The Empty Promises of Customer Satisfaction

In February 2006, ASQ’s Quality Progress published an article titled, “Link Satisfaction to Market Share and Profitability”.  Because this subject is of great interest too me, I grabbed a hold of it and began reading with great anticipation.  With sweaty palms I turned the pages, my breathing rapidly escalating, my eyes dilating as I poured over the contents.  At last I thought, someone is going to actually show me how satisfaction can be linked to market share growth and profitability.

The article promises the following:

• Increased customer satisfaction can lead to increased market share and profitability.
• There are several ways for organizations to link satisfaction data to financial performance data.
• Organizations can choose their methods depending on the amount and type of data available.

Alas, there is nothing new here.  The article lays out a conceptual argument linking satisfaction with market share growth and profitability.   Unfortunately, neither in the article nor in the real world, is there any empirical evidence that shows a satisfied customer is a profitable customer.  This is what I call the “contented customer theory” which may make some intuitive sense but folds like a house of cards in the light of reality.

The article quickly devolves into a discussion of research design with measurement implications leaving the reader asking a ton of questions.  The basis of the article is summed up in a single sentence:

“The focus of this article includes variables presumed (emphasis added) to be the result of internal and external satisfaction, such as profitability, revenues, market share and share of wallet.”

Well there you have it.  Satisfaction is presumed to be a leading indicator or correlated with factors such as market share, revenues, etc. when it is not.  The author ignores a lot of research showing that satisfaction is not linked to market performance.  At best, satisfaction is a good transactional measure.  By that I mean it provides an assessment of how well the organization has performed on any number of customer interactions such as a sales experience, parts purchase, service work, billing inquiry, etc.

What the Six Sigma and quality community as well as the marketing profession should be focusing on is value – customer value.  This has been shown to be the best leading indicator of market share and top line revenue gains.  Check out Brad Gale’s book, Managing Customer Value or some of the articles written by Frederick Reichhold that provide a solid empirical foundation for eschewing the satisfaction – market share linkage.  In Best in Market: The New Imperative for U.S. Manufacturing (see end of blog for a complimentary copy) I detail the empirical research of Magnus Soderlund and Mats Vilgon who show that satisfaction has no linkage to market performance.  It’s well worth looking at.

As I indicated earlier, customer value is the best leading indicator of market share and top line revenue gains.  Enterprises that seek a systematic approach to market growth need to switch from customer satisfaction as their strategic metric to customer value.  But since measurement alone does not guarantee share growth, the enterprise will have to learn how to manage value to grow share.

The DNA of Six Sigma Marketing (SSM) is value.  SSM uses a fact based disciplined approach for growing share in targeted product/markets by providing superior value.  It is a systematic approach that replaces the hit-and-miss guessing, agenda driven approaches that are in place in many organizations by providing a strong accountability to the real role of marketing which is to drive business growth.

If your organization is still coupled to satisfaction and believes that the way to build market share is to grow satisfaction, start asking some hard questions about the satisfaction – share linkage.  Start by asking “What proof do you have that investing in satisfaction actually grows market share or revenues?”  If there is one single thing you can do to jump start your growth in market share that is learn to measure and manage the value you are providing to your targeted markets.

For a complimentary copy of my new book: Best in Market: The New Imperative for U.S. Manufacturing go to the contact page of www.6sigmarketing.com and download the pdf version.