Customer Satisfaction in a Slump: Even the Net Promoters Agree

This article discusses the the latest statistics from the American Customer Satisfaction Index (ASCI).

 

A few weeks ago, we saw the latest statistics from the American Customer Satisfaction Index (ASCI), which put the average customer satisfaction rating for more than 225 companies in 45 different industries and government agencies at 75.3 out of a hundred. As it turns out, that number has not improved appreciably for more than a decade.

By way of background, the ASCI is based on customer interviews and an econometric model developed at the University of Michigan's Ross School of Business. The model maps the relationship between customer expectations, perceived quality, and perceived value (a.k.a., the drivers of satisfaction), satisfaction, and customer complaints and customer loyalty (a.k.a., the results of satisfaction).

Given all the recent emphasis on really "engaging" with customers by responding to their unique needs, wants, and interests throughout the pre- and post-purchase process, we found the news that it hadn't improved at all for years pretty astonishing.

Keep in mind that for more than a decade, companies have obsessed over corporate and brand equity and management consulting firms have preached the joys of 100% customer satisfaction. For all that, according the ASCI many firms still earn "C" grades.

Coincidentally, about the same time we saw the ASCI report, we also read the 2011 Net Promoter Industry Benchmarks put out each year by the software firm Satmetrix.  A completely different measure of customer satisfaction from the ASCI, the Net Promoter Score first saw the light of day in 2003 when The Harvard Business Reviewpublished The One Number You Need To Grow, by Fred Reichheld, a senior management consultant at Bain and Company.

Reichheld's objective was (and is) to elevate customer satisfaction metrics to the same level of rigor and importance as financial metrics like revenue growth or return on equity. He proposed an 11-point "recommend" scale from zero—definitely would not—to 10—definitely would "recommend this company to a friend or colleague."  People who score 9 or 10 for a particular company or brand are labeled "Promoters"; people who score 0-6 are, in turn, labeled "detractors"; the 7's and 8's are ignored. Subtract the % of detractors from the % promoters and you have the "net promoter score" (NPS).

Generally speaking, a score over 50% is considered a good score. In some industries where the average NPS is negative, just hitting positive single digit numbers is a relative achievement.  True, NPS is one of the most controversial and often criticized customer satisfaction metrics in marketing research, but true or not, correct or incorrect, it's a score that many CEOs and CFOs look at to gauge how their company and its brands are performing at keeping customers happy.

According to Satmetrix, there were some standouts in their 2011 report. Financial services firm USAA earned the highest NPS across all brands and industries examined at 87%. Grocer Trader Joe's was also up there at 82%, as was Costco at 77%, Apple at 72%, and Amazon at 70%.  Still, we were startled by the negative NPS industry averages and scores for big brands. Insurance had an industry average of –5%, for instance. In credit cards, Citigroup earned a -20%. In insurance, Cigna had a -24%.

Other industry averages and scores for big brands were only just fair. Airlines had an industry average of 15%, for example. We know getting over 50 is considered in the range of good, but we would have expected a brand like search engine giant Google--the #2 most admired brand in the world no less—to do more than just barely make it over that threshold. It got a 53%.

Interestingly, Reichheld himself has said the NPS score of the average American company is 15%. You could get that by having 45% promoters and 30% detractors or 58% promoters and 43% detractors or—and this would be really crazy—you could have only 20% promoters and 5% detractors with 75% of customers and prospects giving you a pass.  Any way you look at it, a 15% isn't exactly a good sign about the ability of American business to make customers happy.  

Our own research does not support the pursuit of 100% customer satisfaction. We have repeatedly found the relationship between satisfaction and profitability to be curvilinear—profitability does rise as satisfaction rises, but only up to a point. After that point, the costs of delighting the customer with ever-increasing levels of satisfaction exceeds the retention-linked profitability.

While the point of diminishing returns differs from company to company, it does exist.  Finding out where it is as part of an effort to better understanding the financial relationship between satisfaction and profitability would certainly help companies set more realistic, achievable, and bottom-line-friendly goals than 100% customer satisfaction.

Still, anyway you look at it, put the ASCI and Net Promoter results together and it's clear that companies have some work to do when it comes to figuring out what drives customer satisfaction with their brands.

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This content was provided by Copernicus Marketing Consulting and Research. Visit their website at www.copernicusmarketing.com.