Customer Satisfaction Systems grow a business’s revenues and profits by improving retention among its customers, employees and investors. Loyalty programs measure and track the loyalty of those groups, diagnose the root causes of defection among them and develop ways not only to boost their allegiance, but also to turn them into advocates for the company. Customer Satisfaction Systems quantifiably link financial results to changes in retention rates, maintaining that even small shifts in retention can yield significant changes in company profit performance and growth.

Usage and satisfaction among survey respondents

How Customer Satisfaction Systems work:

A comprehensive customer satisfaction program requires companies to:

• Regularly assess current loyalty levels through surveys and behavioral data. The most effective approaches distinguish mere satisfaction from true loyalty. They ask current customers how likely they would be to recommend the company to a friend or a colleague, and also ask frontline employees whether they believe the organization deserves their loyalty.
• Benchmark current loyalty levels against those of competitors.
• Identify the few dimensions of performance that matter most to customers and employees, and track them rigorously.
• Systematically communicate survey feedback throughout the organization.
• Build loyalty and retention targets into the company’s incentive, planning and budgeting systems.
• Develop new programs to reduce customer and employee churn rates.
• Revise policies that drive short-term results at the expense of long-term loyalty, such as high service fees and discounts given only to new customers.
• Reach out to investors and suppliers to learn what drives their loyalty.

Companies use Customer Satisfaction Systems to:

• Build lasting relationships with customers who contribute the most to profitability, and capture a larger share of their business
• Generate sales growth by increasing referrals from customers and employees
• Attract and retain employees whose skills, knowledge and relationships are essential to superior performance
• Improve productivity, and decrease recruitment and training costs
• Strategically align the interests and energies of employees, customers, suppliers and investors in a self-reinforcing cycle
• Improve long-term financial performance and shareholder value

Brief

Management Tools & Trends

Five key trends emerged from Bain's survey of 1,268 managers.

Selected references

Dixon, Matthew, Karen Freeman, and Nicholas Toman. “Stop Trying to Delight Your Customers.” Harvard Business Review, July/August 2010, pp. 116–122.

Humby, Clive, Terry Hunt, and Tim Phillips. Scoring Points: How Tesco Continues to Win Customer Loyalty. 2d ed. Kogan Page, 2008.

Kumar, V., J. Andrew Petersen, and Robert P. Leone. “How Valuable Is Word of Mouth?” Harvard Business Review, October 2007, pp. 139–146.

Owen, Richard, and Laura L. Brooks. Answering the Ultimate Question: How Net Promoter Can Transform Your Business. Jossey-Bass, 2008.

Pearson, Bryan. The Loyalty Leap. Portfolio Hardcover, 2012.

Reichheld, Fred. Loyalty Rules: How Today’s Leaders Build Lasting Relationships. Harvard Business School Press, 2003.

Reichheld, Fred. “The Microeconomics of Customer Relationships.” MIT Sloan Management Review, Winter 2006, pp. 73–78.

Reichheld, Fred. “The One Number You Need to Grow.” Harvard Business Review, December 2003, pp. 46–54.

Reichheld, Fred, and Rob Markey. The Ultimate Question 2.0. Harvard Business Review Press, 2011.

Reinartz, Werner, and V. Kumar. “The Mismanagement of Customer Loyalty.” Harvard Business Review, July 2002, pp. 4–12.