First Business

June 19, 2009

The Customer Satisfaction Survey Snag

Customer satisfaction has been a major business buzz phrase for more than a decade. In his 2001 book, The Loyalty Effect, Fred Reichheld claimed that customer loyalty is a dominant determinant of success in business. He purported, for example, that a 5% improvement in customer retention for an advertising agency can create a 95% increase in average profit per customer over time. He claims similar (though less extreme) effects in most other industries.

To address the loyalty question, consultants often persuade companies to spend time and money trying to ensure that they know precisely how pleased their customers are. Theoretically, this is vitally important information. Empirically, however, it can be of little worth. In our experience, many large companies kid themselves about how accurate a picture they really get. So how do you get truly worthwhile feedback?

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