Last week, we focused on productivity and its impact on IT Value. This week, we will take a look at customer satisfaction and its impact on IT Value
That customers are important to any organization is an understatement. After all, organizations exist because there is a customer for their products and/or services. If there is a goal that transcends any other, it is to achieve superior customer service.
Companies often talk about putting the customer at the “center of the enterprise.” Their actions, however, are not consistent with this lofty objective. Converting intentions into reality takes effort - careful thought, planning and execution. IT can help.
Who is the customer?
The journey toward greater customer satisfaction begins at knowing thy customer. Unfortunately, many organizations stumble on this critical first step. Many large and profitable companies cannot clearly articulate a definition of their “customer.”
We will not be able to cover this topic in depth in this article except for making some critical observations. It is obvious that someone who buys your products and services is a customer.
- Are your vendors your customers too?
- People who buy from them or provide products and services to them you customers as well?
- Are your employees your customers?
What is customer satisfaction?
Another critical step on this journey is to have a clear understanding of customer “satisfaction”. Again, we fall into the trap of thinking that this is obvious and does not need further discussion on discovery. We could not be more wrong or hurt our investment objectives more!
Is a customer satisfied when they buy from you again? Or are they satisfied when they buy more? Or are they satisfied when they tell their friends about your products and services?
Are there degrees of customer satisfaction – one more valuable than the other? Can we measure and track this on a scale?
Please do not be fooled into thinking that if a customer buys from you that they are “satisfied”. There are many reasons why customers buy from you. Market inefficiency is one – they may not know that there is an alternative. It may be a lack of other offerings that makes them come to you. In other words, lack of competition that is keeping you in business. Your business may be one competitor away from disaster and you do not even know it.
Sometimes, locking customers into multi-year contracts is another way to “keep them”. Unless you plan on being in business for a few years, this is not a very good business strategy.
Every organization must understand what customer satisfaction is. And here is another radical thought – ask your customer what it means to them!
What drives customer satisfaction?
Similarly, it is a good idea to understand what drives customer satisfaction and how to measure it.
Customers do not buy products or services they buy a solution to their “problem” or “pain point”. Revlon did not sell makeup they sold hope! You, the IT Organization leader, are not selling applications and servers but solutions to your business customers’ problem.
The words “problem” and “pain point” have a negative connotation, but in this context they do not have to be. The solution can help overcome a “hurdle” as in entering a new market or lowering the cost of ownership of a product to improve margins.
Additionally, some “problems” are point in time but most have a life. The solution must have a lifecycle similar to the problem it is trying to solve. For example, one buys a car for transportation. This car must work for its entire life cycle; not break down; and when it does, you should be there to fix it quickly.
Simply put, the degree to which your solution helps with solving the customer’s problem is the degree of customer satisfaction it creates.
By definition, customer satisfaction starts with product concept and design because if your product does not ostensibly or demonstrably solve their problem they will not buy it! But customer satisfaction is gained along every aspect of the product life cycle – from concept to sunset i.e. when the customer decides to discard the product.
Sometimes, we focus on customer satisfaction at customer “touch points,” forgetting that everything that happens internally in an organization has bearing on how it manifests itself to the customer eventually. For example, product design usually happens outside of the customer’s view but when the product comes out and the customer sees it they will react to what ostensibly happened internally within the organization.
If we are to keep our customer i.e. you satisfied, we better get to the point and make the connection between customer satisfaction and IT value!
How to measure customer satisfaction?
There are two ways to measure customer satisfaction:
- Customer Survey: there is a slew of options in terms of the types of surveys, their delivery method, timing, and location that can provide invaluable insight into customer satisfaction
- Measuring customer actions: what is the customer doing and what does that tell us about their degree of satisfaction with our organization. Many metrics exist to measure customer satisfaction:
- Customer retention: Keeping the customer for a long time increases the value they deliver to the organization because:
i. Customer acquisition costs are much higher than customer retention costs
ii. Incremental loyalty results in exponentially higher purchases
- Customer Acquisition: The fact that customers want to buy from you is sometimes enough to prove that they are satisfied. It might also indicate that they have heard good things about you.
- Repeat customers: percentage of total customers or sales. This is a good indicator of customer loyalty
- Bigger share of the wallet: customers buying more of your products and services is usually a good indication of customer satisfaction
- Use of customer service channels: Customers using your customer services less, sometimes signals:
i. Better product quality and/or
ii. Easy to use product and/or
iii. Extreme customer dissatisfaction resulting in them giving up on you completely!
Usually the best approach is to utilize both these means to gauge customer satisfaction.
IT drives customer satisfaction
For starters, IT can help measure customer satisfaction – using both methods described above - efficiently and effectively. Indeed, customer satisfaction might not be measured at all if not for IT!
But that is not where IT can help the most with customer satisfaction. As we discussed previously, customer satisfaction is built and sustained along the entire product life cycle – from concept to sunset by the customer. IT systems are helping all along this way:
- Want better product concepts? Use IT driven customer focus groups and now, online customer feedback forums
- Want better product design? Use integrated IT systems that integrate customer input to design to manufacturing to supply chain to distribution
- Want to reduce customer dissatisfaction over delay in product delivery? Use integrated IT systems but more importantly, demand forecasting systems linked to point of sale systems that tell you in advance when a product is needed where and in what quantity!
- Want to empower customers? Use cutting edge self service systems
IT is not only an enabler of customer satisfaction; it is indispensable to the task!
Follow the Series
Part I: A Framework for IT Value
We are going to start with a definition of IT value and its imperatives.
Part II: A Framework for IT Value
In Part 1, we lay the foundation for a discussion on IT Value. This week, we look at specific areas where IT creates value.
Part III: A Framework for IT Value
In Part 2, we focused on revenues. This week, we look at the costs in the IT value equation.
Part IV: A Framework For IT Value
In Part 3, we discussed the cost dimension of IT Value. This week, we will discuss the time to market dimension.
Part V: A Framework for IT Value
In Part 4, we discussed the time to market dimension of IT Value. This week, we will discuss the quality dimension.
Part VI: A Framework for IT Value
In Part 5, we focused on quality and its impact on IT Value. This week, we will take a look at productivity and its impact on IT Value
Part VII: A Framework for IT Value
In Part 6, we focused on productivity and its impact on IT Value. This week, we will take a look at customer satisfaction and its impact on IT Value
Part VIII: A Framework for IT Value (Risk Dimension)
In Part 7, we discussed customer satisfaction. This week we will look at the risk dimension of IT Value.
About the Author:
Sourabh Hajela is a management consultant and trainer with over 20 years of experience creating shareholder value for his Fortune 50 clients. His consulting practice is focused on IT strategy, alignment and ROI. For more information, please visit http://www.startsmarts.com/. Or feel free to contact Sourabh at Sourabh.Hajela@StartSmartS.com