Posts Tagged ‘Jan Hofmeyr’

Rankings – not Ratings – Matter in Customer Satisfaction Research

October 5, 2010

Companies spend countless dollars each year trying to measure and improve customer satisfaction. Much research has indicated that improved customer satisfaction brings about improved sales and share of wallet. Yet, the relationship is a weak one. Despite how satisfied customers say they are in customer satisfaction surveys, nearly 80% of their spending doesn’t relate to their stated satisfaction. Why is that?

In the Fall 2010 issue of Marketing Research, Jan Hofmeyr and Ged Parton of Synovate offer two reasons for this weak relationship between business results and satisfaction: companies don’t measure how their customers feel about competitors, nor do they recognize that they should be concerning themselves with the company’s rank, not its rating. For these reasons, the authors argue, models of what drives customer share of wallet offer little confidence.

Hofmeyr and Parton suggest some ways companies can make these improvements. Companies can start by getting ratings of the competition from the same respondent. If, for example, you are asking your customers to rate your company on a set of attributes that you believe are part of their customer satisfaction experience, if one customer gives a rating of “9” on a 10-point satisfaction scale, and another gives a rating of “8,” you are naturally inclined to treat the first customer as more likely to return and do business with you in the future. But that is only one piece of the puzzle, the authors say. What if you ask your customers to also rate your competition on those same attributes? What if the first customer assigns a competitor a “10” and the second customer a “7”? Basically what happens is that the first customer is very satisfied with your company, but even more satisfied with your competitor; the second customer may not be as satisfied with your company as the first customer, but he/she is most satisfied with your company over the competition. You’d probably want to spend more time with the one who gave the “8” rating.

In this example, the authors are essentially turning ratings into rankings. The ranking, not the rating, the author’s say, is the key to increased share of wallet. Hofmeyr and Parton’s research showed that if a customer shopped predominantly at two retailers, regardless of rating, as long as a customer rated one retailer higher than the other, then the top ranked retailer got an average of between 59% and 68% share of the customer’s wallet, while the lower ranked retailer got just 32% on average. If a customer shopped at three retailers, the pattern was similar: the top-ranked retailer got as much as a 58% share of the customer’s wallet; the second-place retailer, 25%, and the lowest ranked, 17%.

While it is important to have customers rate your company on satisfaction, it is just as important to have them rate your competition on the same evoked set and then order and rescale the ratings so that you can see where your company stands. By ranking your company with respect to your competition, you can much more easily determine gaps between satisfaction expectations and delivery so that you can increase share of wallet.