What is customer satisfaction?

"Customer satisfaction provides a leading indicator of consumer purchase intentions and loyalty." "Customer satisfaction data are among the most frequently collected indicators of market perceptions. Their principal use is twofold:"

1. "Within organizations, the collection, analysis and dissemination of these data send a message about the importance of tending to customers and ensuring that they have a positive experience with the company's goods and services."
2. "Although sales or market share can indicate how well a firm is performing currently, satisfaction is perhaps the best indicator of how likely it is that the firm’s customers will make further purchases in the future. Much research has focused on the relationship between customer satisfaction and retention. Studies indicate that the ramifications of satisfaction are most strongly realized at the extremes."

On a five-point scale, "individuals who rate their satisfaction level as '5' are likely to become return customers and might even evangelize for the firm. (A second important metric related to satisfaction is willingness to recommend. This metric is defined as "The percentage of surveyed customers who indicate that they would recommend a brand to friends." When a customer is satisfied with a product, he or she might recommend it to friends, relatives and colleagues. This can be a powerful marketing advantage.) "Individuals who rate their satisfaction level as '1,' by contrast, are unlikely to return. Further, they can hurt the firm by making negative comments about it to prospective customers. Willingness to recommend is a key metric relating to customer satisfaction." Read more...

Customer retention: its impact on the business, the products, and profitability

Customer retention refers to the ability of a company or product to retain its customers over some specified period. High customer retention means customers of the product or business tend to return to, continue to buy or in some other way not defect to another product or business, or to non-use entirely. Selling organizations generally attempt to reduce customer defections. Customer retention starts with the first contact an organization has with a customer and continues throughout the entire lifetime of a relationship and successful retention efforts take this entire lifecycle into account. A company's ability to attract and retain new customers is related not only to its product or services, but also to the way it services its existing customers, the value the customers actually generate as a result of utilizing the solutions, and the reputation it creates within and across the marketplace.

Successful customer retention involves more than giving the customer what they expect. Generating loyal advocates of the brand might mean exceeding customer expectations. Creating customer loyalty puts 'customer value rather than maximizing profits and shareholder value at the center of business strategy'. The key differentiation in a competitive environment is often the delivery of a consistently high standard of customer service. Furthermore, in the emerging world of Customer Success Retention is a major objective.

Customer retention has a direct impact on profitability. Research by John Fleming and Jim Asplund indicates that engaged customers generate 1.7 times more revenue than normal customers, while having engaged employees and engaged customers return a revenue gain of 3.4 times the norm.

Measurements, antecedents and drivers, customer lifetime value, and standardization of customer service >>>

What do the transaction and exchange between the customers and the enterprise yield?

Customer knowledge

Source: Wikipedia, the free encyclopedia
Customer knowledge (CK) is the combination of experience, value and insight information which is needed, created and absorbed during the transaction and exchange between the customers and enterprise. Campbell (2003) defines customer knowledge as: "organized and structured information about the customer as a result of systematic processing". According to Mitussis et al. (2006), customer knowledge is identified as one of the more complex types of knowledge, since customer knowledge can be captured from different sources and channels.

Classification

Various classifications exist: Gebert et al. (2002), classified customer knowledge from an organization's perspective into three types:

1. knowledge about customers: is gained mainly by service management, offer management, complaint management and, if available, contract management. The main user processes of knowledge regarding the customer are campaign management and service management, because both processes personalize their services based on user criteria. Knowledge about the customer must be transparent within the company; although its distribution beyond the border of the company must be controlled, as this type of knowledge can often be directly transformed into competitive advantages. The development of such knowledge is also expensive, because knowledge revelation is quite time-consuming.
2. knowledge for customers: is mainly developed in processes within the company, for example, the research and development section or a production department. Collecting this knowledge is the responsibility of campaign management. It should be refined according to the customer requirements. It is then disseminated to the other customer relationship management (CRM) processes, mainly: contract management, offer management, and service management. CRM manages knowledge, transparency and dissemination of knowledge for customers. Maintaining the balance between comprehensibility and precision is the main challenge when managing this kind of knowledge.
3. knowledge from customers: can be obtained in the same ways as knowledge about customers. Capturing knowledge from customers is based on the important fact that customers who obtain their own expertise when utilizing a service or product can be seen as equal partners. This concept is not regularly understood in the business world and its effects have been poorly researched in academia (Garcia-Murillo and Annabi, 2002).

The same categorization of customer knowledge has been made by others such as Bueren et al. (2005) and Feng and Tian (2005). In another categorization, Crié and Micheaux (2006) divide customer knowledge into two types, namely: "Behavioural" (or Quantitative) and "Attitudinal" (or Qualitative). Behavioral knowledge is easy to acquire and is basically quantitative by nature; that is, containing a customer transactional relations with the company. On the other hand, attitudinal knowledge is difficult to acquire because it deals with a customer's state of mind; but meanwhile it is an important factor for enhancement of customer knowledge because they are directly related to a customer's thoughts and insights.

Customer involvement management

Customer involvement management, CIM, is a marketing management method that takes customer orientation further than customer relationship management. CIM identifies and develops ways to involve customers in the business and product development process, such as design, marketing, sales, customer service, etc. The degree of involvement can be as far as to make the customer a part of the product, experience, and delivery.

