Houston voices

Tracking customer satisfaction is essential to business success, Rice University research finds

Customer satisfaction directly influences a company's sales, margins, and earnings, and companies that track and measure customer satisfaction have a leg up on competition. Getty Images

Back when people flew nonchalantly for business, an unabashed fan of Great Reputation Airline took a flight where almost everything went wrong. First there was a weather delay. Then there was a mechanical issue. The crew was surly, the pretzels stale. Finally, after landing, when she finally made it to baggage claim, her suitcase was MIA.

But instead of complaining on social media, Great Reputation's passenger wrote off the problems to a rare bad day for the airline – which showered her with drink coupons and later delivered her luggage to her hotel.

GRA's response exemplifies customer satisfaction principles outlined in a paper by Rice Business professor Vikas Mittal and former Rice Business doctoral student Carly Frennea. Summarizing the major research about customer satisfaction, the coauthors codified their findings into a checklist for managers.

While most people understand the general concept of customer satisfaction, in business it's a specific term summarizing a consumer's post-use evaluation of the extent to which a product or service met their expectations. Satisfied customers are more likely to buy again, buy more, recommend a business to others and cost less to serve in the future. A satisfied customer doesn't just cut customer-acquisition costs. She can also help a business attract the right customers through online recommendations.

But the most compelling reason to chase customer satisfaction, say Mittal and Frennea, comes from the University of Michigan's American Customer Satisfaction Index, which tracks customer satisfaction ratings of public companies. Decades of studies based on this data show that customer satisfaction and financial performance go hand-in-hand. While the strength of this association can vary, the link is indisputable. "Nowhere else in marketing has the impact of a customer-based metric on a firm's financial performance been so clearly and consistently established," Mittal and Frennea write.

To help make that satisfaction/revenue link a felicitous one, the researchers recommend the five kinds of data managers should collect.

  • Overall customer satisfaction: A summary evaluation of an overall experience.
  • Behavioral intentions: "Loyalty metrics" that measure the likelihood of buying again, recommending to others and intent to complain.
  • Attribute-level perceptions: Evaluating specific product or service features. For a doctor, this may include time spent waiting in the office, quality of care and explanation of diagnosis. For an oilfield services company, this may include product quality, safety, ongoing service and support, billing and pricing.
  • Contextual information: Comparisons to earlier experiences with a firm and against those with competitors.
  • Customer background variables: Includes gender, age and use of competitors' products and services.

Once these data are collected, the researchers say, managers should use statistical analysis that includes all relevant variables (a method known as multiple regression). This allows companies to figure out which variables have the largest association with overall satisfaction, and which have none. For example, a multiple regression might show that the bad effect of dashing customer expectations is stronger than the good effect of exceeding those expectations. The analysis may also reveal that this effect is stronger for ongoing service and support, say, than for pricing and billing. Conclusion: The company should fix problems with ongoing service and support before tinkering with its pricing and billing strategy.

Companies should also share such customer satisfaction insights with employees and incentivize them to make customer satisfaction a top priority, the researchers write.

To achieve this, executives need to see customer satisfaction as a strategic tool, not just a "good-to-have" afterthought. For this:

  • Treat customer satisfaction as a strategic investment and integrate it into the strategic planning process.
  • Don't skimp on the science. Use the most advanced multiple regression models, and now machine-learning technologies, to distinguish the important from the unimportant, and prioritize the important.
  • Using statistical science, link customer-loyalty patterns to actual behaviors such as repurchasing and repeat sales.
  • Remember that your front-line employees are vital and motivate them by linking their performance to the right customer satisfaction metrics.
  • Don't just maximize customer satisfaction. Balance decreasing and increasing returns on satisfaction initiatives. For this, don't rely on "voice-of-customer" based on casual interviews and discussions. Use rigorously designed customer studies that can be statistically linked to financial results.
  • Share! Summarize satisfaction findings in understandable terms and train employees to act on them. Smart companies use this approach to derive their customer-value proposition and focus the company's strategy.

The formula, after all, is a simple one. If customers are a primary source of your company's cash flow, the first variable in your strategy needs to be making them happy.

------

This story originally ran on Rice Business Wisdom. It's based on research from Vikas Mittal, the J. Hugh Liedtke Professor of Marketing at Jones Graduate School of Business at Rice University, and Carly Frennea, now an executive at Nike, who received her M.B.A. and Ph.D. at Jones Graduate School of Business.

Trending News

Building Houston

 
 

This week's roundup of Houston innovators includes Isabella Schmitt of Proxima Clinical Research, Rob Schapiro of Microsoft, and Lara Cottingham of Greentown Labs. Photos courtesy

Editor's note: In this week's roundup of Houston innovators to know, I'm introducing you to three local innovators across industries — from medical device innovation to energy tech— recently making headlines in Houston innovation.

Isabella Schmitt, director of regulatory affairs at Proxima Clinical Research and principal at M1 MedTech

A Houston life science expert shares what she thinks Houston needs to work on to continue growing as an health care innovation ecosystem. Photo courtesy

Houston is home to the world's largest medical center, but it still tends to fall behind other metros when it comes to life science innovation hub rankings. Isabella Schmitt, director of regulatory affairs at Proxima Clinical Research and principal at M1 MedTech, writes in a guest column for InnovationMap about why this is — and what can be done to change that.

"Houston's life sciences sector holds immense growth potential, but addressing funding, talent recruitment, regulatory navigation, and collaboration challenges is needed for continued success," she writes. "By tackling these issues and leveraging its unique strengths, Houston can establish itself as a significant player in the global life sciences arenas. If we wait too long, we won’t be able to truly establish the Third Coast because another player will come into the mix, and we’ll lose companies like BioMatrix to their golden shores." Read more.

Rob Schapiro, Energy Acceleration Program director and Houston site leader for Microsoft

Rob Schapiro of Microsoft joins the Houston Innovators Podcast to discuss DEI initiatives, translating between the tech in the energy sectors, AI, and more. Photo courtesy of Microsoft

At a glance, Rob Schapiro admits his resume might not make the most sense. A trained geologist with decades of experience in the energy sector, Schapiro made the move to Microsoft three years ago.

"I saw this disconnect between technology companies and energy companies — they didn't really speak the same language," he says on this week's episode of the Houston Innovators Podcast. "I thought I could help potentially solve this problem and work between the two as a sort of translator."

Now, as Microsoft’s Energy Acceleration Program director and site leader for the company’s Houston office, which is located in the Ion, Schapiro is deeply embedded in Houston's innovation ecosystem and is dedicated to helping advance Houston's role energy transition in a sustainable and equitable way. Read more.

Lara Cottingham, vice president of strategy, policy, and climate impact at Greentown Labs

Greentown Houston is asking its current and potential members what they want in a wet lab. Photo via GreentownLabs.com

Greentown Labs is in the early stages of building out a wet lab for its members. But first, Lara Cottingham, vice president of strategy, policy, and climate impact at Greentown Labs, says they want to know what their members actually want.

"We want to announce to the community that this is something we're going to build — but we still need a lot of feedback and input from startups so we can learn what exactly they need or want to see from the wet lab," Cottingham tells InnovationMap. "No two wet labs are the same."

Right now, there aren't any details available about timeline or specifics of the new facility. Greentown is prioritizing getting feedback from its members and having conversations with potential sponsors and corporate partners. Read more.

Trending News