Avoiding the Customer Satisfaction Rut

Customer satisfaction has received a great deal of attention for decades now. It is in fact one of the most unassailable concepts of modern management rhetoric. Not only does the idea of satisfying customers have a clear, common-sense appeal, it is also generally believed that customer satisfaction leads to loyalty and translates to higher future profits.1 For these and other reasons, customer satisfaction practices have become one of the core prescriptions for managers and organizations.2 Indeed, for many companies, customer satisfaction has become the guiding principle, as they increasingly initiate all manner of strategies and processes under its banner.

The basic idea is a sound one: True customer orientation,3 based on genuine customer understanding, will provide superior customer value and thereby superior company value. Increasingly, however, corporate customer satisfaction (CS) practices — which comprise how customer satisfaction is defined and measured, and how the resulting knowledge is used in the organization — seem to be losing their effectiveness for both companies and their customers alike. In the worst cases, companies can get stuck in a customer satisfaction rut.

Although many organizations employ rigorous and extensive CS measurements, they may be measuring the wrong variables and using the information in mainly reactive ways. The concept of customer satisfaction has been wrongly equated with the concept of quality, for example. It has become more important to prevent dissatisfaction, which is an internal focus on fixing what has “gone wrong,” than to increase satisfaction, which requires an external focus on developing what will “go right.” Many companies have fallen into a self-perpetuating pattern in which practices that are not truly customer-oriented are reinforced and those that are customer-centered remain undiscovered and unexplored, a ll while the company’s distance from the customer gradually but inexorably increases. Managers who wish to climb out of this rut must move beyond the mere measurement of quality and satisfaction and refocus their CS practices on the actual customer experience. They then must formulate a comprehensive strategy for using that knowledge throughout the organization.

Compared to the body of research that has been devoted to methodological and conceptual examinations of customer satisfaction, surprisingly little has focused on how such practices and their associated assumptions and challenges play out in real organizations. Based on recent qualitative research at Volvo Cars (see “About the Research”), this article seeks to provide greater understanding of CS practices and their managerial implications by illustrating how the practices at one company, though professional and efficient, can be improved and complemented. The automotive industry provides an especially apt context for such a discussion as it is generally recognized as being one of the industries most concerned with customer satisfaction. Most automakers spend a great deal on CS market research,4 and their interpretation, measurement and use of that information is sophisticated and recognized as strategically important by senior managers. Although Volvo Cars is regarded as doing well in terms of customer satisfaction, its goal is to become a CS leader. This article reveals both some of the problems at Volvo and some of the ways it is trying to become more customer-oriented —by honestly and thoroughly scrutinizing its current CS practices as well as pioneering new methods not used by competitors.

Customer Satisfaction Practices at Volvo Cars

During the mid-1990s, Volvo Cars embarked upon a major initiative to improve customer satisfaction. Although the company used a holistic TQM approach, the focus was primarily on improving product quality. As a result, from 1991 to 1996 Volvo improved from 26th to third among vehicle producers in the J.D. Power and Associates’ Initial Quality Study (IQS). By the end of the decade, Volvo Cars’ customer satisfaction focus had blurred somewhat, but was reestablished in 2000, following the company’s acquisition by Ford Motor Co. A new strategic agenda was initiated, with the goal of becoming number one in the industry in customer satisfaction by 2004. A high-profile, cross-functional customer satisfaction board was established with the mandate “to examine, challenge, change and/or direct any aspect of company activities detrimental to the delivery of the target for customer satisfaction.” Operational quality forums were established to develop and monitor customer satisfaction and quality issues in the areas of product, delivery, sales and ownership. A series of internal communications continually reiterated the importance of customer satisfaction and all employees were asked to include CS goals in their personal objectives. The consistent efforts and widespread attention again resulted in an improved CS ranking in the automotive industry and a ranking of fifth in the May 2002 IQS survey, up from 22nd the previous year.

Nevertheless, Volvo Cars’ overall customer satisfaction strategy has engendered internal discussions and some doubts. Although the company has had a history of focusing on customer satisfaction, sustaining that focus and its attendant benefits has been a problem. It has become clear that episodic CS programs are not enough. Market research has indicated that while customer satisfaction is increasing, brand loyalty is decreasing. Sales development has been slower than expected, despite the higher CS rankings. As a result, there is a widespread notion at the company that product quality is only a qualifier and not a differentiator in today’s automobile market. Therefore, in order to garner greater loyalty, higher sales volume and better CS rankings, Volvo Cars is exploring alternatives to the customer satisfaction approaches that are predominant in its industry.

Initiating and communicating customer satisfaction goals without offering a clear rationale for them can promote differing interpretations within an organization and be the first sign the company is in a customer satisfaction rut. Stating CS targets is not necessarily the same as shifting the organizational focus toward the customer. The unassailable logic of focusing on customer satisfaction tends to automatically legitimize all kinds of actions in an organization, but if the resulting initiatives do not demonstrably stem from an intimate understanding of the customers, the desired changes in customer behavior may not be achieved.

