Thursday, June 4, 2015

Is 'Improving Customer Satisfaction' a valid strategic objective, or just a Performance Indicator?

Any KPI determined by the company is hopefully aligned with both creating operational efficiency and delighting the customers.

Being customer-centric is one of the most important business goals in any forward-thinking business today. Customer Satisfaction is a state where the customer perceives a business experience to be positive, but the event itself is not memorable. It is difficult to pin short or long term business performance solely on customer satisfaction. So is improving “Customer Satisfaction” a valid strategic objective or just simply a KPI?

Customer satisfaction or some aspire to achieve customer delight is more a vision: Even that it changes often, which can be characterized by indicators of short-term satisfaction, how they liked or disliked the process they just completed, long-term satisfaction, more with product or service fit, form, function and aesthetics, and other elements of satisfaction such as price, available variation, service levels, and ease of use. It is also about loyalty, delight, experience as lead indicators. It is the indicators that you look at as business KPIs, which then have to be measured in a way that makes sense as relating to the value proposition, or at least what is valued by the customer. A customer objective should describe the value in the eyes of the customer. Do customers really buy products or services to be satisfied, or is that a given or are they expecting a particular value experience such as inherent in the brand promise of the supplier, in many cases?

There’s business objective that relates to a building or increasing customer loyalty, particularly in the private sector: Because loyal customers, rather than satisfied ones, are required to help achieve objectives like increasing revenue by (1) growing the customer base, and (2) increasing purchasing $$ per customer. It can also include an objective and a metric related to customer loyalty because it reminds the organization that building customer loyalty, not satisfaction is a critical part of the overall value chain and strategy. A customer doesn't become loyal, just by buying. They become loyal when they have experienced something out of the ordinary. But remember the customer needs and desires and consequently their satisfaction changes, which implies that the value proposition has changed in some way, which means the KPIs have to be readdressed often, so as to ensure they still align to that value proposition.

Strategy mapping allows you to first understand your customers and what they value, and then identifies how to best characterize that value through key indicators, and then define those measures appropriate to best assess the performance of these indicators because they show you how well they satisfy or delight customers. It is also useful to think about the function that the customer requires; for example, Ford gave people cars rather than faster horses, because he recognized the function. When the value definition shifts, so do everything else. It could have argued that the objective could go into the financial perspective rather than the customer perspective (does the customer care whether you built loyalty - there are customer and company benefits to loyalty), but it makes better sense to the flow of their strategy story to include it, in addition to other customers in the customer perspective.

The fact is that KPIs are part of a conversation and not in themselves the conversation. Customer satisfaction to be a KPI and the defined area should possess a goal and measurement indicator stating that businesses are hitting or missing the objective. Some sort of client satisfaction measure should be defined, a goal around it and a way of improving and getting better at the delivery of the component. Any KPI determined by the company is hopefully aligned with both creating operational efficiency and delighting the client. KPIs should both be defined by its meaning and relevance to the client as well as its ability to be executed by the company. Balanced Scorecard measures are all about improvement in relevant areas as well as its impact on both the customer and the business.


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