Why investors are attracted to the number zero.
By Vikas Mittal
Think Customers Crave Delightful Extras? In Fact, They Report More Satisfaction When Firms Simply Avoid Disappointing hem.
This article was originally published by the American Marketing Association.
Many executives believe that delighting customers will improve their satisfaction and increase sales, but few can say how exactly to meet (and exceed) their expectations. Often, they think satisfying customers is a subjective exercise that cannot be precisely defined or measured. But both are possible by examining what satisfies and dissatisfies customers.
For the last two decades, I’ve developed statistical algorithms to measure “satisfier” and “dissatisfier” attributes. My colleagues and I have analyzed hundreds of attributes in dozens of industries to reveal how satisfiers and dissatisfiers can be used to understand customer satisfaction.
Satisfier attributes — also called “delight attributes” — tend to be hedonic, sensory, “nice to have” amenities that are not considered critical to the functionality of a product or service. At a hotel, a chocolate on your pillow would be a satisfier attribute. Dissatisfier attributes are fundamental must-haves that deliver the basic utility customers expect from the product or service.At a hotel, a clean bathroom would be a dissatisfier attribute. At a doctor’s office, an accurate diagnosis is a dissatisfier attribute, while a polite receptionist may be a satisfier attribute.
When it comes to satisfier attributes, a strong performance improves customer satisfaction a lot more than poor performance hurts it. That is to say: Above-average performance has a disproportionately higher positive effect on satisfaction than the negative impact of below-average performance.
In the oil and gas sector, sustainability and social responsibility are satisfier attributes, for example. Going above and beyond expectations on these attributes can have a disproportionately greater impact on customer satisfaction than would the negative impact of doing too little.
Below-average performance on dissatisfier attributes, however, hurts customer satisfaction much more than above-average performance would improve it. In other words, below-average performance on a dissatisfier attribute is more harmful for overall customer satisfaction than the benefit from above-average performance.
Communication is a dissatisfier attribute among oil and gas customers; the negative impact of below-average communication on satisfaction is disproportionately larger than the positive impact of above-average communication.
Companies that want to maximize customer satisfaction, therefore, should focus on reducing below-average performance on dissatisfier attributes. In general, the negative impact of dissatisfier attributes is twice as large as the positive impact of satisfiers. Companies that want to avoid steep declines in overall customer satisfaction should start by minimizing below-average performance on dissatisfiers. Simply put, delighting customers with satisfiers does not compensate for dissatisfying customers with subpar performance on the fundamentals.
Customer experience management is especially prominent in the services sector, with brands such as Ritz-Carlton in hospitality, Sears in retail, JPMorgan Chase in financial services, Ford and Toyota in automotive dealerships and Disney in entertainment. These brands emphasize the sensorial and hedonic aspects of the interaction between brand and customer; the goal is to endlessly please and delight customers by continuously exceeding their expectations. Bloomberg reported on employees at a Ritz-Carlton in Bali who demonstrated this concept when a child with food allergies arrived as a guest. The child required special eggs and milk that could only be obtained in Singapore. The staff called in personal favors and brought in the specialty food from more than 1,000 miles away. This increased the overall customer satisfaction disproportionately higher than if the staff had made a subpar effort to accommodate the child.
Based on this anecdote, should all companies strive to maximize positive performance on all attributes to delight customers? No.
In most cases, trying to continually exceed customer expectations is going to be unrealistic and unprofitable. As customers come to expect more of you, delighting them becomes progressively more difficult and costly. It will require an astronomical investment to maintain these efforts — investments that will squeeze margins and dramatically raise the cost of doing business. Despite the increased cost of delighting customers, competitive pressures will preclude most firms from raising prices to offset these increased costs. Eliminating dissatisfiers, on the other hand, is less costly to implement, easier to sustain, and provides a durable cost advantage.
A B-to-B company we worked with found that customers expected their order to be fulfilled within two weeks. Previously, this company had attempted to delight some customers with rush orders that were fulfilled in less than two days — but others were taking more than three weeks. The average fulfilment time was a week and a half, yet many customers were still dissatisfied when their order took more than two weeks.
Based on our recommendation, the company implemented a strategy to minimize below-average performance by fulfilling every order in fewer than 12 days. It eliminated its policy of rushing orders to delight customers and replaced it with a goal to ensure all orders were met within the 12-day limit. By eliminating rush orders, the company not only saved resources but also improved overall customer satisfaction, leading to an 8.3 percent increase in sales and a 14.6 percent increase in margins.
My colleagues and I also counseled executives from an oilfield-services company that treated communication as a satisfier attribute. Its sales team and customer service representatives were communicating with customers as often as possible in as many ways as possible. Customers received an average of five communications per week, including customer surveys, service representative calls and messages and requests from salespeople to arrange demo meetings for new products. Rather than delighting customers, the communication fatigued and dissatisfied them. Executives were surprised to learn that communication was a dissatisfier, not a satisfier, for its customers.
Further research showed that the optimal communication frequency was one touch point every two weeks, or two communications per month. By going from 20 touch points per month to two, this company decreased its cost of doing business by 20 percent and simultaneously increased sales and maximized customer satisfaction.
The takeaway? Because losses loom larger than gains, most customers are looking for value that comes from consistently meeting expectations, with few, if any, major letdowns. A strategy of minimizing disappointments runs counter to the oft-touted principle of customer delight, which can inflate customer expectations, erode margins, and cost more than it’s worth.
To identify dissatisfier attributes, a company must have a clear and consistent measurement strategy that links attribute performance to overall customer satisfaction. This requires a deep understanding of the attributes that drive customer satisfaction, competency in developing customer surveys and fluency with advanced statistical analysis. But the payoff is huge: Customers are more satisfied and companies can increase sales and margins while using fewer resources overall.
Vikas Mittal is the J. Hugh Liedtke Professor of Marketing and Management at the Jones Graduate School of Business at Rice University.