Do Happy Customers Also Ensure More Profits?

Who do you think is the most important person in your company? No, it’s not the CEO. Nor the CFO, CIO or CMO or any other employee on C-level. The most important person is the customer. In every company. That’s why the focus should always be on the customer and why I help companies work on continuous improvement of customer-centricity, customer-friendliness, customer satisfaction, and customer loyalty. Because satisfied customers are good for the company.

This sounds nice but is it also true? Is there a proven relationship between customer satisfaction and profitability?

Shareholder Value

Chris Denove and James D. Power IV, authors of the book Satisfaction, asked themselves the same question. They investigated the relationship between customer satisfaction and shareholder value in 29 different American listed companies. Denove and Power compared figures from 2004 with figures from 1999. Customer satisfaction could have risen, stayed the same, or dropped compared to the industry average. They also looked at shareholder value: it could also have increased, stayed the same, or decreased.

Customer Satisfaction

Denove and Power made a discovery that far exceeded their most optimistic expectation. The companies that had improved their customer satisfaction compared to their competitors had seen their shareholder value increase by more than 50 percent! Companies that had seen customer satisfaction decline in the previous five years saw shareholder value fall by 28%.

Increase in Sales

A study in the American automobile industry shows comparable figures. Customer satisfaction was measured among 50,000 owners of a passenger car. Each car brand ended up in one of these three categories after the investigation: low customer satisfaction, average customer satisfaction, high customer satisfaction. What turned out to be? Car brands with ‘high customer satisfaction’ had seen their sales increase by more than 40% in the period 1998-2003. Brands with ‘low customer satisfaction’ had seen their sales fall by 4%. How is this relationship in your company?

Crossborder Study

These figures indicate a strong relationship between customer satisfaction and shareholder value and a strong relationship between customer satisfaction and sales. I have no reason to believe that these relationships are different in other countries. To be absolutely sure, I would be happy to discuss ideas about a crossborder study to see the relationship between customer satisfaction and profitability in companies all over the world. If you are interested, don’t hesitate to drop me a line to see how we can work things out.

Frans Reichardt | The Customer Listener

 

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