The American Customer Satisfaction Index fell 0.3% in the first quarter, to a score of 76.7 on a 100-point scale, with the organization noting that substantial investment by businesses to make shoppers more satisfied in recent years doesn’t seem to have paid off.
According to ACSI, an upward drift in consumer satisfaction during the first 13 years of this century didn’t continue during the next 13 years through the first quarter of this year, with the current national ACSI score the same as it was in 2013. As such, it appears as if the estimated $100 billion-plus annually invested in customer satisfaction has generated little, if any, detectable returns overall, ASCI concluded.
The financial penalty for losing customers is extraordinarily high, ACSI asserted, citing Spirit Airlines and Sears as examples of businesses that suffered erosion. Reduced upsell opportunity, which also tends to encourage competitive inroads, is another consequence associated with pent-up customer defection. Seller monopoly power and high customer switching costs can undermine a consumer’s ability to defect.
However, companies in competitive markets work to minimize defection by making sure customers are satisfied, which lends to higher returns on investment. ACSI emphasized that current methods employed to ensure customer satisfaction haven’t necessarily been successful. Analytics need to effectively incorporate relevant customer data in a way that is profit related — taking into consideration the role of customer satisfaction — and generates more signal than they do noise, which is often the situation today.
“When customers come back for more, even if they are less than satisfied, pent-up defection, the inverse of pent-up demand, intensifies,” said Claes Fornell, founder of the ACSI. “When realized, the cost is the future revenue and profit lost, plus the additional expenditure for replacing departed customers. It is the flipside of the value escalation from customer retention growth where loyal customers generate multiplicative, and at high levels of retention, exponential revenue growth. Profit improves even more than revenue because the marginal cost of keeping a customer is usually lower than the corresponding customer acquisition cost.”