Interpreting Customer Satisfaction

It is widely acknowledged that customer satisfaction is a function of the relationship between customer expectations and experience,5 that it is dependent upon value and that it is formed continuously.6 Further, although quality is known to be an antecedent of customer satisfaction (and that is certainly true in the auto industry7), it is generally agreed in the management literature that the two concepts are not synonymous. At Volvo Cars as well as at other auto companies, however, this distinction has blurred. When internal considerations such as cost-oriented quality practices8 begin to take precedence over the genuine satisfaction of the customer, it can be another indication that a company is in a CS rut.

Volvo Cars’ quality policy states that “Customer satisfaction is the way we measure quality,” which emphasizes the notion that product quality is equivalent to customer satisfaction. Interviews reveal, however, that there are divergent opinions among senior managers at Volvo Cars about what constitutes customer satisfaction. These inconsistent interpretations are not conducive to coordinated customer-oriented action. As one senior manager noted, “There is a lot of communication about the importance of customer satisfaction, but less understanding.” For example, one manager’s assertion that “Customer satisfaction equals no mistakes” indicates a problem-oriented approach to CS, but fails to acknowledge that avoiding dissatisfaction might not necessarily generate satisfaction. Another’s articulated mandate to “positively surprise the customer” approximates the generally recognized notion of customer delight.9 Still another’s belief that CS means “Having the right range of attributes in the product profile” tends to neglect the service context of customer satisfaction.10 One senior manager even somewhat tautologically defined customer satisfaction as “what is being measured.” That, of course, is backwards. It must be the organization’s conception of customer satisfaction, defined by its intimate knowledge of customers, which dictates what is to be measured. Further, the reliance on survey results at Volvo Cars indicates that measuring CS is primarily viewed as a point-in-time assessment, whereas the view of CS as a process, in which customer expectations and experiences form satisfaction continuously, seems to be neglected.

Measuring Customer Satisfaction

It can be a challenge for any company to translate unique, personal customer benefits into measurable attributes.11 Many factors influence satisfaction, and how something is measured can begin to take precedence over what is measured and what it reveals. Some researchers claim that CS surveys are not likely to reflect customer reality.12 Critical distinctions among customer segments are often ignored.13 The true character of the customer, for instance, is likely to get lost in surveys that normally show a high level of customer satisfaction, but with little variation in the sample.

Like many companies in the auto industry, Volvo Cars’ CS measurements are primarily survey-based and quantitative. (Most auto manufacturers use similar types of surveys.) Qualitative research is used only occasionally when designing new studies. Volvo Cars has an extensive and complex customer satisfaction measurement system, including some 20 different surveys that cover different topics and markets in different ways. Topics include satisfaction with the car (short term for car characteristics and long term for reliability), sales and workshop experience. Surveys are done both from an operational perspective, offering quick feedback primarily from Volvo owners, and from a strategic perspective, covering most car brands in order to show Volvo’s CS position in the market. The prodigious amount of data is, with a few exceptions,14 primarily analyzed in a descriptive rather than explanatory manner.

Senior managers often pay a good deal of attention to the reliability and efficiency of the methodology of this market research — so much so that its validity, or its ability to capture what is important to the customer, often goes unexamined. For example, Volvo Cars’ CS surveys are designed to align with its internal systems and product management structures. There is also a risk that these types of measurements will be viewed in isolation, not taking the antecedents and consequences of customer satisfaction into consideration. Customer expectations, one of the most important antecedents, are rarely measured. And brand loyalty, which is the major consequence of customer satisfaction, is hard to measure using surveys. Nevertheless, actual customer behavior must be continuously assessed. When CS measurement systems are used primarily in narrow and conservative ways, a healthy discussion about the usefulness of the information is often neglected, which can push a company even further into a CS rut.

To go beyond the aggregate customer satisfaction figures that almost everyone collects, it is essential to cultivate a learning relationship between customer and producer.15 Although the old saying “What gets measured gets done” is not completely true, CS measurements clearly affect how the CS knowledge is used in an organization. While rapid customer feedback on specific products and services is important, focusing on it alone fails to address longer-term customer needs.

Using Customer Satisfaction Knowledge

The value of acquired CS knowledge depends upon how it is used in the organization. Two companies in the same business can have access to essentially the same information and use it in very different ways — one company gaining competitive advantage and the other not.16

At Volvo Cars, as at many other companies, management expects tangible results from its costly CS research, and that tends to promote action-oriented rather than knowledge-enhancing use of the information. The results of extensive operational surveys on product quality and dealer performance are rigorously heeded, and corrective changes are implemented in response. Ongoing product management and development is also, to a great extent, informed by actionable metrics such as “things gone wrong” per hundred cars. CS results for individual dealers are monitored in real-time via the Web and help to facilitate dealer management. Corrective changes are done continuously and systematically, both by fixing quality issues on current cars as well as developing dealer standards and processes.

