How to set realistic targets for improving customer satisfaction

1.The baseline

To be realistic and credible, targets must start from a reliable baseline. As far as satisfaction is concerned, customers base their satisfaction with any customer experience on the extent to which their requirements have been met. The Leadership Factor’s Satisfaction IndexTM therefore measures a supplier’s success in meeting its customers’ requirements. It covers all aspects of the customer experience (rational and emotional) and uses the relative importance of customers’ requirements to weight their satisfaction scores, expressing customer satisfaction as a percentage, an index of 100% signifying total customer satisfaction with that supplier. Since Satisfaction Index™ measures a supplier’s success in meeting its customers’ requirements, it provides a comparable measure across services, industries, markets etc.

2. Customer satisfaction database

Based on approximately 500 satisfaction measurement results per annum, involving around quarter of a million customers each year, The Leadership Factor has developed a database that enables The Leadership Factor to track organisations’ ability to improve customer satisfaction. The range of customer satisfaction indices on the database is approximately 48% to 93%. This 45% range of scores reflects the fact that some organisations perform much better than others in meeting customers’ requirements. There is little evidence that it is more difficult to perform well in some industries compared to others. However, there is evidence that, regardless of industry sector, certain types of people are more difficult to satisfy than others. For example, a 40 year old, well educated male living in London would typically be less satisfied than a 60 year old social class DE female living in the provinces, and that trend applies across industry sectors. Similarly, internal customers are more difficult to satisfy than external customers.

3. Improving customer satisfaction

Improving customer satisfaction is a long haul. Customers are quick to notice problems, slow to notice improvements and very slow to change their attitudes, especially in situations where they have experienced problems in the past. Year on year increases in the Satisfaction Index™ therefore tend to be small – around 1% on average. Some organisations experience a fall in their index. Moreover, due to the relative nature of customer satisfaction, it is possible for customer satisfaction to fall due to rising customer expectations rather than deteriorating supplier performance. Consequently, when setting targets for customer satisfaction improvement based on gut feel, organisations almost invariably set targets that are unrealistically high. The Leadership Factor has therefore developed a formula that sets realistic customer satisfaction improvement targets for clients.

4. Target setting principles

(a) The starting point.
The higher satisfaction becomes the more difficult it is to improve it further. By contrast, larger satisfaction gains can be expected from a low satisfaction base.

(b) The maximum achievable
Based on the comments made in point 2, a realistic ceiling for customer satisfaction may be set at a level lower than the maximum ever achieved on the wider database. This applies particularly to internal customers.

(c) Priorities for improvement (PFIs)
Using the importance and satisfaction measures generated by the customer survey, the formula identifies priorities for improvement (PFIs). These are areas where there is a large negative gap between importance and satisfaction, indicating that the supplier is not meeting customers’ requirements. The most effective way to improve customer satisfaction is to address the PFIs.

(d) The difficulty of PFIs
Some PFIs (priorities for improvement) are more costly and/or difficult to address than others. For example, ‘price’ will be a more costly PFI than ‘friendliness of staff’. This is taken into account in the targets formula. If the PFIs are all very costly and difficult to address, the realistic target will be lower than if they are all relatively inexpensive and easy to tackle.

5. Time period