Measuring customer satisfaction is key: Happy customers lead to stronger businesses

On August 31 the Learning Lab team hosted a private webinar for partners where we shared rationale and approach to measuring customer satisfaction in the rural and agricultural finance industry.  Here we summarize some of the concepts discussed, as well as offering the presentation document from the webinar (with slideshare version below), and much of the webinar recording for public viewing.

In recent years, customer satisfaction in the private sector has led to robust principles and a multi-billion-dollar industry. As a result, these companies have demonstrated the crucial need for measurement of customer satisfaction as part of a business strategy. Customer measurement tools provide (1) an indicator of ability to serve a market, (2) enable differentiation in competitive industries, (3) provide an indication of future purchase patterns and habits to supplement present/current sales data, (4) provide warnings of potential revenue or profit dips if results are negative, and (5) focus staff on fulfilling customer expectations.

Additionally, leading firms realize that a customer-centric business strategy has impact for staff and core operations. A customer centric model helps put the customer’s voice at the heart of everything they do, guiding the organization’s learning and action across all levels. This empowers the employees to continuously improve the customer experience while also enabling culture change and employee engagement in the company mission.

If measuring customer satisfaction is so important, then why isn’t everyone doing it?

While the RAF community may generally agree on the importance of measuring customer satisfaction, many providers are not collecting this data. This might be for several reasons, including that organizations may find customer satisfaction measurement tools expensive, time consuming, complex, unimportant, or they simply don’t know how to implement them.

Knowing these perceived challenges faced by providers, the Learning Lab has put together two short guides, which can be viewed in detailed in the PowerPoint below, to show you a simple approach that is grounded in the low-burden, low-cost, high value approach used by private businesses worldwide.

Guide One: Making the business case for measuring customer satisfaction

Evidence from thousands of business applications (see PowerPoint for specific data points) illustrates the case for careful and conscious collection, analysis, and application of customer satisfaction data. In fact, findings from Bain and Company suggest that a 5% reduction in the customer defection rate can increase profits by 5 – 95%. Overall, implementation of customer satisfaction measurement can increase customer loyalty, reduce defection/churn, increase re-purchase rates, and reduce the need to sell to new customers. These findings are key, because acquiring new customers can cost a company 6–7 times more than retaining an existing one (Bain and Company). Additionally, Marketing Metrics finds that the probability of selling to an existing customer is 60 – 70%. Whereas, the probability of selling to a new prospect is 5-20%.

In addition to enabling responsiveness to customer needs/requests/complaints, customer satisfaction measurement can also reveal details about preferences and desires that can inform product development and differentiation. For example, evidence from financial institutions in Africa revealed that clients wanted banks to improve product and support offerings. In fact, 70% of respondents said that they did not feel that they received the assistance they needed to understand their bank’s products and how to access them. Furthermore, less than 10% of respondents admitted being very satisfied with the way their banks delivered their products. Ongoing customer satisfaction surveys are critical to designing better product offerings. With better products customers are happier making for stronger businesses.

Figure 1: Customer loyalty pays-off: loyalty leaders outperform on both growth and costs

Source: 

Bain & Company. http://www.bain.com/publications/articles/customer-loyalty-in-middle-eas...

Guide Two: Principles and mechanisms for measuring customer satisfaction

Principles for how to measure: The Lab has identified a few key principles that can guide providers who are interested in measuring customer satisfaction.

• Align capacity and incentives from the outset
• Ask few questions
• Ask the right questions
• Ask questions often
• Listening is not enough 

Organizations can align capacity and incentives by setting ambition early, coaching customers and employees regularly, and integrating executive commitment to the front line. To do this well, organizations must make time to interact with customers and employees, support and train employees in customer feedback, and encourage leadership to highlight the importance of customer satisfaction relative to financials.

Furthermore, organizations can implement “Micro-surveys” which are a great model for asking frequent and targeted questions. These surveys reduce response burden but can be varied and supplemented to collect a broader range of relevant data. To complement these activities, Net Promoter Scores (NPS) are a simple, yet powerful tool, that fit well with these principles for measuring customer satisfaction.

The Net Promoter Score (NPS),an effective approach to measuring: The Net Promoter Score (NPS) is a common and simple metric used in the private sector for determining customer loyalty and a company’s future growth.

NPS asks customers how likely they are to recommend a product/service to a friend of family member on a scale of 0 to 10 (0 being not likely at and 10 being extremely likely). Customers with a 9-10 response are classified as promoters, 7-8 responses are passives, and 0-6 responses are detractors. The NPS score is calculated by taking the percent of promoters and subtracting the percent of detractors. Following up on the NPS question with the “why” allows organizations to focus on behaviors and immediately drive to core issues that are affecting customer satisfaction.

Mechanisms of data collection: Collecting reliable data is crucial to ensuring that decision makers feel confident in using customer feedback to determine priorities and drive investments for their business. We present three survey approaches and four data collection methods that can be used to collect customer feedback using the NPS metric. 

Three survey approaches: Each approach has pros and cons that need to carefully considered when designing a customer feedback program (see PowerPoint for specific details).

• Census: Collects feedback from all members and typically has very accurate results but is expensive and difficult to implement.
• Representative sampling: Collects feedback from a subset of customer selected through a randomization processes to be representative of the population. This approach is more cost effective and less time consuming. However, it requires a well designed sampling approach and may not be representative of customer population if the sample is too small.
• Non-probability sampling: Collects feedback from a subset of customers selected on the basis of their accessibility or purposive judgment of the researcher. This approach is inexpensive, quick, and easy to implement. That being said, the data isn’t always reliable and often time results may not be representative of the customer population.

Four active data collection methods: Choosing the right data collection method will depend on a number of factors, including context, location, audience, and resources.

• Mobile/web: USSD, SMS platform, Web based, Interactive voice response
• Live phone: Live phone survey (call center or phone survey service provider)
• Live in-person: Household survey, market survey
• Point of contact: Survey done through a point of contact salesperson, trainer or service-provider 

By implementing these methods and approaches organizations can improve their customer experience and overtime strengthen their business strategy. We are excited to make these guides publicly available and look forward to continued research around effective customer satisfaction measurement tools in the context of the rural and agricultural finance space. 

View the presentation segment of the webinar recording here: 

310816_FINAL webinar recording from Malia Bachesta on Vimeo.