flevyblog

Flevy Blog is an online business magazine covering Business Strategies, Business Theories, & Business Stories.
MANAGEMENT & LEADERSHIP STRATEGY, MARKETING, SALES OPERATIONS & SUPPLY CHAIN ORGANIZATION & CHANGE IT/MIS Other

How Customer Satisfaction Drives Sales Growth

You’ve been told you should be measuring your customer satisfaction, but you’re wondering if it’s really worth it. Or, maybe you’re trying to drive sales growth and wondering whether improving your customer satisfaction will help.

Well the short answer is “yes, customer satisfaction has been proven to drive sales growth.” Improving your customer satisfaction really will boost your sales. But don’t just take my word for it.

A National Customer Satisfaction Survey

In 2012 the Institute of Customer Service (ICS) surveyed 26,000 consumers in a study specifically designed to test the link between customer satisfaction and business performance.

The ICS study found that:

Amazon had the best customer satisfaction (91.7) and achieved the strongest sales growth (20%).

By contrast, the four retailers with the lowest customer satisfaction all suffered a serious decline in sales. Comet posted the biggest sales fall (-14%) and scored lower customer satisfaction than most retailers in the survey (71.7).

Perhaps this result isn’t surprising. In the battle between 9044202806_42bcb98ac3Amazon and Comet it’s easy to argue that there are other factors at work.

So let’s take a look at a more straight-forward comparison. How about supermarkets?

The 2012 ICS report showed that:

The two food retailers with the highest customer satisfaction ratings were Waitrose and Aldi, both scoring 84.6.

Despite having very different models and target customers, they also achieved the greatest gains in market share over the Christmas period – Waitrose by 0.2%, Aldi by 0.4%.

Sustained Growth

At the time of the report the ICS were able to draw a clear link between customer satisfaction and sales growth. But could that be quirk of the data? And does it play out over the longer term?

Grocery News recently published the Kantar supermarket industry growth figures for 2013-2014. These latest figures not only support the previous finding that customer satisfaction drives growth, but emphasise them even more strongly.  Aldi not only grew its market share faster than any other supermarket, but significantly out-grew its closest competitor, Lidl – who had a lower customer satisfaction score in the 2012 report. And at the other end of the market, Waitrose grew their share faster then any other non-discount supermarket, including Sainsbury’s and Tesco, who again showed lower customer satisfaction scores in the 2012 report.

British Supermarket Share

Supermarket October 2014  £ Billion October 2013 £ Billion % Change
Aldi 4.8% 1.17 3.8% 0.92 +27.3%
Lidl 3.5% 0.85 3.0% 0.72 +18.1%
Waitrose 5.2% 1.25 4.9% 1.17 +6.8%
Asda 17.2% 4.16 17.3% 4.20% +1.0%
Co-op 6.4% 1.55 6.4% 1.56 -0.4%
Iceland 1.9% 0.46 2.0% 0.47 -0.7%
Morrisons 11.6% 2.66 11.9% 2.71 -1.8%
Sainsburys 16.1% 3.92 16.7% 4.04 -3.1%
Tesco 28.8% 7.01 30.1% 7.27 -3.6%
Total +0.7%
Inflation -0.2%
Source: grocerynews.org via Kantar

So customer satisfaction scores collected in 2012 were a successful indicator not just of growth in that year, but of sustained growth in the following years. It’s the reason some of biggest, fastest growing and most successful companies on the planet are obsessed by customer satisfaction.

Saga Holidays were another of the companies that were rated in the 10 top for customer satisfaction in the UK. In their 2013 Annual Report one of the very first things that Andrew Goodsell, the Chief Executive, noted was how proud he was that they had retained their position at the top of an Ipsos Mori customer satisfaction survey. The only thing he mentioned above that was the fact they’d grown their turnover by 6.4% to £2.2 billion and their profit 4.9% to £621 million!

Customer Satisfaction for Every Business

If it works for the big companies, what does it mean for the rest of us?

Regardless of company size, the fundamentals still hold. And it doesn’t matter if you call it customer satisfaction, customer experience, customer delight or anything else. The more satisfied your customers are the more often they’ll return and the more they’ll recommend you to others. All of which drives sales growth without you having to spend an extra penny on advertising, marketing or sales.

If you still need to see it to believe it, why not try it for yourself? Head over to satsum.com for a free trial of the quickest and easiest way to start tracking and improving your customer satisfaction.

References:

About Andy Lees

Andy Lees is the founder of Satsum, a customer experience analytics platform. Andy is an expert in consumer insights, having spent over 20 years in the industry. Prior to founding Satsum, Andy was Product Director at Lumi and Innovation Director for Kantar (WPP group). You can connect to him on LinkedIn here.

, , ,




Complimentary Business Training Guides


Many companies develop robust strategies, but struggle with operationalizing their strategies into implementable steps. This presentation from flevy introduces 12 powerful business frameworks spanning both Strategy Development and Strategy Execution. [Learn more]   This whitepaper authored by McKinsey Communications specialist teaches us the 4 Cs of Communication Review, so you can find and fix errors in your Communication prior to sending it out. It addresses the most critical elements of Communication across all formats. [Learn more]
We've developed a very comprehensive collection of Strategy & Transformation PowerPoint templates for you to use in your own business presentations, spanning topics from Growth Strategy to Brand Development to Innovation to Customer Experience to Strategic Management. [Learn more]   We have compiled a collection of 10 Lean Six Sigma templates (Excel) and Operational Excellence guides (PowerPoint) by a multitude of LSS experts. These tools cover topics including 8 Disciplines (8D), 5 Why's, 7 Wastes, Value Stream Mapping (VSM), and DMAIC. [Learn more]
Recent Articles by Corporate Function

  

  

  

  

  


The Flevy Business Blog (http://flevy.com/blog) is a leading source of information on business strategies, business theories, and business stories. Most articles have been contributed for management consultants and industry executives with over 20 years of experience. If you would like to contribute an article, please email our editor David Tang at [email protected].

Flevy (http://flevy.com) is the marketplace for premium business documents, such as management frameworks, presentation templates, and financial models. Our documents are of the same caliber produced by top tier consulting firms, like McKinsey, Bain, Accenture, BCG, and Deloitte. Learn more about Flevy here.


Connect with Flevy:

   
  


About Flevy.com   /   Terms   /   Privacy Policy
© 2019. Flevy LLC. All Rights Reserved.