According to a study conducted by the University of Technology Sydney (UTS) Business School and published in the Journal of International Business Studies, customer satisfaction is now the most important marketing metric today, influencing over half (53%) of all marketing mix decisions.
UTS Business School researchers looked at over 4,000 marketing plans from more than 1,600 companies operating in 16 countries and identified 84 total metrics. After customer satisfaction, the two most popular metrics were awareness (45%) and ROI (43%). Researchers found that on average, marketing managers used nine metrics in their marketing mix decisions. Managers in South Korea, China and India used metrics the most; their counterparts in Japan, France and the US used them the least.
“We wanted to know what metrics managers are using globally, what drives metric use, including cultural influences, and how many metrics managers are using. In today’s digital technology-intensive and data-rich environment, it is important for managers to know which metrics count,” UTS Business School lead researcher Dr. Ofer Mintz explained.
Right idea, wrong metric?
That customer satisfaction is such a popular metric and is even more popular than ROI isn’t so surprising when one considers just how much emphasis has been placed on customer experience in recent years. Instead of excelling in one or two areas, the common wisdom is that companies have to make every aspect of a customer’s journey an excellent if not pleasurable experience.
Customer satisfaction, as a metric, effectively seeks to measure how customers perceive the customer experience.
This is a good idea, but a big challenge with the use of customer satisfaction as a decision-driving metric is that there is no standard definition for what customer satisfaction is. In fact, despite the fact that companies have been investing heavily in customer experience initiatives, just what customer experience actually represents is still a subject of discussion:
None of this is to say that customer satisfaction can’t be measured. Companies have numerous ways of polling their customers and distilling the feedback into a quantitative format. And there are third-party metrics, such as Net Promoter Score, which is said to correlate customer satisfaction to revenue growth.
But the nature of the popular Net Promoter Score raises the question: if companies are ultimately interested in financial outcomes, why rely most heavily on customer satisfaction metrics instead of direct financial metrics?
Companies are being implored to take the long view when evaluating their customer relationships and marketing efforts and the interest in customer satisfaction ultimately appears to be driven by a belief that happy customers are more valuable than less happy customers over some definable period of time. Studies suggest this isn’t always true, but even if this belief is well-founded, especially for small and medium-sized enterprises in highly-competitive markets, one could argue that companies are betterserved by prioritizing financial metrics.
While the simplest of financial metrics, such as revenue, leave a lot to be desired and can be used to justify marketing activities that are too focused on short-term gain, there are financial metrics that are more nuanced. Take for example customer lifetime value (CLV). It aims to measure the total value of a customer to a business over the entirety of the customer relationship and is therefore inherently aligned to both customer experience and long-term results.
CLV can be challenging metric to calculate, which might explain why the number of companies using it is relatively low. There are also risks to using it improperly. But as detailed in Econsultancy’s The Performance Agency Plan for Growth report, which was produced in partnership with Google, agency performance leaders are 53% more likely than the mainstream to say that over half of their clients view CLV as a key metric of success.
With this in mind, companies interested in incorporating customer satisfaction into their marketing decisions would be wise to consider that the right financial metrics, such as CLV, might tell them more about customer satisfaction than their existing customer satisfaction metrics.