SUCCESS IN BUSINESS SERIES: CUSTOMER SATISFACTION FOR BUSINESS SUCCESS

Michael Le Boeuf is famously quoted saying “A satisfied customer is the best business strategy of all.” We cannot argue with that.

Gianluigi Guido, who has done extensive research in this area defines customer satisfaction as the judgment a consumer makes in relation to her sense of fulfillment related to her choices about the purchase and use of specific products and/or services. A high customer satisfaction rate leads to high customer retention thus fueling sustainable growth.

So how do you ensure a satisfied customer is your hallmark as a business? To answer this question, it is useful to draw lessons from those that have done well in this area.

One company that has mastered the art of customer satisfaction is Amazon. Starting only 27 years ago, Amazon is now the world’s largest e-commerce company, also ranked by value. today as the fifth-largest company in the world. Amazon’s proposition is to enable you to buy almost everything you need in one place. Its customer success lies in the way its founder and process designers removed friction from the online buying process while offering exceptional value in pricing and item choice.

Ensuring frictionless customer interactions has continued to characterize how Amazon builds its business. For example, when they expanded to new countries and regions, Amazon offered shoppers the option to browse and pay in their local language and currency respectively. Amazon’s premium membership program, Amazon Prime is a huge customer success story, offering users free delivery within two days or even same-day delivery for customers in select areas.

The latest innovation, Amazon Go, is a new kind of store that allows users to simply walk into the store, check in with their app, and take items as they go, without having to wait at the checkout counter. Alexa, their AI virtual assistant has also proved very popular with customers, especially given its vocal search capabilities. One-click purchase options, fast worldwide delivery, an advanced package tracking system, an easy return policy, and 24/7 customer service tools are other elements that keep users hooked and coming back to the website to shop for their favorite products.

In 2009, BusinessWeek magazine’s third annual “Customer Service Champs” list ranked Amazon as #1 in customer satisfaction ahead of customer service stalwarts like Lexus, The Ritz-Carlton, Nordstrom, and Four Seasons Hotels. In January 2020, the Institute of Customer Service (ICS) named Amazon as the company with the best customer service score for the past decade in the UK. Amazon received an average customer service score of 87.4 (out of 100) on the UK Customer Service Index (UKCSI) between January 2010 and January 2020 – the best in the UK. According to Forbes, Amazon shoppers stated that what they like most about them is their rapid response to customer complaints or order queries.

Amazon has certainly demonstrated that a satisfied customer is a good business strategy. Amazon’s rapid growth from non-existence 27 years ago to becoming the fifth-largest company in the world is certainly hard to beat. And the success story continues; according to their published Q4 2021 results, net sales increased by 9% to $137.4 billion in the fourth quarter, compared with $125.6 billion in Q4 2020. Net sales were up by 22% to $468bn for the year ended Dec’21. Net income increased to $14.3 billion, compared to $7.2 billion in Q4 2020, and from $21.3bn to $33.4bn for the year.

According to Forbes (Aug 2021), Amazon’s revenues are expected to grow further to $568 billion in 2022, increasing its net income to $37.6 billion and Earnings per Share (EPS) to $73.7, which coupled with the Price to Earnings (P/E) multiple of 57.7x will lead to an Amazon’s share price valuation of $4,257, a 29% upside on the market price at the time of their analysis ($3,306)or a 53% upside compared to last week’s market price of $2,785 if the same projection holds.

You will agree with us that these are awe-inspiring business and customer satisfaction performance records. We believe the good performance in customer satisfaction has directly contributed to the good overall business performance.

So, how do you translate the learnings from Amazon into actions that can make customer satisfaction the hallmark of YOUR business? We have drawn some key insights on Amazon customer service practices that can help you make customer satisfaction your distinctive advantage, helping you to step up and sustain excellent business performance – based on which we here make recommendations on actions you could take immediately:

