Businesses survive because they have customers that are willing to buy their product or service. However, many times businesses fail to "check in" with their customers to determine whether they are happy or not and what it will take to make or keep them happy.

This Business Builder will explain why it's absolutely necessary to measure your customers' satisfaction level, different options for obtaining customer feedback, what is needed to ensure an effective survey, how to analyze the results of your survey, and the next steps you should take to attract new customers and keep your existing ones coming back for more.

WHAT YOU SHOULD KNOW BEFORE GETTING STARTED [top]

The Costs of Poor Customer Service

Just think of the money Coca-Cola might have saved if it had talked to its consumers before changing its cola formula.

Businesses survive because they have customers that are willing to buy their product or service. However, many times businesses fail to "check in" with their customers to determine whether they are happy or not and what it will take to make or keep them happy.

According to the U.S. Consumer Affairs Department, it costs five times more to gain a new customer than to retain an existing one. Other studies have reported that with just a five percent increase in customer retention a firm can raise its profitability by 25 percent and in some cases as much as 85 percent. Similar studies also show the longer a company keeps a customer, the more money it will make. What happens is that consumers spend slowly at first, but with succeeding years of good experiences, they will spend increasingly more. The Profit Impact of Market Strategy (PIMS) database (see the Strategic Planning Institute) shows that firms perceived as having better customer service can charge more for their products and services and still have higher market shares and returns on sales than their competitors.

TARP, a management consulting research company, reports only two to four percent of dissatisfied customers ever complain to a business regarding a poor experience. The others just leave and potentially do business with competitors. Of customers that leave in a given year, 68 percent do because of supplier indifference or poor attitude. In a study conducted by General Electric, GE found that word-of-mouth has a significant influence on consumer decisions, twice as much as advertising. (The Information Challenge, General Electric Company, Louisville, KY, 1982. Survey conducted by Cambridge Reports, Inc. 12 pp.) Negative word-of-mouth can be really dangerous since dissatisfied customers are usually more vocal than satisfied customers. Depending on the industry and the nature of the bad experience, dissatisfied customers will complain to 10 to 20 friends and acquaintances, which is three times more than those with good experiences. Furthermore, this negative information is influential, and consumers generally place significant weight on it when making a decision.

If that isn't reason enough, fierce competition is requiring more and more innovations to differentiate firms from one another. With technology available to virtually everyone today, the traditional feature and cost advantages are no longer relevant. Still, product and service quality provide an enormous opportunity to distinguish a firm from the rest. The Japanese have recognized this and have taught us to expect quality. Today's consumers do, and they know more about products and services than they ever did.

According to futurist and corporate advisor, Faith Popcorn, a new type of customer is emerging in the '90s. They are "vigilante consumers" — a new generation of super consumers that are smart, discriminating and vocal. They demand value for their money and expect the companies that they buy from to be responsible and accountable. When companies don't respond, these "vigilante consumers" will make sure that they will tell anyone who will listen why they shouldn't do business with those companies. Satisfying these smarter consumers just makes good business sense.

The Customer Service Payoff

Customers are your best source of business information — whether it's to improve an existing product or service or whether you're planning to launch something new. There's no substitution for "getting it from the horse's mouth." You open up the lines of communication; you are able to align your resources properly; and you often can make changes or launch products more quickly. When you talk to your customers directly, you increase your odds for achieving success; you "mistake-proof" your decisions and work on what really matters. Just think of the money Coca-Cola might have saved if it had talked to its consumers before changing its cola formula. When you routinely ask your customers for feedback and involve them in your business, they, in turn, become committed to the success of your business.

Watch Out For…

Even the best intentions are subject to problems along the way. Temptations to avoid are:

