The high price of customer satisfaction

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Summarize the key points of the article please

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Marketing Paper

12 January 2015.

The High Price of Customer Satisfaction

The aim of this article is to investigate the relationship between customer satisfaction and financial performance. It reports that the relationship between customer spending behavior and customer satisfaction is very weak. Findings also indicate that efforts to increase customer satisfaction often bring trivial, sometimes even negative, return on investment. Customer satisfaction is said to be less important for a company than the customer-generated ranking of the company’s brand relative to that of its competitors.

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            The authors argue that the economic benefits of high customer satisfaction for business are not clear-cut. Although improvement in customer satisfaction can lead to an increase in sales revenue, the additional costs often outweigh the benefits. Moreover, an increase in satisfaction levels may not necessarily be reflected in a corresponding increase in market share. In fact, higher satisfaction is a predictor of negative changes in future market share (Keiningham et al. 38).

A major argument in this article is that knowing a customer’s level of satisfaction does not tell a company about how the customer will allocate her spending to different brands. For this reason, an increase in the level of satisfaction may not change the customer’s decision on the amount of money he or she is willing to spend on the company’s brand. This is simply because many customers of today choose to divide their loyalty among different brands instead of opting out of one brand completely in order to get the best value. This provides justification for business managers to seek greater opportunities for financial performance improving the share of spending the customer allocates to the company’s brand instead of seeking to improve customer retention.

A great strategy that managers can use to align customer satisfaction to profitability is to reduce investment on customers who get little value from the brand and in turn deliver little value to the company in terms of profitability (Keiningham et al 42). Managers may also try providing new product offerings to customers who present a vulnerable relationship with the company such as free riders. Regarding the nexus between market share and customer satisfaction, companies should focus on core benefits like convenience, price, and product assortment needs. The authors conclude that although customer satisfaction is a fundamental pillar of business success, it must be anchored on fiscal oversight and sound business strategy to ensure that does impact negatively on financial performance.

Works Cited

Keiningham, Timothy., Gupta, Sunil., Aksoy, Lerzan and Buoye, Alexander. “The High Price of Customer Satisfaction.” MIT Sloan Management Review, 55.3 (2014): 36-46.