How much customer satisfaction is good enough? Of course, the long- term goal should be 100% ”total customer satisfaction. However, there are specific business questions that need better answers. Should my company invest $2,000,000 to improve satisfaction from 85% to 90%? Given that my company's customer satisfaction is at 95%, should I invest another million dollars to improve it or should I do this later?
The key to answering questions such as these lies in the relationship between customer satisfaction and market share. The basic assumption is that satisfied customers continue to purchase products from the same company and dissatisfied customers will buy from other companies. Therefore, as long as market competition exists, customer satisfaction is key to customer loyalty. Even if a company has no direct competitors , customers may purchase substitute products if they are dissatisfied with that company's products. Even in monopoly markets, customer dissatisfaction encourages the development and emergence of competition. Studies and actual cases in business have lent strong support to this assumption.
Assuming that satisfied customers will remain customers of the company, Babich (1992) studied the "how good is good enough" question based on a simplified model of customer satisfaction and market share that contains only three companies: A, B, and C. Therefore, when customers are dissatisfied with company A, they choose company B or C, and so forth. Babich further assumed that the distribution of dissatisfied customers among the alternative suppliers is in proportion to the suppliers' current market share. Babich then determined the algorithm for the market shares of the three companies at time t + 1 as follows :
A = number of A customers
B = number of B customers
C = number of C customers
G = number of new customers to market
x = dissatisfaction level with A products
y = dissatisfaction level with B products
z = dissatisfaction level with C products
t = time
Based on this model, Babich computed the market shares of the three companies assuming satisfaction levels of 95%, 91%, and 90% for A, B, and C, respectively, over a number of time periods. The calculations also assume equal initial market share. As shown in Figure 14.5 (A), after 12 time periods the 95% satisfaction prod-uct (company A) would basically own the market. However, had the satisfaction levels of companies B and C been 98% and 99%, respectively, and company A's satisfaction level remained at 95%, company A's product would have had less than 10% market share in 24 time periods, as shown in Figure 14.5(B).
Figure 14.5. Satisfaction Levels and Market Share
From "Customer Satisfaction: How Good Is Good Enough?" by Pete Babich. Quality Progress , December 1992. Copyright 1992 American Society for Quality. Reprinted with permission.
From Babich's simple model and examples, the answer to the "how good is good enough" is obvious: You have to be better than your competitors. Therefore, it is important to measure not only one's customer satisfaction level, but also the satisfaction level of one's competitors. Indeed, many companies have been doing exactly that.
Finally, we emphasize that measuring and analyzing customer satisfaction is but one element of customer satisfaction management. A good customer satisfaction management process must form a closed loop of measurement, analysis, and actions. While it is not the intent of this chapter to cover the customer satisfaction management process, we recommend that such a process cover at least the following elements:
Recommendations for Small Organizations
Total quality management (TQM) literature recommends three key elements of a good customer satisfaction management program: a postpurchase call back program, a complaint management process, and a customer satisfaction survey program. Although in this chapter we focus on the last element, many companies practice all three elements. Implementing any of the programs requires resources. Our view of the order of importance of the three elements is that complaint management is the most important, followed by postpurchase call back, and then overall satisfaction surveys. The first two are immediate and important to customer's transaction experience, and the last one is for systematic quality and business improvement.
Besides measuring customer satisfaction, perhaps more relevant to software engineers is the roles customers can play in software development. Development teams should leverage the benefits of customer involvement for better quality and customer satisfaction. Following are some scenarios of customer involvement that a team can leverage throughout the software development process. With the exception of large-scale customer beta programs, these processes and programs can be implemented by large and small organizations. For small organizations that don't have a customer focus program in place, I strongly recommend integrating one or more of these practices into their development process.
What Is Software Quality?
Software Development Process Models
Fundamentals of Measurement Theory
Software Quality Metrics Overview
Applying the Seven Basic Quality Tools in Software Development
Defect Removal Effectiveness
The Rayleigh Model
Exponential Distribution and Reliability Growth Models
Quality Management Models
In-Process Metrics for Software Testing
Complexity Metrics and Models
Metrics and Lessons Learned for Object-Oriented Projects
Measuring and Analyzing Customer Satisfaction
Conducting In-Process Quality Assessments
Conducting Software Project Assessments
Dos and Donts of Software Process Improvement
Using Function Point Metrics to Measure Software Process Improvements
A Project Assessment Questionnaire