• Complacency — Obtaining feedback is an ongoing process, not a one-time event. You cannot know what your customers want if you only ask them occasionally. Change is certain, and priorities do shift. The most successful companies are those that can detect and respond to customer changes quickly.
• Analysis paralysis — When you get your feedback, don't analyze it to death. Many corporations have departments full of statisticians to determine the reliability and validity of the feedback; however, they never get around to doing anything with the data. In most cases, it will be very obvious what you are doing well and where you need to improve so it's in your best interest to get started immediately.
• Doing nothing with the feedback — Nothing will do more to cut off feedback from your customers than not doing anything with their suggestions. You must show them that you appreciate their input as well as communicate to them what has changed as a result of their input. If they feel nothing has been done, then they think their efforts have been wasted and will not participate further.
• Fail to listen to your experts — Another valuable source of customer information is your employees. They deal with customers constantly and often have first hand knowledge on what the customers' "hot buttons" are. Too often employers ignore this valuable resource. Big mistake! Talking to your employees should be one of the first steps you take in gathering customer satisfaction data. That way you'll get a preliminary reading on potential problem areas so that you can focus your efforts when soliciting your customers for their feedback.
• Demotivator for employees — Customer feedback should not be used to punish employees. Instead, use it to detect areas for improvement. Improper training and lack of communication and direction are often the culprits of poor job performance. Besides, if customers discover that their input is used to discipline employees, they may stop providing constructive feedback altogether.

Sources of Customer Data

Too many times organizations claim to know what their customers' requirements are, yet too many times they fall short of the mark. Sure, they probably know their customers' general requirements, but do they know what influences customer buying decisions, how important each influencer is, or how they measure up to the competition in the areas most important to the customer? In most cases they don't and won't unless they collect this information in a formal, systematic manner.

* Your own organization — Without looking too far, you'll be able to uncover potential areas of customer discontent by reviewing your key operational data. Check on the status of backlogs or stockouts. Chances are if these are significant you may have some customers that are not happy with your delivery cycle time.

Review your "Returns and Allowances." If they are high, then your customers are sending you a strong message that they were not happy with the product they purchased — either the quality was inferior or they felt the product was misrepresented and not what they expected at all.

Another place to look is your internal reject or yield rates. If your rejects are high or your yields low, you can bet that some bad product is leaking out to your customer. Even if you inspect the product before shipping it to the customer, tests have shown that inspection isn't 100 percent reliable — some bad product will sneak out.

Your employees are a valuable source of information on customer satisfaction. They interact with customers constantly and probably know a great deal about your customers' likes and dislikes. If you are a one-person organization, then you are the one dealing with customers. You know what's going well, what needs fine-tuning, and what needs a major overhaul. You should begin your search for customer data in-house. Most likely you'll uncover some things that you can fix immediately, which will make your customers happy and get you started on the right track.

* Customers — You may want to start with a review of customer complaints and inquiries. If you don't have a systematic way of collecting these, you should develop one. Both are good indicators of opportunity areas. However, don't limit yourself to just complaints and inquiries. Remember, only two percent to four percent of dissatisfied customers ever complain. If you're only looking at complaints, you're missing the other 96 percent to 98 percent who have problems with you.

Surveys and focus groups are two popular methods for gathering information on customer needs. Surveys are written assessments given to individual customers; focus groups are oral assessments administered to groups of customers. Both must have clear and specific goals up front in order to be successful. A broad questionnaire or focus group session provides you with a lot of information, but it's usually too general to do anything with. Objectives must be clear and questions specific if they are to provide results that can be acted upon.

Although focus groups and surveys are similar in what they want to accomplish, one may be more suitable than the other, depending on the application. Surveys are relatively simple and economical to administer and can reach large amounts of customers, but the information can sometimes be limited since it is a one-way exchange of information. On the other hand, focus groups take more time and effort, are often more expensive to administer and may not be as far-reaching as surveys, but their interactive nature may produce clearer feedback. The best results are found when combinations of both techniques are used to identify customer requirements and expectations.

Currently, surveys are the most popular tool used by today's businesses for collecting customer satisfaction data so we will focus the remainder of the Business Builder on developing a customer satisfaction survey.

The Best Kind of Customer Data

More is not necessarily better when it comes to customer data, but getting the right kind of data is critical. Following are the key characteristics of good customer data:

• Ongoing — One thing is certain, change is going to happen. Your customers may change; their needs may change; the environment may change (e.g., the competition gets tougher, regulations change); and most certainly you will change. As you improve, your customers expectations will likely rise, too. In order to respond to these changing needs, you'll need to constantly assess your customers.

• Specific — In order to make the kind of improvements your customers will appreciate, you'll need to have specific feedback. While general inputs may give you an overall tone of the customer, you can only respond to specific feedback.

• Timely — If you're working with old data, it may be obsolete and no longer relevant.

• Focused — Organizations have limited resources. While the problems can be overwhelming, you can realistically work on just a few. If you try to do too much, you might not do anything well.

