Article Synopsis: The High Price of Customer Satisfaction

MIT Sloan Management Review

March 18, 2014   Magazine: Spring 2014

Timothy Keiningham, Sunil Gupta, Lerzan Aksoy and Alexander Buoye

Highly satisfied customers = revenue dollars. Or do they?  Some data has shown that the relationship between customer satisfaction and customer spending behavior is surprisingly weak. 1 In this article, the authors share their analysis of the relationship between satisfaction and business outcomes, gathering data from more than 100,000 consumers covering more than 300 brands.   This data came from two sources, the American Satisfaction Index data (2000-2009) which are measures of stock returns, appended with market shares of these companies, and consumer satisfaction ratings and customer spending levels across 315 brands.2

This analysis revealed three critical issues that have an impact on correlating customer satisfaction to positive business outcomes.  1) There is a downside to continually devoting resources to raise customer satisfaction levels; 2) High satisfaction is a strong negative predictor of future market share; 3) Knowing a customer’s satisfaction level tells you almost nothing about how customer spending will be divided among the different brands used.

The authors share strategies to align customer satisfaction and profitability that companies should understand and implement as follows:

“Value to the Company vs. Value to the Customer—research and analyze your customers’ satisfaction levels with your product to the product’s profitability.”

“Market Share vs. Customer Satisfaction—begin with an analysis of customers’ satisfaction levels with not only your company but also with your competitors, as well as your and your competitors’ market shares.”

“Satisfaction and Customer Advantage—what really matters is whether or not your customer satisfaction rating is higher for your brand than for competing brands that a customer also uses.”

The authors conclude that increasing satisfaction levels can be a component of a company’s strategy, but perspective is needed.  In fact, a company may need to accept lower satisfaction scores from a smaller group of customers, in order to increase market share within a larger less homogenous group.  For researchers conducting customer satisfaction research, this context provides some fresh inspiration about how to weave conventional satisfaction research with additional data sources.


1 J. Hofmeyr, V. Goodall, M. Bongers and P. Holtzman, “A New Measure of Brand Attitudinal Equity Based on the Zipf Distribution,” International Journal of Market Research 50, no. 2 (2008): 181-202; and A.W. Mägi, “Share of Wallet in Retailing: The Effects of Customer Satisfaction, Loyalty Cards and Shopper Characteristics,” Journal of Retailing 79, no. 2 (2003): 97-106.

2 Some examples cited include: L. Aksoy, A. Buoye, P. Aksoy, B. Larivière and T. L. Keiningham, “A Cross-National Investigation of the Satisfaction and Loyalty Linkage for Mobile Telecommunications Services Across Eight Countries,” Journal of Interactive Marketing 27, no. 1 (February 2013): 74-82; Aksoy et al., “Long-Term Stock Market Valuation”; and others.


This synopsis was written by Lynn Croft, independent marketing and market research consultant. With 15 years of experience at companies such as Genzyme, Bayer Corporation, Shire, and Eli Lilly, Lynn has expertise in market research, market analysis regarding product launches, pricing and lifecycle management. 


[Are you planning your organization’s first customer satisfaction research? Or looking to refresh an existing program? Learn about goal setting, monitoring strategies, and common challenges in our 90-minute, live online Improving Customer Satisfaction class. MRA approved for 1.5 hours of PRC credit.]



Survey Template: Gauging Brand Perception

What does your target market think of your brand?

How does your target market perceive your brand as compared to your competitors’ brands?

While brand research can be a very complex, exhaustive exercise, in many cases a simple approach may suffice. 

If you plan to do your own brand perception research using online surveys, here are some tips.

How your brand is perceived

For brand perceptions, a quick and easy way to collect data is to ask, “Which of the following words would you use to describe our company?” Then give them a list of varying words and allow them to pick up to three. It’s a simple format for the respondents, and gives you very useful insights.  Do people think of your brand as “smart” and “fun” or “stable” and “safe”? Are your competitors perceived as “friendly” and “creative” or “slow” and “boring”?

Other perceptions that we commonly seek to measure in research:

  • This is a company that values its customers
  • This is an innovative company
  • This is a company that offers products or services that are a good value (or a good value for the dollar)

These types of brand questions are going to vary by product category and target market. B2B companies will have very different questions than B2C, and so on.

