We’re all familiar with questions that ask us to rate our satisfaction “on a scale of zero of 10″, where zero indicates a state of extreme dissatisfaction and 10 indicates a high level of satisfaction. And, we often hear the claim that ‘high satisfaction ratings indicate high customer loyalty leading to high customer retention’.
At first glance, it seems like a good way to assess customer satisfaction. After all, 10 out of 10 means perfect satisfaction leading to the highest customer retention levels, right?
A Satisfaction Rating of 10 Does Not Guarantee Retention.
At The Dunvegan Group, we conducted large sample research and found that 80% of the Business-to-Business (B2B) customers who gave an Overall Satisfaction (OSAT) rating of 8 renewed their contracts … this was also the case for those giving ratings of 9 and 10. At the other end of the scale, among those who gave a rating of zero, 60% renewed their contracts.
So … there is an increase in customer retention (from 60% to 80%) as Overall Satisfaction ratings increase from zero to 8 but then retention remains flat across ratings of 9 and 10.
You may be wondering why retention or renewal is so high (60%) among customers who gave an Overall Satisfaction (OSAT) rating of zero? One of the key objectives of a customer satisfaction measurement program is to identify business at-risk (e.g., those who are highly dis-satisfied) in order to intervene and rescue this business. A retention or renewal rate of 60% suggests that some rescue efforts were successful – it also muddies the research results by improving customer retention (among those who gave an OSAT rating of zero) in the process .
The proportion of retained business among those giving ratings of 8, 9 or 10 is ‘flat’ at about 80%. What does this tell us?
This finding suggests that a high customer satisfaction rating … 8, 9 or even a “perfect” 10 … is no guarantee of renewal or retention. It also tells us that pushing for customers to increase their ratings from 8 to 10 is unlikely to deliver increased customer retention.
Ratings Are Subjective.
One person’s 8 is another person’s 10 is another person’s 7. This phenomenon is discussed in B2B Customer Feedback Programs – Things to Think About. Without specifically asking each customer to calibrate the scale (as to what they consider to be an excellent rating), it’s impossible to know what each rating means in terms of the customer’s level of satisfaction.
The Dunvegan Group investigated this phenomenon through large sample research among B2B customers. We discovered that for some people, a rating of anything less than 10 (e.g., 9 or below) means that performance is less than satisfactory – so much so that the customer will be looking around for alternate suppliers of your products and services. Other people indicated that they would renew their contract at a satisfaction level of 6 or even 5.
So, as you can see, without calibrating ratings for each customer, we are at risk of misunderstanding the customer.
Words Are More Useful.
Think about your day-to-day conversations; people are more likely to say “The service was outstanding” than they are to say “I would rate the service a 9.” Or, “It was OK, but I would not rush back” rather than “On a scale of zero to ten, it was a three.”
At The Dunvegan Group, we use verbal scales … scales that describe how the customer feels and what they intend to do. For example, we ask customers whether the service is so good that they will continue to do business with our client. And, if not, is the service so poor that they are considering making a switch to another company. As you can see, these questions can be answered “yes” or “no” or “probably”.
With this method, companies receive specific feedback from their customers that can be understood with greater certainty.
The Dunvegan Group works with B2B companies to improve customer retention using The Platinum Rule®, “Treat other people the way they want to be treated.” Learn more about our solution.
Anne Miner founded The Dunvegan Group in 1987 as a full-service marketing research consulting firm. Under her leadership, the company has adapted to changes in the markets, advances in technology, and economic ups and downs. The firm developed its own processes, metrics, and software to support the services it delivers to Business-to-Business corporations, as well as smaller companies, including start-ups. The company serves clients across North America and around the world as they thrive and grow through serving their own customers according to the insights customers provide.