• Weighted (according to importance) — This will help to narrow the list of opportunities to just the few on which you should concentrate. You can rate the relative importance, but it will be much better if your customer does it.

• Competitive comparison — You should always know where you stand in comparison to your competition. If your customers are willing to provide you with that feedback, take it. And you won't need a separate survey. Look at the sample survey at the end of the Business Builder to find out how you can incorporate this information in the same survey.

There are five steps in conducting a successful survey. They are:

• Decide on your objectives

• Determine who should complete the survey

• Develop the survey

• Analyze the results

• Communicate the results

What do you want to know from the survey? Be specific. Your objectives will form the basis from which your survey questions will be developed. Limit your objectives to just a few. If you try to include too much, you will make the survey too long (customers may not complete it), and you may uncover more than you can handle (you can't respond to it). For instance, Josie's Custom Woodworking wants to increase sales. Josie's objective for her survey is to determine the best ways to increase sales. That might include questions about pricing, the competition, ways to add value, advertising methods, referrals, etc. In order to limit the length of the survey, she may have to be selective with the kind of questions she asks — even though she's chosen just one objective! Now determine the objective(s) of your survey.

Step 2
Determine Who Should Complete the Survey

First and foremost, know who your customers are and which are appropriate to survey! As obvious as this sounds, it is not so obvious in practice. If your market is large, you may have different segments of customers. Or depending upon the industry you may have different levels of customers. Nevertheless, your survey objective(s) will usually determine which customers you should survey. For instance, Sue's Dress Shop supplies dresses for designers and tailors clothing for individual clients. If Sue is interested in ways to increase her commercial business, then she should probably target the survey to her designer customers. Similarly, Oscar's OJ supplies fresh-squeezed orange juice to distributors who then sell to the consumer. If Oscar wants feedback on the flavor of his orange juice, he should survey the end-user, the consumer, not his direct customer, the distributor.

Also, give some thought to the amount of customers you want to survey. Do you have a couple of key accounts? Maybe you want to survey each of them. If you have several customers, you may have to select a portion of those to survey. Also, you may want to hear from different individuals at the same customer site. Often, it is enlightening to get feedback from individuals other than your direct contact. They may have problems that you never hear about because it never gets to your contact and never is reported to you.

Step 3
Develop the Survey

Now, you're ready to develop the content of your survey. The following tips may help you:

• Develop the questions. The questions should relate to your objective(s) and be relevant to what you want to measure. If a question is not relevant to your product or service, you might confuse the customer.

  Keep the questions concise. Long questions can make the survey difficult to read and discourage customers from completing it. Eliminate unnecessary words.

  Instead of: Did the clerk provide me with personal service when I asked to be helped with my selection?
  Aim for: Was the clerk personable?

  Try to avoid vague and ambiguous questions. The customer should be able to understand exactly what you are asking.

  Instead of: Was the bank transaction by the teller acceptable?
  Aim for: Did the bank transaction take a short period of time? (and) Did the teller talk to me in a pleasant way?

  Make sure your question contains only one thought. If more than one are embedded in a question, it's confusing to the customer who wants to respond positively to one thought and negatively to another.

  Instead of: Was the clerk pleasant and did she handle my transaction in a short amount of time?
  Aim for: Was the clerk pleasant? (and) Did the clerk handle my transaction in a short amount of time?

  Do not include double negatives in your questions.

  Instead of: Wasn't the customer service rep never available when I had a problem?
  Aim for: Was the customer service rep always available when I had a problem?

  Develop your questions for the survey

  Items in your survey do not always have to be in a question format. They can be statements, as well. Please refer to the sample survey at the end to see how statements are handled.

  Develop the response format for your survey questions.

• Decide on the response format. This will determine how your customers will provide their answers to your survey questions. There are two commonly used formats — checklist and Likert scale.

  For each question in a checklist format, the customer will be able to respond either "yes" or "no." While this is the simpler of the two, it can be confusing if the customer's answer is actually "maybe," "sometimes," or "mostly." The other format, developed by R.A. Likert in 1932, scale represents a bipolar continuum where the lower end is a negative response and the higher end is a positive response. Examples of Likert scales are:

  • Strongly disagree, disagree, neutral, agree, strongly agree

  • Very dissatisfied, dissatisfied, indifferent, satisfied, very satisfied

  • Very poor, poor, average, good, very good

  On occasion you may want to add NR (not relevant) or NA (not appropriate) to indicate that the customer is not a valid respondent for that question.

