and investments in customer satisfaction. Customer service already accounts for a high proportion of many companies’ costs, up to 60% for high-tech companies, according to the analyst (which is why an increasing number of companies are looking to save their pennies by outsourcing their operations). And if you had that mind, you could spend much more. So at some point, you have to draw the line, or your cost of sale will be too high.
Rather, this research goes against the grain of recent trends. Many UK businesses have upped their game in customer service in recent years: led by the likes of John Lewis, our businesses were recently voted as having the best customer service in the world in the UK’s Customer Satisfaction Index. UK (for UK punters, admittedly). And such measures have increasingly become among the most important quality performance indicators. But this research reminds us that you can go too far: there are times when good is good enough. Another good example is the lunch experience at a fast food restaurant. When you decide to go to a fast food restaurant for lunch, you decide to use drive-thru and order a cheeseburger, fries, and a larger Coke. First you get into a row of other cars, place an order, pay your money, and without a single smile hand over a bag containing your order. You walk away once you pull out a potato chip hoping it was crispy and instead it was soggy and lukewarm. Surprisingly, you got a regular hamburger instead of the cheeseburger you ordered. Your experience with lunch is bad. Suppose fast food is committed to customer satisfaction.
They advertise that if there is any dissatisfaction, they will immediately replace the order free of charge and even deliver a new meal wherever it is. This increases customer satisfaction. However, customer satisfaction alone is not the ultimate goal. Because to be a profitable business, an organization must also be efficient. Therefore, if the fast food restaurant has to hire more people to cook more hamburgers, it will quickly recognize that the cost of being totally focused on effectiveness, without efficiency, will result in an unprofitable situation.