Optimizing Customer Satisfaction, Maximizing Results
Phil Doriot, PhD
CFI Group Partner and Program Director

Many organizations, even those that have had successful measurement programs in place for a while, will ask the question: When is Enough Really Enough? The value from an effective measurement program comes from optimizing investments in customer satisfaction. But how do you avoid over investing where there is no payback on improving customer satisfaction, or under investing where highly-valuable customer satisfaction returns are still available?
 
The reality is that many customer behaviors are impacted by diminishing returns (click here). Exceeding expectations may sound good, but it does not make good business sense to do so because of declining returns from customer satisfaction investments, or from missing an opportunity for better return on customer satisfaction elsewhere.

Here is a real-world example. This client’s contact center was looking at the relationship between call abandonment and satisfaction. They were at 9.77% abandonment of repair calls and, based on linear analysis and qualitative “best practices” advice, were thinking that 5% would be an optimal abandonment rate. However, after analyzing the data looking for non-linear relationships (inflection points), CFI determined that diminishing returns on improvement in call abandonment began to show up at 7.1%, and that customer satisfaction wasn’t impacted greatly once the percentage abandonment reached 6.6%.

Setting targets too aggressively results in overspending

To reach the original target of 5%, the client would have had to make significant additional investments in new facilities and its contact center staff.  This investment was estimated at over ten million dollars, plus additional on-going operating costs. After seeing the analysis, the client opted not to make that investment because they could get to the optimum abandonment rate of 6.6% within their existing facility with a more modest investment in operating costs.

Conversely, it is very common to be under invested in some drivers of satisfaction where significant return on customer satisfaction investment is still available. But how do you know?

CFI analysis helped another client identify how much customer satisfaction improvement was still available before diminishing returns on investment kicked in. The client had exceeded their original target for satisfaction of 80.0. CFI analysis showed that the company could establish a revised higher target of 84.2 before they encountered diminishing returns, and that this higher target would maximize their financial return. This CFI client reclaimed this lost opportunity by establishing stretch metrics at this higher level and funding investments to get there.

Setting targets too low results in lost opportunity

In creating action plans, organizations should optimize investments that maximize the financial outcomes and ultimately market value. Organizations that can do this will see the benefits of maximizing the customer asset at the lowest possible, or optimum, cost.