  The advantages of the Likert scale are (1) they allow the customer to express their degree of opinion, and (2) scales with five response items have shown to be higher in reliability than those with just two. However, reliability appears to level off after five responses so keep in mind that while a five point scale is better than a two point, 10 is not necessarily better than five.

• Determine the level of importance for each question. Not only is it important to determine how you're doing for each question, but you should also know its degree of importance. Remember, you don't have unlimited resources. You can't improve everything, nor should you expect to. Work smartly. If you know what is most important to your customer, it's only logical that you should start there first, especially if your customer is not satisfied with your performance level. This is one of the most critical components of surveys, but it is one that is frequently omitted. Without it, you can't prioritize your work.

  For example, Barry's Body Shop just completed a customer satisfaction survey that told him he needs to extend his service hours and clean up his shop. Because of his limited staff, Barry only has resources to work on one. Which one should he choose? If he had asked his customers to rate the importance of each, the choice would have been easy. He would have discovered that extending his service hours was highly important while cleanliness was not important at all. The simplest method for determining level of importance is to use a three point scale — 3 for high, 2 for medium and 1 for low. Again, refer to the sample survey at the end of the Business Builder to see how it's done.

• Minimize open-ended questions. An example might be, "How can we improve our service?" Then you would allow space for the customer to write in his answer. Open-ended questions are hard to tabulate. Whenever you can, format your questions so you can use a checklist or Likert scale. Do allow room for comments, though. If a customer has a specific problem, he may describe it in the comments section enabling you to respond — maybe even fix it immediately.

  For example, Karen's Kolorful Kites just completed a survey and discovered that one of its distributors experienced on-time delivery problems. The distributor commented that the carrier Karen utilized did not have a regional depot in his area. He was always the last stop. Karen had no idea this had been a problem and immediately switched his product to a regional carrier. The problem was solved, and the distributor was elated.

• Develop an introduction to your survey. Keep it brief. You should explain the purpose of the survey and include any instructions that are needed to complete the survey. Customers are more likely to complete your survey if they know (1) why you need it and (2) how to complete it. You may also want to collect information such as name, function, or company so you can segregate the data further. Explain in the introduction that while this is optional, it does allow you to follow-up with issues that individuals cite.

• Test the questions on a select number of people before you send your survey out. This will flag potentially confusing questions. You can either have some of your employees complete the questionnaire or sample a group of customers. The choice is yours.

• Keep your survey short. Long surveys will reduce the number of responses that you'll get. A rule of thumb to keep in mind is two pages, front and back (for a total of 4), not exceeding 30 questions.

• Set a deadline to complete the survey. Don't extend it too long because it'll never find its way out of your customer's "In Basket." At the same time, don't make it too soon. Travel schedules and vacations may preclude your customer from completing it. Two weeks from receipt of the survey usually works well.

• Clearly identify who should receive the completed survey. This should be included in your introduction. If it is to be returned to you directly, include a self-addressed stamped envelope to facilitate the return of the completed survey.

• Thank all who participated. Everyone is asked to complete surveys these days. Make sure you include a thank-you in the survey introduction. Also, if the respondent provides his name, it is customary to send a note or card thanking him again and explaining the appropriate follow-up actions.

Once your customers return the completed surveys, you are ready to compile the data and analyze the results. In most cases, competency with a computer spreadsheet program is all you'll need. First, you'll need to design the spreadsheet, enter the data, then choose the graphs to summarize the results. These might be pie charts, bar graphs, or line graphs which are available in all of the popular spreadsheet programs.

For both the checklist and Likert format, you'll be able to determine the percentages of positive and negative responses for each response. Each "yes" is a positive response and each "no" is a negative response for a checklist. With the Likert scale, you can determine positive and negative percentages by combining the responses on each end of the continuum. For instance, Strongly Agree and Agree become positive; Disagree and Strongly Disagree become negative. When this happens, you transform the five-point scale to a three-point scale that just happens to be the same as your "Level of Importance" scale and very similar to a checklist format.

If your customers decide to fill in the biographical information (name, function, company, etc.), you'll be able to do some further manipulation that may prove helpful. For instance, you may want to sort the survey data by type of customer, function, sales level, product purchased or whatever makes sense to determine if any trends are developing.