Volvo Cars does not, however, utilize all the customer satisfaction information it gathers, but focuses more on those attributes that generate complaints than on those that drive customer satisfaction. Moreover, the planning horizon for CS-driven actions is short term, often lasting only until the next survey results arrive. Further, the research that confirms prior beliefs tends to get more attention17 and be more thoroughly used. All this leads to a reactive, corrective use of information about customer satisfaction that does not necessarily include real customer considerations. Instead, managers are preoccupied with figures, rankings and quality fixes. Overall CS rankings, although an important communication tool, may sometimes get more attention than do the reasons behind them. There can be more focus on checking off items on an internal list of quality problems than on ascertaining customer perceptions of the problem.

This use of CS data is bound to be reactive, at best responsive and adaptive, but always derivative of the status quo. It becomes an operational tool that focuses on single-loop learning — that is, learning to improve what is already being done — rather than double-loop learning, which stimulates rethinking, creativity and development.18 Such CS practices do not facilitate the generative organizational learning and accrual of collective meaning19 that is a prerequisite for true customer understanding and organizational change.

Toward an Extrinsic Customer Satisfaction Focus

Many companies have an intrinsic CS focus — a product orientation based on attribute quality and a short-term internal perspective triggered by surveys and aimed at cost control. With an intrinsic focus, customer satisfaction is seen as the absence of dissatisfaction. Intrinsically focused practices are efficient but, by themselves, ineffective when it comes to creating true customer-oriented change. In contrast, an extrinsic CS focus is more customer-oriented and emphasizes finding new ways to increase the positive, emotional aspects of the customer experience over time. Empirical evidence confirms that an extrinsic customer satisfaction focus aimed at revenue growth leads to better overall corporate performance than does an intrinsic quality focus.

The challenge for managers whose companies are stuck in a customer satisfaction rut is to infuse a more extrinsic focus into their CS practices. The implementation of an extrinsic focus is not likely to take the shape of a new massive organizational framework, but rather requires an organic shift from focusing on today’s problem in a reactive and cost-conscious way to concentrating on longer-term opportunities. To accomplish that, managers must explicitly reevaluate CS practices from the customer’s or potential customer’s point of view. The nature and uses of knowledge about the customer must be continually recalibrated with long-term outcomes in mind, not just updated from last year’s survey.

An extrinsic approach is more qualitative than quantitative and should be geared to producing insight, not metrics. The inability of European automakers to produce adequate cup holders for the U.S. market is one example. Despite consistently poor CS scores on that feature, changes were not implemented. Because it was not known how the cup holders were actually used in the U.S. market, it was hard to make improvements.

It is difficult to achieve greater insight into customers without creating more mechanisms for interacting directly with them. Collaborative approaches, involving cross-functional staff and customers, are conducive to creating experimental learning relationships that can lend new meaning to the concept of customer satisfaction. Managers should experiment both in terms of customer knowledge acquisition, such as through ethnographic research approaches,20 and in terms of launching or supporting initiatives to use that knowledge in new ways. For example, studying customers loading their cars at the local mall is likely to give more understanding of their load-capacity needs than analyzing CS scores. Intrinsic CS measurements can be used as a starting point to reveal what the company knows and doesn’t know. Extrinsic research such as follow-up interviews with customers can then be targeted at the gaps in knowledge and guide corrective action and survey development.

At Volvo Cars, many senior managers have become more aware of the decreasing effectiveness of their current CS practices, and there are some tangible illustrations of an evolving extrinsic focus. A companywide education program intended to boost general customer satisfaction awareness was retooled in 2002 explicitly to create more customized knowledge about customers for those parts of the organization, such as the spare parts operation, that most directly affect customer value. Recognizing that its CS surveys did not distinguish among different groups of customers and thus lost an opportunity for deeper understanding, the company now combines qualitative research based on customer motivations with customer satisfaction research. Volvo Cars also now overtly promotes and organizes direct customer contact: Engineering teams meet with customers; senior managers visit dealers and end users to a greater extent than before.

Volvo Cars has also begun to take a more proactive approach to customer research. The company now does lost-sales analysis to capture perceptions of customers who decided not to buy a Volvo. Product-development projects now incorporate the input of consumer reference groups in order to manage customer satisfaction issues in the conceptual stages rather than in production. For example, the XC90, a new SUV, was developed with the input of such a group composed of female customers in California. Similar interaction with customers is also orchestrated via the Web and through workshops located in different markets, involving local staff. Volvo also does additional qualitative customer research in its core areas of product differentiation, such as safety, to ensure that consumers’ shifting perceptions about key product attributes will not undercut the company’s competitive advantage.

To be sure, intrinsic focus cannot and should not be abandoned at Volvo Cars or at any company. To do so might jeopardize quality cost control, a risk that many organizations would not take. But intrinsic focus alone is not sufficient to engender true customer orientation. It functions best only with a strong extrinsic complement. To facilitate corporate action that not only meets customers’ expressed needs, but also their latent needs and wants, requires a focus in which the customer is not merely an object that companies can learn from, but a subject they can learn about.21