Key Benefits of Customer Satisfaction in Marketing
Customer satisfaction is a fundamental concept addressed in all marketing textbooks and many organizations consider it the most important marketing goal, because it should deliver ongoing customer loyalty and resultant enhanced profitability.
But there are actually many more benefits of customer satisfaction, as shown and discussed in the following table:
|Benefits of Customer Satisfaction||Discussion|
|Increased customer loyalty||Satisfied customers are more likely to stay with the firm for a longer period, which can significantly increase sales revenue and profitability over time|
|A strong competitive switching barrier||Existing customers will be less interested in competitive offers|
|Higher amount of average purchases||The firms will generally gain greater share of customers’ purchases in that product category. Typically satisfied customers will increase their purchase quantity over time|
|Increased word-of-mouth (WOM)||Satisfied customers are more likely to recommend the brand, product or firm to their family, friends and social media connections|
|Lower promotional expenditure is required||As a steady flow of new customers should be generated from word-of-mouth referrals, reducing the need to generate new customers from various promotional activities|
|More stable sales revenues (cash flows)||This occurs from the combination increased customer loyalty, the competitive switching barrier and enhanced new product successes.|
|Greater success of new products and line extensions||The firm will achieve greater success with new product launches, as generally they can target existing satisfied customers with a significant degree of success. In fact, many satisfied customers look forward to new products from the companies that they like to deal with.|
|Increased opportunity for product/service recovery||Service recovery refers to a firm (usually a service firm) being able to fix a problem/complaint for a customer in order to keep the customer satisfied. This is more likely to happen as satisfied customers are more likely to approach the firm for a solution.|
|Greater voice-of-customer inputs||Satisfied customers are more likely to be interested in working with the firm (through forms of market research) to provide input to new product, process and service initiatives.|
|Stronger staff-customer relationships||Many service firms pursue strong customer relationships as a key part of their marketing strategy. Clearly relationships are stronger and more productive when working with satisfied customers.|
|Reduced price sensitivity||Satisfied customers value the overall experience and product of the firm and are less concerned with price in their overall assessment.|
Simple Model of Customer Satisfaction Benefits
Here is a straightforward model for outlining the benefits of customer satisfaction.
A more complex and interrelated model is provided in the next section down.
As shown in the model, the key benefits of customer satisfaction includes greater customer loyalty, reduced price sensitivity, enhanced positive word-of-mouth and increased share of customer – which all adds up to increased long-term profitability.
Interrelated Benefits of Customer Satisfaction
As can be seen, there are quite a number of strong reasons why customer satisfaction is often actively pursued in a firm. Many of these reasons have a direct impact on the firm’s bottom-line financial performance.
In addition, many of these factors are interrelated and help reinforce each other. For example, strong and positive word-of-mouth helps drive new customers, which increases sales revenue streams and profitability.
But strong and positive word-of-mouth also enables the firm to reduce (or get more impact from) its overall promotional budget, which in turn reduces marketing costs and helps deliver enhanced profitability.
These interesting and important interrelationships are outlined in the following model:
- Understanding Customer Satisfaction
- Disconfirmation Model of Customer Satisfaction
- Limitations of Customer Satisfaction
- How to Enhance Customer Satisfaction
- How to Measure and Track Customer Satisfaction
- How Customer Satisfaction Evolves over Time
- What is the difference between customer satisfaction and customer value?
- Customer Satisfaction and CRM
- Understanding the SERVQUAL Model