Kath's Karaoke Kompany decided to sort its customer satisfaction survey results by job function. After analyzing the results, Kath found that the manufacturing and sales people gave her company high satisfaction results. Yet, the executives gave her company low marks. It was obvious that she needed to investigate why the executives were dissatisfied. If she had not sorted the data in this manner, she may have overlooked this issue.

Step 5
Communicate the Results

After you have analyzed the data, it is now time to communicate the results to your customers. This is absolutely necessary if you want to continue to receive feedback from your customers. If they feel that the survey results do not get the proper attention, they'll be reluctant to provide you with feedback in the future.

Get your customers involved when you can. This gives them ownership of the issues, makes them part of the solutions and allows them to experience firsthand your dedication in satisfying their needs. You might also want to solicit their input for your annual goals and objectives. Then, tell them how you're doing against the goals, and tell them frequently. That way they know that progress is being made and that you value their opinions and their participation. Plus, it provides you with some great public relations.

The Bedrock Bank Corp. decided to communicate what they were doing with their customer feedback during their Customer Appreciation Week. Instead of the general promotions, free coffee and giveaways they were accustomed to providing, they designed a major communication campaign to inform their customers of the survey results and announce their follow-up plans.

NEXT STEPS [top]

Once you've identified your customers' needs, your strengths and weaknesses, and the priority for improvements from the surveys, pick a few areas on which to concentrate your organization's efforts. If there are some simple, quick fixes then, by all means, make them, but focus the majority of your efforts on those "vital few" that will achieve the biggest gains in satisfaction levels. Identify some key performance indicators for customer satisfaction, develop goals, and measure your progress against those performance indicators. Also, under-promise and over-deliver. Keeping expectations slightly below perceived performance keeps your customer happy and makes you look good.

Ongoing assessments are needed to keep a current and accurate account of customer satisfaction. Remember, surveys and focus groups are valuable in detecting shifts and spotting trends in satisfaction levels, for providing incentive for continuing progress, and in identifying new opportunities for improvements. Direct customer input is imperative. A system that doesn't include large doses of customer input is meaningless. Also, updates or revisions to performance indicators are often necessary to reflect changes in customer needs.

As quality guru John Guaspari wrote in I Know It When I See It, "It doesn't matter whether your own records show high satisfaction levels, it's the customer's perception that counts."

SOME THOUGHTS ON HOW TO SAVE MONEY [top]

• Design and administer the survey yourself. Although there are survey houses who will try to convince you that this is much too complex a process for you to undertake alone, don't be intimidated. You know your customers. Who better than you could design a survey that assesses your customers' needs? A thorough knowledge of statistics will not be necessary. If this is the first time you've asked for feedback, it will be very obvious what you are doing well… and not so well. If you follow the advice given in this Business Builder, you will be quite capable of creating a survey that provides you with relevant feedback that you can act upon.

  With each succeeding survey, you'll perfect the process. Furthermore, when you conduct the survey yourself, you internalize it, and it becomes the cornerstone from which you make some very important business decisions — not just another program performed by an unrelated third party.

• Utilize available software programs. Due to the increasing use of surveys, many companies have developed software packages that simplify the survey process. Not only do these programs provide a broad selection of questions to include in your survey, but they also perform both elementary and complex statistical manipulation. Although you can spend several thousand dollars for ones with lots of bells and whistles, there are more moderately priced packages for under $500. You can find a listing of these in the Resources section at the end of the Business Builder.

RESOURCES [top]

Books

Measuring Customer Satisfaction — Development and Use of Questionnaires by Bob E. Hayes. (ASQC Quality Press, 1998).

Delivering Quality Service: Balancing Customer Perceptions and Expectations by V.A. Zeithaml, A. Parasuraman and L.L. Berry. (The Free Press, 1990).

Customer Satisfaction: The Other Half of Your Job by Dru Scott. (Crisp Publications, Inc., 1991).

Customers For Life: How to Turn That One-Time Buyer into a Lifetime Customer by Carl Sewell and Paul B. Brown. (Doubleday, 1998).

Software

Apian Software — Survey Pro

Creative Research Systems — The Survey System

Inquisite

Professional Groups or Trade Associations

American Society for Quality Control

International Customer Service Association

Other Sources

• Samples of surveys from banks, restaurants, dry cleaners, etc.

• Statisticians from universities, colleges, corporations

• Corporate Total Quality Management (TQM) Directors

• Survey houses

Writer: Susan Smith