Understanding the Limitations of CSat

 

There are a number of limitations of customer satisfaction in terms of relying too heavily on this marketing metric. It is, therefore, important to understand the various limitations in order to utilize the results of CSat research/scores appropriately.

Expected versus delivered value is being measured

The basic premise of customer satisfaction is that it is the customer’s evaluation of how well the firm delivered on its value promises. In other words, did the firm live up to the expectations of value in the mind of the consumer.

(Please note: the basic and more detailed models of customer satisfaction are discussed in other articles on this website). Therefore, the consumer goes through some method of comparison to reach an overall assessment, as per the following simple list:

  • Received value exceeds expectations = Highly satisfied
  • Received value equals expectations = Just satisfied
  • Received value is below expectations = Dissatisfied

The key limitation with this model is the impact of expectations – this can be the major driver in determining the level of customer satisfaction, rather than the overall value provided to the consumer. In my lectures, I provide marketing students with the following simple analogy.

Assume you were expecting a $100 gift for your birthday and you only received $50, you would be disappointed (dissatisfied). But if you were only expecting $10 and received $50, you would be delighted (highly satisfied). As you can see, in this example you received $50 in both instances, but it was your initial level of expectation that was the main driver of your level of satisfaction.

The same principle applies to consumers and their interactions with firms/brands when forming views of customer satisfaction, particularly for new customers to the firm. Their resultant initial customer satisfaction assessment will be primarily driven by their prior held expectations.

The main concern here is that the easiest way for a firm to achieve high CSAT (customer satisfaction) scores is to create relatively low levels of expectations. You may have heard the old under-promise and over-deliver cliché but that can be a fallacy that is discussed in a separate article on this website and may even reduce profitability.

Therefore, if consumers have relatively low levels of expectations of a firm, then they are LESS likely to deal with them and they are LESS likely to use the firm for higher value purchases. These two factors in combination increase new customer acquisition costs while, at the same time, limiting profit per customer – which adds up to equal reduced profitability, not enhanced profits.

A good example of this occurs in the credit union industry, where (on average) credit unions have much higher CSAT scores than banks, but much lower rates of growth and profitability. Please note that there is a discussion of this high customer satisfaction and low profitability paradox on this website.

High satisfaction scores cannot be maintained over time

Given that the strategy of having low expectations (under-promise and over-deliver) in order to generate high customer satisfaction levels is not a profitable or long-term strategy, the question then becomes: should the firm build high expectations and then work really hard to exceed these high expectations?

Again the basic premise here, at least at first glance, seems quite logical. Building high expectations with the target market should increase numbers of new customers and many of them should be high-value customers as well. And provided you exceed these high expectations with an even higher level of product and service quality, these new customers will be highly satisfied.

But there are two concerns in this regard. The first is the amount of cost and effort required to deliver products and services well above high expectations (possibility from demanding customers). This is especially difficult if it is a very large service firm that is highly reliant upon direct staff-customer contact. Therefore, this approach may simply be cost prohibitive.

The second concern is that CSAT scores evolve over time with the experience of the customer with the firm. This means that, even after the first very satisfactory encounter with the firm, many customers will increase their level of expectations accordingly.

Therefore, for future purchases or encounters the customers will now expect very high value/service, meaning that they will become “just satisfied”. In fact, most service firms primarily have most of their customers in the “just satisfied” category – please refer to this separate article on why this happens.

CSAT probably does not accurately measure what it is designed to measure

Customer satisfaction is essentially designed to be a top-level and all encapsulating marketing metric. That is, its intent is to summarize the firm’s overall level of marketing performance. This is because CSAT is seen as a combination measure for:

  • Customer loyalty
  • Customer profitability
  • How much customers like the firm
  • Whether the customers will recommend the firm

However, customer satisfaction can be a relatively poor measure of the above issues and there are more direct and reliable marketing metrics available.

For example, customer loyalty can be measured more accurately through loyalty programs or through the customer database. In fact, research suggests that there is a weak correlation between CSAT and loyalty. And customer profitability does not necessarily align to high customer satisfaction scores either, as highlighted in the credit union industry case study example.

The final bullet point above is quite interesting and more relevant. Many firms are now using a version of “would you recommend this firm to a friend?” This is becoming a highly viable alternative to the traditional customer satisfaction question. Its prime advantage is that it removes the impact of expectations and provides a much cleaner and reliable metric as a result.

Related Topics

Summary list of the Limitations of CSat – this article also includes links to related Academic Literature