Lessons from Amazon

  • Educate users about your products. Amazon seeks to educate its customers about each product by giving them as much information as possible through its well-detailed product descriptions on its e-commerce interface. This helps their customers make informed decisions ensuring they are happy with the items they purchase thereby avoiding buyer’s remorse.
  • Capture, analyze, understand, and interpret Customer Complaints. Amazon employees are trained to pay attention to customers’ problems which makes it possible for them to provide appropriate solutions. They then create a plan of action to bring about a satisfactory result from the customers’ point of view, let the customer know the actions they plan to take, and ask them if the intended results will satisfy them.
  • Continually & intentionally purpose and execute to improve customer experiences. Your entire business system (products, people, processes, systems) needs to be aligned and continually fine-tuned to make this happen. Drawing from our inspiring example, Amazon always offers fast hassle-free ordering and delivery by aiming to get customers’ orders delivered to them earlier than the predicted delivery date. This translates to happy recipients, by extension repeat purchases.
  • Don’t be afraid to apologize because a solid, heartfelt apology is a demonstration that your organization cares about the needs of the customer, and that speaks louder than any multi-million-dollar advertising message. Amazon’s employees are trained to always apologize to their customers in their line of duty but in cases where big percentages of customers are affected, the CEO bears the cross and does a written apology.
  • Record customer interactions towards arming yourself with the knowledge that will help you review, understand, and improve their experiences. Amazon has maintained a practice of keeping track of customer experiences- whether those are instances in which the customer is happy or unhappy. This offers insights that improve their customer service.
  • Lastly, develop a customer loyalty program and a customer experience strategy. The former will help you recognize and reward customers who engage with your brand regularly. The latter is a means to plan and execute improvement & measurement of customer experiences across touchpoints, thereby improving customer service credentials, reducing churn rate, and ensuring interactions meet customer needs.

Measuring Customer Satisfaction

After putting in all the effort, we must consistently measure the impact of our actions. This will help provide valuable insights into what works and opportunities for optimization. Customer surveys can be deployed at all points along your customer’s journey. You can then consolidate and track customer satisfaction through the following metrics:

  • Customer Satisfaction Score (CSAT) is one of the most straightforward ways to measure customer satisfaction. According to HubSpot, it measures a customer’s satisfaction with either a business, a purchase, or an interaction. The score is obtained by asking simple questions to which customers respond with either numbers, symbols, or smiley faces to express their level of satisfaction on a scale of very unsatisfied to very satisfied. A CSAT score is the sum of all positive responses, divided by the total responses collected, multiplied by 100. The outcome gives you the percentage of customers satisfied with your business, and their level of satisfaction. Expectations vary across industries, but a good score usually falls between 75% and 85%, according to Simpler Media Group. You probably want to be aiming around the 85% mark if you want to become distinctive in your industry for customer satisfaction.
  • Net Promoter Score (NPS) is defined by Qualtrics as a simple score between -100 to +100 that helps organizations rank themselves within their industry. It asks the question: “How likely are you to recommend us to a friend or colleague?” The respondent ranks their likelihood on a scale of 0 (highly unlikely) to 10 (extremely likely). In 2021, Amazon’s NPS score was 25 going to CustomerGuru’s NPS benchmarks. The average NPS score for the consumer brands/internet industry under which Amazon falls is 19. NPS score is calculated by subtracting the percentage of detractors from that of promoters. Promoters are customers who respond with a score of 9 or 10 while detractors respond with a score of 0 to 6. Those who respond with 7 0r 8 are considered passive respondents.
  • Customer Effort Score (CES) measures a product or service’s ease of use by customers such as how much effort it takes them to use your products or services or how easy it was for them to have a problem solved by your service reps. Customers rate the ease of their experience through a 1-5 or 1-7 scale, where 1 means strongly disagree while 5 or 7 means strongly agree. The less effort required, the better the CES hence higher customer satisfaction. The average of all the collected answers becomes the CES. There is no record of a CES score for Amazon from the data we reviewed, hence their usage of this metric is in doubt, but we believe it is a very useful metric for any business to consider for adoption.

According to Marketing Skull, Amazon uses 11 quantitative customer satisfaction metrics. These include order defect rate, pre-fulfillment cancellation rate, late shipment rate, Perfect order percentage, return dissatisfaction rate, policy violations, on-time delivery rate, valid tracking rate, contact/seller’s response time, order refund rate, and customer service dissatisfaction rate. Mostly self-explanatory, many of these measures apply well to goods providers, and such businesses are well-advised to consider them for adoption. For further information or help in the adoption of these or any other metrics we have discussed here feel free to contact us.

We at Stratex major in business diagnostics, helping you identify what would be a game-changer for your business and develop and execute strategies for your business success. The customer service & satisfaction area is one such area and we trust that the above information will be of some use in that direction. We are happy to work with you to diagnose your customer satisfaction performance including how you can improve your customer satisfaction levels to turn around or take your business performance to the next level, ensuring it lives up to its ambition and gears it up to maximize profitable growth.

However, if you feel you would like to explore your business performance more widely, ours is a strategic review expertise and so we can help you diagnose your business performance and create business and strategic plans to address where your business is at.

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