As I am sure you are aware, a lot of business managers and marketers go to great lengths to measure customer satisfaction.
Ensuring your customers feel satisfied when dealing with you is a noble goal – but just because they're satisfied DOESN'T mean they will deal with you again(!).
Qantas versus Jetstar
Returning from Sydney yesterday, I overheard a passenger remark that this was her last trip in business class. "Is there a problem?" I asked. "Aren’t you satisfied with Qantas’s business class service?"
"I love it," she said. "But with these new super cheap Jetstar fares, I can no longer justify the extra expense. Jetstar simply OFFERS MORE VALUE."
Here is an example of a satisfied customer - that WON'T be repeat purchasing.
When customers describe their level of satisfaction - and there is an entire industry of market research firms that assist businesses to measure and act on customer satisfaction - they are really describing how they feel about PREVIOUS purchase experiences.
Further- by definition "customer satisfaction" gets feedback from existing customers: BUT what about people that have never bought a company's products: How can we tell if they will buy?
Given these sorts of problems with "customer satisfaction", marketers are increasingly turning to "customer perceived value" as a more useful measure of a (potential) customer's likelihood of buying from a business in the future.
What is customer perceived value?
In mathematical terms:
customer perceived value = benefits – sacrifice
It measures the various benefits a potential buyer perceives they will receive from dealing with a business and buying their product, and compares this to the sacrifices they perceive they will have to make.
Benefits are well known to marketers - for example a feature of Qantas’s business class service is that it provides "bigger seats": the benefit is that the traveller will feel more comfortable and hence more refreshed upon arrival.
Sacrifices a customer makes in purchasing a product could include the price paid, the time it takes to undertake the purchase, the distance one has to travel, the overall hassle etc.
Customer perceived value is a "relative term" – you cannot measure it absolutely – only relative to a firm's competitors. From our earlier example - Jetstar is offering "less for much less" compared to Qantas: less benefit, but for MUCH less monetary sacrifice. (Of course - for affluent individuals -paying additional money is in fact NOT a sacrifice - they would perceive that Qantas provides better value as the benefits are superior and – to them - there is no difference in price sacrifice. Indeed - "loss of prestige" may be a significant sacrifice to be made when traveling Jetstar.)
Comparing "satisfaction" and "value"
Many marketers believe "perceived value" to be a much better predictor of future purchase than "satisfaction" because:
- Satisfaction can only be measured within those that have already purchased - what about future customers?
- Satisfaction looks backward - value looks forward
- Satisfaction is measured relative to expectations – value is measured relative to competitive offerings
- Satisfaction helps improve internal business process – value predicts customer behaviour
- Satisfaction is emotional – value is rational
Influencing customer perceived value
Carpe Diem has developed a complete methodology to identify the "value drivers" that various market segments hold dear - by understanding these, a strong action plan can be developed to focus offerings on maximizing value, and hence on increasing the number of new and repeat customers.
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