Within CIM, the product is considered a subset in what meets the customer's need of identification, problem solving, and consumption. The possibility to influence the design and the consumption itself is assumed to be of great importance for the customers buying decision and loyalty.

One example of a company that uses CIM is Nike. With the concept NikeiD they let the customers design their own sport shoes.

More recently companies have started to build Web portals that involve customers in the idea generation, selection, development, and commercialization. (Source: Wikipedia)

Customer delight definition

Customer delight is surprising a customer by exceeding his or her expectations and thus creating a positive emotional reaction. This emotional reaction leads to word of mouth. Customer delight directly affects sales and profitability of a company as it helps to distinguish the company and its products and services from the competition.In the past customer satisfaction has been seen as a key performance indicator. Customer satisfaction measures the extent to which the expectations of a customer are met (compared to expectations being exceeded). However, it has been discovered that mere customer satisfaction does not create brand loyalty nor does it encourage positive word of mouth.

Customer delight can be created by the product itself, by accompanied standard services and by interaction with people at the front line. The interaction is the greatest source of opportunities to create delight as it can be personalized and tailored to the specific needs and wishes of the customer.[3] During contacts with touch points in the company, more than just customer service can be delivered. The person at the front line can surprise by showing a sincere personal interest in the customer, offer small attentions that might please or find a solution specific to particular needs. Those front-line employees are able to develop a relationship between the customer and the brand. Elements in creating motivated staff are: recruiting the right people, motivating them continuously and leading them in a clear way. Read more on customer delight...

What is customer base?

The customer base is the group of customers who repeatedly purchase the goods or services of a business. These customers are a main source of revenue for a company. The customer base may be considered the business's target market, where customer behaviors are well understood through market research or past experience. Relying on a customer base can make growth and innovation difficult.

Companies with a customer base consisting mainly of large companies may increase their customer base by pursuing small and mid-size companies.

Building The Base

All businesses begin with no customers. These start-ups begin with an abstract idea that slowly evolves into something someone will buy. As these products evolve from abstract ideas into primitive objects that are then further refined, the business that created the product begins to gain customers. The satisfied customers become the repeat buyers and core customer of the company. This is the process that creates the customer base. Most often, successful start-ups begin with low-end or downmarket customers with low income and low costs. As the products or services that are being bought are polished and remade, a company gains higher-end customers who gain interest in the product as it reaches higher levels of functionality, use, or value. As the shift to these higher priority customers continue, they begin to be a larger source of income for the company, and slowly become the main base whom the business lends the most importance. This process, of moving from low-end customers to more expensive and more profitable customers, is known as upstreaming, and is an integral part of the theory of disruptive innovation.

Businesses work very competitively to keep their core market intact. The sellers will research their buyers to increase customer awareness. Keeping products customer oriented has become so huge a priority, in fact, that it has become a large focus of business schools to teach all types of business administrators, from manager to marketer, to keeping the customer in mind for the improvement and creation of sellable products. It is very rare for an established company to lose its core customers to incumbents, and it has been stated that when an established company loses their consumer base via sudden and straightforward methods, it was not an ingenious move of the incumbent that allowed this to happen, but rather a result of the established company “dropping the ball.” Read more...

What is customer attrition?

Customer attrition, also known as customer churn, customer turnover, or customer defection, is the loss of clients or customers.

Banks, telephone service companies, Internet service providers, pay TV companies, insurance firms, and alarm monitoring services, often use customer attrition analysis and customer attrition rates as one of their key business metrics (along with cash flow, EBITDA, etc.) because the cost of retaining an existing customer is far less than acquiring a new one. Companies from these sectors often have customer service branches which attempt to win back defecting clients, because recovered long-term customers can be worth much more to a company than newly recruited clients.

Companies usually make a distinction between voluntary churn and involuntary churn. Voluntary churn occurs due to a decision by the customer to switch to another company or service provider, involuntary churn occurs due to circumstances such as a customer's relocation to a long-term care facility, death, or the relocation to a distant location. In most applications, involuntary reasons for churn are excluded from the analytical models. Analysts tend to concentrate on voluntary churn, because it typically occurs due to factors of the company-customer relationship which companies control, such as how billing interactions are handled or how after-sales help is provided.

When companies are measuring their customer turnover, they typically make the distinction between gross attrition and net attrition. Gross attrition is the loss of existing customers and their associated recurring revenue for contracted goods or services during a particular period. Net attrition is gross attrition plus the addition or recruitment of similar customers at the original location. Financial institutions often track and measure attrition using a weighted calculation called Recurring Monthly Revenue (or RMR). In the 2000s, there are also a number of business intelligence software programs which can mine databases of customer information and analyze the factors that are associated with customer attrition, such as dissatisfaction with service or technical support, billing disputes, or a disagreement over company policies. More sophisticated predictive analytics software use churn prediction models that predict customer churn by assessing their propensity of risk to churn. Since these models generate a small prioritized list of potential defectors, they are effective at focusing customer retention marketing programs on the subset of the customer base who are most vulnerable to churn. Read more...