Why Customer Satisfaction Fails

Buying decisions are based on value, not satisfaction

One of the first organizations to recognize the inherent flaw in customer satisfaction was AT&T.  AT&T was reporting satisfaction levels of 90% or more yet was still losing customers.  There was no statistical  correlation between customer satisfaction and market share (Managing Customer Value, pp. 77-78).  When an AT&T scientist isolated a single question from the AT&T data collection tool, “worth what paid for,” he found a significant correlation to market share as shown below.  The “Worth what paid for"  (WWPF) insight later became the pivotal factor in AT&T’s move from customer satisfaction to the Customer Value Analysis concept employed by GALE consulting, Inc.

"The simple fact is that quality is a relative thing.  What ultimately matters is not the percentage of customers satisfied, but the extent to which customers are more satisfied by your product or services than by your competitor's“
Source: Bradley T. Gale, "Satisfaction is not enough," Marketing News, 27 October 1997

Customers choose between suppliers by evaluating which supplier provides them with the best value.  The choice is driven by evaluating the relative importance of a complete set of factors (product, service, relationship, image and price) and the perceived performance of all suppliers on those factors.  The decision process is not, and will never be, a function of just how satisfied a customer has been with a product or service. 

High levels of customer satisfaction do not equate to loyal customers.  In fact, highly satisfied customers frequently defect to other suppliers.  Consider this question:

"If a competitors offers a better value will your highly satisfied customer remain loyal?"

Customers buy based on value, the relative tradeoff between price and benefits a product provides.  Consider this question:

"Would my company be better positioned to win in the marketplace if we measured value defined from our customers’ perspectives?"

Customer satisfaction is a subset of the value equation.  It's a backwards-looking measurement that typically leads to tactical improvements focused on service and the correction of product defects.  Consider this question:

"Would I be better positioned to differentiate my offerings if I focused improvements on the factors customers actually use to choose between competing suppliers?"

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