Are customer satisfaction and profitability linked?

[Claes Gefvenberg]

Re: Customer Satisfaction: A Gimme

Let's look at the reality. Can a company ever 'completely' satisfy all customers?

No, no... absolutley not. That wasn't my point. I just think that looking at extremes is a good way to examine questions of this kind, and my conclusion is the same as yours: Customer satisfaction and profitability are linked. See post 2 in this thread.

/Claes

 

[energy]

A commercial this morning on TV was " There's a link between a smile and test driving a Toyota or Saab. Whatever. Is that why the driver is smiling? Could he be laughing?
Interesting fact to pass onto members, for those, like me, I thought I could vote in a Poll in cognito. If you click on the link (total votes) to the right of the color bar, you can see "who" voted what. It's an interesting feature. I voted not sure, but thought it was a "secret" because I didn't post one way or the other. The list puts the thread in a new perspective. You see the names of some knowledgable members on both sides of the spectrum. For that reason, to me, there is no absolutely correct answer. Just opinions. Some are very persuasive, for both views

Note: Not all Polls are set up with this option. If there's no line under the numbers, no link to a list of Poll voters. Must be an option in the developing the Poll. I like it.

 

[D.Scott]

Re: Customer Satisfaction: A Gimme

Just my quick thought on this. I think there is a direct link between profitability and customer satisfaction.

The lower my profit, the more the customer is satisfied.

(Marc, we need a tounge-in-cheek emoticon)

Dave

 

[Craig H.]

Re: Customer Satisfaction: A Gimme

What I would like to see is some folks giving some facts (data) to show that by increasing Customer Satisfaction they increased their bottom line. Hopefully this will include a history (data wise) some measure of Customer Satisfaction.

Marc:

I would like to see data like this, as well. But, even if it was offered, I don't think I could take it at face value. Why?

Because there is no way to control for other factors, IMO. We do not conduct our business in a controlled environment. Quite the opposite. So, there is no way that we can control for factors other than satisfaction. There are simply too many variables to say that any coorelation found = a causal link, at least with any semblance of credibility.

So, we are all left with opinion and intuition, as educated as they may be. Heck, I enjoy a good argument as much as the next guy, and as much as I respect the folks in the Cove, I don't think we'll solve this one. Frankly, I don't see anyone solving it. Still, this is a fun, thought provoking thread.

Craig H.

 

[Al the Elf]

Profitability is linked to sales price and cost.
Sales price is an element (but not the only element) of customer satisfaction.

I struggle to think of any situation where I have been fully satisfied with a supplied product or service (excluding my marriage of course ) that I wouldn't consider testing the value (and indeed satisfaction) on offer from another supplier. Often the factor that gets me to consider another supplier is sales price (although as for Marc earlier, a new supplier opening up more conveniently could be a trigger too). I'll then make up my mind which provides me with the most overall satisfaction and have that as my default. Therein lies the problem of trying to link customer satisfaction mathamatically to profitability. The equation that describes the relationship for me (as a consumer) is different to the next person. Yes, so there'll be a distribution for the total population (that would be complex to measure - ask the marketeers), but then it'll be almost impossible to identify all possible criteria that influence the satisfaction of the entire population. And even if we succeeded, it would be incorrect as soon as we had the model ! One thing that is sure in my mind is that part of the satisfaction criteria for all of us in the capitalist economy is purchase price and this is definitely in the equation for profitability !

I voted for the link however like others before me have been pushed on and off my pedastal by the excellent views in the thread. Thanks y'all.

Cheers, Al.

 

[Mike S.]

Re: Customer Satisfaction: A Gimme

No, no... absolutley not. That wasn't my point. I just think that looking at extremes is a good way to examine questions of this kind, and my conclusion is the same as yours: Customer satisfaction and profitability are linked. See post 2 in this thread.

/Claes

Claes,

This post and your previous one are good ones, IMO. You seem to have a way of saying a great deal in just a few words. And English is a second language! Jeesh! Anyway, we obviously for the most part are in agreement on this issue.

Would you also agree that "Customer satisfaction and profitability are positively correlated to some degree, with a correlation coefficient of less than 1 and greater than random chance"?

I would, because correlation by definition exists in varying degrees and does not necessarily imply cause-and-effect.

The word "linked" has caused some debate, but I would be of the same opinion whether the operative word was linked, correlated, related, associated, etc. As long as the caveat was there that it is not a 100% if/then issue yet the occurrence is significantly greater than random.

JMO.

 

[David Hartman]

Re: Customer Satisfaction: A Gimme

Claes,

This post and your previous one are good ones, IMO. You seem to have a way of saying a great deal in just a few words. And English is a second language! Jeesh! Anyway, we obviously for the most part are in agreement on this issue.

Would you also agree that "Customer satisfaction and profitability are positively correlated to some degree, with a correlation coefficient of less than 1 and greater than random chance"?

I would, because correlation by definition exists in varying degrees and does not necessarily imply cause-and-effect.

The word "linked" has caused some debate, but I would be of the same opinion whether the operative word was linked, correlated, related, associated, etc. As long as the caveat was there that it is not a 100% if/then issue yet the occurrence is significantly greater than random.

JMO.

JMO Mike, but I believe that the point that several have tried to make is that given there is a correlation between customer satisfaction (although somewhat tenuious at times) it is no moreso a factor to be considered than overhead; the local, national, and world economy; labour costs; productivity rates; effeciency scores; downtime (in a manufacturing environment); and many others that could be the most important factor at any given time (and in an economic clime like we are in today we should even be looking at - is my product a customer "need" or a "what").

This is one of the major fallicies of the ISO-9001 "industry" in that it alone is NOT (and cannot be) the ultimate saviour of industry (manufacturing or service), since there are so many factors that impact business that go beyond the QMS defined by ISO-9001.

 

[Mike S.]

dd,

I agree! If you pick any one factor (customer satisfaction, "overhead; the local, national, and world economy; labour costs; productivity rates; effeciency scores; downtime (in a manufacturing environment); and many others") and focus on it to the exclusion of others, or pick it at the wrong time, you're in trouble. It'd be like concentrating 100% on lowering your cholesterol level (so you can live longer) while ignoring the fact that you get drunk and drive home at high speed 3 days a week.

 

[Al the Elf]

...probably safe to predict that driving home too fast whilst drunk is linked to reduced profitability

 

[ralphsulser]

I still say one cannot assume they are linked. Circumstances in the business market for your product may dictate otherwise. I the case I cited previously, there was no fat in the overhead left. We had an experienced, highly efficient workforce, and equipment modifications to enhance productivity. Our raw material costs were the remaining factor in our ability to further reduce selling prices to retain customers. EPA regulations also negatively impacted our costs with new requirements at the time. We soent over 1 million dollars to comply with the lastest regulatory mandates. Our foreign competition from Taiwan also manufactured their own raw materials, and literally dumped product in our market with one strategy--eliminate the domestic competition at all costs. I know this for a fact because the Chairman of this company told it to one of our domestic competitor with whom I had a good working relationship. He was told to either sell out, or they would put him out of business. So, while there may be linkage for some industries, there may not be for others. Each has a uniques set of operating strategies, and fixed burdens, and market strategies. Unfiortunately most large corporations are still not looking for the long term returns, but month to month. If too many months go by in the red, then something drastic will happen. JMHO