Why your 4-star rating is affecting your sales and revenue

By PE Admin | Hospitality

May 17

For many years, the customer services and hospitality industries have touted the importance of customer satisfaction and how it leads to customer loyalty. But do we really understand what the scores mean, and how they are affecting your business?

Lets start by looking at two important terms

Customer Satisfaction

Customer Satisfaction is a measurement of each customer’s attitudes towards your products, services, and their overall experience.

The aim of measuring customer satisfaction is to find out:

  1. Are your customers happy with your product or services?
  2. What areas can you improve on to make the experience better
  3. Are customers willing to come back and buy more and/or promote you to friends and colleagues.

The most common and easiest way to measure customer satisfaction is by using rating scales that ask customers to rate a variety of factors from quality, taste, speed, friendliness of staff etc. Where customers rate their feelings from 1 to 5 (sometimes 10 ) to measure their levels of satisfaction.

Customer loyalty

Customer Loyalty refers to a customer’s behaviour and how they choose a shop, product or brand over another.

Customer loyalty is harder to measure but is often scored on repeat business and sales. Common ways to measure loyalty is using loyalty cards and frequent user points systems (the ones that offer a free item after so many sold or get points for further discounts).

Does Satisfaction create Loyalty

It is fair to assume if we satisfy customers that they will become loyal and as long as we are satisfying our customers they will be happy to return and buy more. RIGHT.

Well actually NO.

Customer satisfaction does not create customer loyalty.

To explain this lets look at two common myths about customer satisfaction.

Myth 1 - Customers who repeatedly buy from you are both satisfied and loyal.

Just because a customer is buying from you may make them satisfied but does not make them loyal. If you think about it there are many reasons why a customer returns to buy from you, including:

  • The convenience of your location,
  • Your low prices and promotions
  • You have a product they like
  • Your staff are friendly and likeable
  • Someone else is paying the bill

These do not encourage loyal behaviour, instead if these are the main motivators of your customers, this means that your customers see this as a transactional relationship, where they pay for and receive a product or service; where they will return only as long as their basic needs are met, or until they can find somewhere else who meets their needs better.

In much the same way that customers are happy to swap shopping centres to buy their weekly groceries depending on weekly sales.

Myth 2 - Satisfaction scores are an accurate indicator of a customer loyalty

Let’s assume we run a customer survey asking customers to rate us from 1 – 5. The logical assumption is that for every point increase the level of loyalty also increases. Much like the follow graph.

But this is not the case.

The reality is that satisfying customers is not enough, remember customers have come to your coffee shop, bar or restaurant for a reason. Their expectation is to leave satisfied, anything less would leave a feeling of resentment, anger and even the feeling of being ripped off.

In 1997 Harvard professors Heskett, Sasser and Schlesinger identified that there were 3 zones or levels of satisfaction, which created 3 specific behaviours.

Heskett J, Sasser WE and Schlesinger LA, The Service Profit Chain, 1997

Zone of Defection – (Rating 1 – 3.5 out of 5)

Customers who receive poor and ordinary products and services are in this zone. These customer will rarely complain, leave and then take their business elsewhere. Then they will actively bad mouth and tell others to stay away. It is estimated that these people will tell up to 12 others about their experiences as well as posting their experience on-line.

Zone of Indifference (Rating 3-5 - 4.5 out of 5)

Here your customers are happy with the product and service, and possibly even the price. They have had a nice experience but they are not ‘wowed’ by it. Customers in this zone might come again but you have lots of competition who are better located, have the same or better variety or cheaper prices.

Sadly, this is the rating most moderately successful businesses receive. Remember customers feel the experience was good but not great, they are happy but no loyal.

Zone of Affection (Rating 4.5 – 5 out of 5)

Your customers love what you do and how you make them feel, they will actively walk further to get to you, promote you to their friends and even be willing to pay more for the experience. These are you ‘raving fans’.

These are also quite often the smallest group of customers.

How to us this in the workplace.

Business need to applaud themselves for getting good customer feedback and satisfaction scores. But they also need to get real about how well they are doing and how their products and services could be costing them sales & revenue.

Remember customers who are in the

  • defection zone (rating you between 0 – 3.5) are bad mouthing you as we speak
  • indifference zone (rating you between 3.5 - 4.5) will still shop around.
  • Affection zone (rating you between 4.5 – 5) will love and promote you, but only as long as you keep them feeling this way.

Ways to help build your rating scores include:

  • Be good at a few things not everything
  • Focus on quality and consistency
  • Focus on the customer experience
  • Ask customers for feedback often
  • Ask customers to post their feedback on-line so others can find it
  • Review your rating scores and share them with the team

If you like what you have read feel free to leave comments and feedback below, or check out more training tools and tips like this on our website at www.profitableemployee.com

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About the Author

I have been involved in Learning & Development for over 15 years in Australia, and the UK. Having worked with a range of public and private business in both private and public sector. I have seen a lot of what works and also a lot of what doesn't. I believe that with the right tools, guidance and support anyone can train better on the job.