Brand Perception Research, Realistically

In an ideal world, a company would do very comprehensive brand perception research. But that type of time, and budget, is not always an option. With some careful planning, many companies can learn quite a lot from a short, online survey approach.

If you’d like to receive more free Market Research tips, click HERE to sign up for Research Rockstar’s Market Research Newsletter.


In Search of Useful Market Research Displays: Don’t Forget Venn Diagrams

Bored with bar and pie charts? Maybe it’s time to rethink the types of graphics you are using to display key research findings.

One graphic display that makes rare appearances in market research reports is the classic Venn diagram. It’s a wonderfully intuitive way to show overlapping groups. Attributed to John Venn, the Venn diagram was first introduced in 1880.

I have seen 100s of research reports, and written many myself, that contained statements about overlapping groups, like, “Customers who buy from retail stores and those who buy from our paper catalog increasingly prefer buying from online retailers.” OK, the statement isn’t so complicated. But wouldn’t a Venn diagram have more impact?

If your audience includes people who aren’t necessarily comfortable with lots of statistics, or who just have short attention spans, Venn diagrams are a powerful and simple way to convey overlaps, and trends in such overlaps.

Picture 76In this diagram, I show how 2 customer groups increasingly overlap over time. It could be done as an animation for even more impact.

For more Venn examples in template form, check out this great Slideshare file: Venn.

And for more examples of various visual displays, please download the free eBook “Makreting Research Insights: 22 Visual Displays.” The ebook is available in the members-access section. Not yet a member? Sign-up for a free membership here: SIGN UP.

[All comments welcome! Every 2 weeks I randomly select a commenter to win a Rockstar Mug: PIC. Next drawing is 11/6!]


Wanted: A Fresh, Competitive Edge

bigstockphoto_business_competition_2182139Have you talked to your competitors’ customers lately?

You really should.

A.    It is feasible in many markets.
B.    They are the best source of real competitive insights.


Talking to competitors’ customers is a great form of market research and it is surprisingly feasible in many markets. So, how do you find these customers?

The most practical option is to buy a list. If you compete with large consumer brands, you can ask a panel or list company to estimate an incidence rate for you (for larger consumer brands they may know). Or you might estimate incidence for them given market share data you already have.

Are you in B2B? OK, that can be trickier. You can buy a list of people who are decision makers for your category (from a list broker or a panel company). And then, depending on your market, you might assume that 60% of them will buy from the top 3 competitors. If your market is not too fragmented, that can be a realistic strategy that doesn’t totally break the bank.

In some markets, you may have access to public, online user communities. They can also be a great source for reaching competitors’ customers, but always follow the community guidelines: if research requests are not permitted, don’t do it.

Competitive Insights

We have heard it a million times: perception is reality. You may disagree based on factual evidence, but that isn’t going to get you very far. If Competitor A is widely perceived as having attractive packaging but you think it’s as ugly as a moldy bread, you lose. It “is” attractive.

Whether you reach them through a quantitative and qualitative approach, remember:

  • Competitors’ customers keep you honest about your strengths and weaknesses.
  • Competitors’ customers know your competitors’ strengths and weaknesses.
  • Competitors’ customers know what’s important (and before you decide what competitive edge you will promote, you really do want a reality check on which ones will resonate—you might be surprised).

Practical Considerations

  • If you want the research to be blind (you do not want to reveal your organization as the sponsor), then you should hire a research agency or at minimum a market research freelancer.
  • If you really only have one competitor you want to assess, and finding those customers is hard: look at your own customer base. Are there folks who recently switched from that brand? As switchers they won’t be totally representative of your competitors’ customer base, but they may still have valuable insights.
  • Don’t forget to poll any employees that may have previously worked for your competitors. You don’t want to ask them to break any confidentiality agreements, but they may be able to point you in the right direction.


Competitors’ customers will keep you honest as you update your competitive positioning. Even if you don’t have a traditional Competitive Intelligence program in place (which typically includes ongoing monitoring of competitors’ strategies and tactics), in my experience, talking to customers is a fast, efficient way of discovering real competitive opportunities.

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