Customer Satisfaction — Measure Both Cause and Effect
What I know about customer satisfaction I learned mostly during the five years I spent working at car dealerships — first auto body technician, later new-car salesperson.
Lessons learned were simple. One rule was sell eight cars a month or it’s the gate. In the body shop, it was get it right the first time. The root cause for these rules was customer satisfaction.
A dissatisfied customer in the body shop usually meant doing some portion of repair and paintwork a second time resulting in economic loss (accounting and opportunity costs).
Accounting costs were materials and wages paid to “re-do” the work. Opportunity cost was profit in new work forgone in order to re-do the work and, more importantly, the impact on customer satisfaction.
Common characteristics of satisfied customers are enthusiasm about the companies they deal with and customers’ repeat purchases, which contribute to business growth. New-car dealers know this well.
However, the benefits of being an auto dealer today have changed because profit allocations have shifted. OEM’s now herd their dealers by offering “back-end” bonuses (usually $500) in addition to what the dealer made on the deal.
OEM’s also reward performance based on a Customer Satisfaction Index (CSI). The score is based on results obtained from surveys. High scores can be worth $600 on a $20,000 vehicle.
Consequently, customer satisfaction has strong impacts on business results and consecutive retention is thought to be most important for a sustained high rate of customer satisfaction.
For example, the American Customer Satisfaction Index (ACSI), finds a 1 percent increase in CSI can lead to a 0.4 percent increase in return on investment. Similarly, companies with the highest CSI were found to earn 1 percent to 2 percent per month above the average return on stock prices.
The influence (left) diagram shows the ACSI scientific model where customer satisfaction is embedded within a series of cause-and-effect relationships. In the model, customer satisfaction is a function of business performance minus customer expectations.
Indices for drivers of customer satisfaction are on the left side, satisfaction (index) in the middle, and outcomes of customer satisfaction on the right. Each index is a component measured by questions to assess customer evaluations that are weighted in the model and reported on scale of 0 to 100.
Satisfaction drivers vary by business type. For example, analysts find main factors contributing to the CSI for an auto-repair-service company are employees (42 percent), facilities (17 percent), services (10 percent), image (9 percent), and cost (9 percent).
The survey and model quantifies the strength of effect of the index on the left to those the arrows points to on the right. The arrows represent impacts.
The model is weighted to explain the CSI on customer loyalty. Thus, looking at indices and impacts, users can determine which drivers of satisfaction, if improved, would have the most effect on customer loyalty and therefore market share.
CSI should have great importance for car wash operators because satisfaction is a prerequisite to customer retention for customer-oriented companies and retention has positive impact on business results.
Some car wash operators will periodically hire a market research firm for “mystery” shopping service to measure store service quality. A survey model is designed and agreed to, which defines what information and improvement factors are measured. The results allow for comparisons to determine how well a store is doing now against previous results.
For example, an operator may want to know how satisfied customers are by measuring the difference between business performance and customer expectations about finish quality, cost, value, time, employees, and safety.
Just as there are car wash operators worthy of imitation, there are successful auto dealers that can teach lessons on growing a business. Typically, these dealers are family enterprises that invest in the community, maximize their opportunity, and where service matters.
Besides these “must-haves,” CSI helps dealers know their customers very well and it is this intelligence mainly that allows a dealer to be aggressive and grow as some of the competition does not.
Bob Roman is president of RJR Enterprises – Consulting Services (www.carwashplan.com). You can reach Bob via e-mail at email@example.com.