Friday, November 9, 2007

Why You Don’t Want a Perfect Customer Satisfaction Score

I was recently introduced to the concept of 91. 91 is the theoretical score out of 100 that a business person would want from a customer satisfaction survey (10 points for 10 questions each). Why only 91? Why would you not want to exceed expectations on every facet of your business? Logically, you want 10 points out of 10 for every question, right?

Wrong, says the president of a major, global, industrial manufacturing company.* This person says the one question you want a 1 out of 10 on is about price. The question “Is our price competitive with your alternative suppliers?” or something of that nature, should garner your company a flunking score.

But if your customer satisfaction survey returns a 91, it means you are exceeding expectations everywhere else, and hopefully, that your customer prefers to use you to your competitors for the value you bring to the table. A score of 91 also means that your company is not leaving money on the table.

According to the McKinsey book, The Price Advantage, a 1% increase in pocket price (the price a company actually receives after all discounts) can result in an 11% increase in profits, which is more improved profitability than any cost reduction strategy, including reducing variable and/or fixed costs. Furthermore, if that 1% is justified, volume should not decrease. The moral of this story: pricing is critical to a profitable business. The right price may not be where your customers want it to be, but they will pay it if your product or service offers a value that exceeds the price tag.

*I heard this person speak in a Pricing class I am taking, and I'm not sure if he'd like his customers to know that he wants to make them cringe over the price!