A Customer Satisfaction Research Prospectus

A Customer Satisfaction Research Prospectus

What drives future profitability? If customers are the ultimate source of all revenue, then efficiency in acquiring and retaining customers is the key to long-term financial health. Moreover, given that customers are more costly to acquire than to retain, customer retention should be one of the highest priorities of any business enterprise.

What drives customer retention? Whether or not a customer remains loyal depends critically on the overall level of satisfaction with the current supplier and the availability of alternatives. Hence, to a large extent, customer satisfaction drives future profitability. As such, it is an [Page 242]important measure of a firm's past and current performance, as well as its future financial health.

Customer satisfaction is also an important performance measure at the macroeconomic level. Macroeconomic satisfaction provides valuable information regarding past and current economic performance. In addition, macroeconomic satisfaction may potentially be a leading indicator of future economic performance. It is an important measure of the value of the goods and services produced and an important gauge of the future financial prospects of industries and nations. As such, understanding macroeconomic satisfaction could be critical to improving a nation's economic performance, global competitiveness, and quality of life.

Why is satisfaction increasing in importance? First, customers are an increasingly scarce resource pursued by an increasingly large number of aggressive suppliers. This is because firms in most developed countries face slowing growth, mature markets, and increasing foreign competition. Moreover, cost structures make price competition difficult for these firms. Quality competition is therefore becoming an increasingly attractive alternative. Providing quality that satisfies customers provides an important source of competitive advantage by reducing price elasticities and retaining current customers. Second, there is a growing need for focusing on long-term relationships between customers and their suppliers. Continued growth in services means that more business transactions involve long-term relationships. Moreover, in a competitive environment in which it is increasingly difficult to compete on technology alone, there is increased interest in customer service as a means of product differentiation. In addition, increasingly complex technologies and the increasing emphasis on strategic alliances between buyers and suppliers require a close relationship between buyer and supplier. An ability to deliver superior levels of customer satisfaction is a key source of competitive advantage in building and maintaining such ties.

This means that customer satisfaction is not just another management fad or “flavor of the month” that is likely to disappear in the wake of the next “big idea.” Customer satisfaction is central to assessing past performance and predicting future financial success. Firms that treat customer satisfaction as a fad—and do not respond to the need for restructuring, reorganizing, reallocating resources, and redesigning incentive plans to genuinely pursue customer satisfaction—will fall behind in the competition for tomorrow's customers. There is an urgent need to transcend old [Page 243]ways of doing business and find new ways to efficiently acquire and retain customers.

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