ADVERTISEMENT

The Cult of CSAT – How the Pursuit of Customer Satisfaction is Insufficient and What May Replace it

February 2015 Marketing, Pricing

Customer satisfaction has become one of the most discussed leading indicators of business growth. From satisfied customers comes customer loyalty leading to higher sales with existing customers, more sales to referral customers, and potentially greater pricing power from reduced price sensitivity.

But is this real?

According to recent research by Haumann et al., it’s real, but temporary. [1] Fortunately, other forms of customer engagement, such as customer-company identification, can have a longer lasting effect even in the face of competitive poaching.

Customer Satisfaction vs. Customer-Company Identification

Customer-company identification is different than customer satisfaction.  Customer satisfaction measures how a post-purchase customer feels an offering performed relative to their pre-purchase expectations. [2] Customer-company identification measures the perception of oneness with or belongingness to an organization, where the individual defines him/herself in terms of the organization. [3]

Customer-company identification is harder to achieve than customer satisfaction, and clearly there are fewer brands with which most people have any identification.  Customer-company identification derives from self-definitional needs of customers that can be fulfilled identifying with a brand.  These self-definitional needs include self-continuity (maintaining a consistent sense of self), self-distinctiveness (distinguishing oneself in social settings) and self-enhancement (maintaining and affirming a positive self-view). [4]

Measuring customer satisfaction can come from a single question Likert-scale survey such as “I am satisfied with [BRAND OF MEASUREMENT] or “I would recommend [BRAND OF MEASUREMENT] to a friend.

Measuring customer-company identification comes from a six-question Likert-scale survey.  Since the topic of customer-company identification appears to be absent from the web, we offer Mael & Ashford’s original survey questions. They are:

  1. When someone criticizes [BRAND OF MEASUREMENT], it feels like a personal insult.
  2. I am very interested in what others think about [BRAND OF MEASUREMENT].
  3. When I talk about [BRAND OF MEASUREMENT], I usually say “we” rather than “they.”
  4. [BRAND OF MEASUREMENT]’s successes are my success.
  5. When someone praises [BRAND OF MEASUREMENT], it feels like a personal compliment.
  6. If a story in the media criticized [BRAND OF MEASUREMENT], I would feel embarrassed.

(For demonstration purposes of the differences between CSAT and Customer-Company Identification questions, try our business thought-leader survey.)

Temporary Impact

It’s no surprise these things are congruent:  customer satisfaction and customer-company identification both have a positive impact on customer loyalty and willingness to pay. [5]

It should also come as no surprise, the longevity of their impact is limited.  Of these two metrics, customer-company identification impacts loyalty and willingness to pay longer than customer satisfaction.

In the face of competition, firms will have their customer’s poached, even satisfied and customer-company identified customers.  Competitive advertising has been shown to shorten the longevity of the impact of customer satisfaction and customer-company identification on loyalty and willingness to pay.

To thwart these actions, firms can take counter or defensive actions themselves.  Research indicated that the key to limiting competitive poaching lies in the relative level of advertising and engagement.  If the firm maintains their relative advertising spend, the impact of competitive advertising on loyalty and willingness to pay is curtailed.  If the firm reduces their relative advertising spend, the impact of competitive advertising on loyalty and willingness to pay is acute.

Beyond the CSAT

Hence, we get to the challenge to the cult of CSAT (Customer Satisfaction).  Without even touching the debate between CSAT and Net Promoter Scores, we have a serious strategic challenge to the pursuit of customer satisfaction.

Given that (1) 65% to 85% of satisfied customer still defect., (2) satisfied customers that don’t defect are likely to defect as time goes by, and (3) competitors can poach your customers simply by advertising more, is investing in satisfied customers really investing or is it just spending on a short-lived wasting asset?

I know that is a heretical question.  And, that wasn’t the point the researchers were making.  Rather, this question raises the issue that that customer satisfaction isn’t enough to drive loyalty and improve pricing power.

It’s an indicator, but a woefully inadequate one.

Rather, customer satisfaction is more of a single step in the long process towards sustainable customer relationships than an accomplishment in and of itself.  Supported through other forms of engagement, customer satisfaction and its impact on loyalty and willingness to pay can be driven towards the goal of mutually beneficial relationships.  But a single incident leading to a single state of customer satisfaction is likely to have no more than a short-term positive impact, if that.

The concept of customer-company identification is an imperfect move towards a better gauge of loyalty and pricing power according to this research.  Customer-company identification is a longer lasting indicator of both loyalty and willingness to pay than customer satisfaction.

Given its definition, customer-company identification sets a goal for firms to engage their market in manners, which may go beyond simple exchange and offering delivery.  It calls for firms to engage the human (and company if you are in business markets) behind the purchase decision. To borrow from my favorite boot company, it calls for firms to #StandForSomething, something their customers can align themselves with.

References

[1] T. Haumann, B. Quaiser, J. Wieseke and M. Rese, “Footprints in the Sands of Time: A Comparative Analysis of the Effectiveness of Customer Satisfaction and Customer-Company Identification over Time,” Journal of Marketing, vol. 78, no. November, pp. 78-102, 2014.

[2] V. Mittal and C. Frennea, Customer Satisfaction: A Strategic Review and Guidelines for Managers, Cambridge, MA: MSI Fast Forward Series, Marketing Science Foundation, 2010, p. 3.

[3] F. Mael and B. E. Ashforth, “Alumni and Their Alma Mater: A Partial Test of the Refomulated Model of Organizational Identification,” Journal of Organizational Behavior, vol. 13, no. 1, pp. 103-124, 1992.

[4] C. Bhatacharya and S. Sen, “Consumer-Company identifcation: A framework for Understanding Consumers’ Relatoinahips with Companies,” Journal of Marketing, vol. 67, no. April, pp. 76-88, 2003.

[5] P. M. Guadagni and J. D. Little, “A Logit Model of Brand Choice Calibrated on Scanner Data,” Marketing Science, vol. 27, no. 1, pp. 29-48, 2008.



About the author

Tim J. Smith, PhD is the Managing Principal of Wiglaf Pricing, and an Adjunct Professor at DePaul University of Marketing and Economics. His most recent book is Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures.

Tim J. Smith, PhD
More by Tim J. Smith, PhD