Customer satisfaction plays a large role in operating a successful business. In fact, maintaining it can be as important as revenues and profit margins. It can even be said that they are directly related. Though everyone understands the significance of providing a positive customer experience, it isn’t always consciously incorporated in the operating environment such as more tangible factors might be.
Vafa Akhavan, executive director of diversified solutions at J.D. Power and Associates, spoke about the dynamics of customer satisfaction in the auto rental industry at the Car Rental Show in September. Based on a number of J.D. Power syndicated studies, he examined car rental as compared to other industries to see where customer satisfaction factored in, and how it should be regarded in looking toward the future.
“What can we do to leverage customer satisfaction?” Akhavan asked those in attendance to consider as he opened his program. “How can we leverage customer experience to generate greater performance for our organization? Whether corporate or independent, it doesn’t matter.”
Dynamics of Customer Satisfaction
Akhavan explained that there are three essential elements of the customer experience in terms of how it becomes value for a business: the customer’s experience, the employee’s experience and the environmental experience. The environmental experience encompasses both the customer’s understanding of what’s going on and the employee’s perception of the working relationship.
In other words, it is the total experience — the customer, the employee and the market. A positive customer experience translates into increased acquisition and retention. If a customer has a positive experience, then the outcome would be the acquisition of a new customer. The customer with a positive experience is more likely to recommend the rental company. A customer with a great experience, and one who experiences consistency in that excellence, will become an advocate to others, therefore increasing acquisition without advertising expense. With a positive experience, a customer is more likely to return, which, as Akhavan explained, leads to retention of that customer.
In retaining a customer, an organization can likely expect that customer to spend more with them. And spending leads to market share and increased revenues. But acquisition and retention are also important with a business’ employees. If the employee enjoys a working environment, they are likely to stay in that environment, which is a driver for a more productive work force.
As it affects customers, that result generates revenue as well, and cuts costs, as hiring and training new employees requires time and money, in turn seeing less productivity on the whole. The customer experience then becomes a reflection of that employee’s experience. With the two experiences working well together, a business is likely to see profit and growth. “(You have) the value, market share and share of wallet from the customer side, revenues and costs from the employee side, and ultimately, that translates into better economic performance for you,” Akhavan said. [PAGEBREAK] What is Customer Satisfaction?
Every business operator is making a promise to customers when he or she opens the doors, allowing the customer to have certain expectations. Additionally, advertisements and marketing campaigns afford the customer an expected comfort level and expectation of service. But is the customer experiencing what was promised? “Our ability to get the customer from the promise to the experience is satisfying the customer,” Akhavan pointed out. "Reaching a satisfied customer requires more than that, though, because satisfaction is about “people, process, product, price and penetration — the five P’s of customer experience.”
In the end, the experience is driven by factors and their attributes. On factor, for example, is how long it takes to pick up the car. Further, there are attributes within each factor. Upon picking up the car, was it clean? Were there any mechanical or service problems with the car? “What most companies don’t do a great job of is rigorous measurement and understanding of critical factors and respective attributes for customer satisfaction, as well as how well the organization performs against them,” Akhavan said.
Inevitably, those aspects that might be considered good business or innovative service techniques in today’s auto rental industry might become a minimum standard in the future. Just as shampooed car seats and vacuumed floorboards are no longer conveniences, but expectations, so too will some of today’s practices become customary. Once someone experiences something long enough, they count on it being there time and again.
“I don’t know when car rental companies started turning on cars in advance in the wintertime for premium renters. It was a great idea then,” Akhavan said. “It’s warm, the ice is melted. You can get in the car and go. Now, if the car is not on, you get upset because it’s now become a minimum requirement for you to have the car on.”
But he also explains that an optimum level of performance in different categories can be reached. “What do we do then? When we reach optimum levels of performance, then what?” Akhavan asked. “Where do you go to create differentiation in the marketplace?”
Product and service quality have the biggest impact on customer satisfaction, according to a J.D. Power survey, but price, communication, rapport and competence, and convenience of the rental process are not far behind. Companies need to understand the weight of these elements in the experience of their customers, and the gaps in their performance against customer-driven standards of excellence. “Otherwise,” Akhavan said, “you won’t have actionable intelligence or know what to do for effective improvement.” That, he said, is the future of differentiation.
The Changing Face of the Customer
Though strides can be made to prefect certain segments of the business operation, you have to understand whom it is you’re trying to keep satisfied. Akhavan said that the old tag, “expert sellers, naive buyers,” doesn’t apply as it may have in the past. “Buyers are a lot more sophisticated,” he said. “They are more savvy today.”
A primary reason for that sophistication is the widespread availability of information. With the Internet, customers can price cars and figure out what it would cost to rent a certain car at a particular time. Now, when a customer calls a reservation center or enters a location, they are more educated than they were a decade ago. Their knowledge of the industry standards and offers could also be why customers, in general, are more assertive when they approach the rental counter. “This is what I want. This is what I’m looking for. If you can’t provide that to me, I’ll go somewhere else,” is, according to Akhavan, the mentality that many employees must cater to these days. But that mentality is less prevalent when customers are more satisfied.
Consumers are also bundling their purchases more and more. One of the more common examples is the packaging of cable and Internet service in the same company, on the same bill. The same can be said of the travel industry. Travel search engines and online travel agencies allow customers to book flights, hotel accommodations and rental cars all in one place. Now, there is a push from vendors for those kinds of bundled purchases, Akhavan explained, specifically pointing to pop-up windows offering a car or airline reservation once a hotel has been booked on one site.
The boundaries for the customer domain are widening, and they are being influenced by their experience sets in other transactions. If you have a great call with a wireless agent, you expect a great call with a reservation agent. And these are things to keep in mind when dealing with a customer. But the new consumer — savvy, confident, bundling — is more recognizable than might be imagined.
“Look at your own, individual buying patterns, and how you have changed as a consumer over the past 10 years,” he added. “I think that you will notice some of these differences.” “The ways in which we’re going to deliver a customer experience to the next generation is going to change,” he continued. “The issue is whether we’re prepared for that and anticipating that.” [PAGEBREAK] Why is Customer Satisfaction Important?
Of course, as a business operator, you want your clientele to have a pleasing experience. But as far as a company is concerned, the economic impact a satisfied customer has on a business is most important. From 1995 to 2000 in a bull market, CSI award-winning companies saw their value increase an average of 176%, while companies whose CSI scores were average or below actually saw company value fall 10%.
Even in a bear market, such as what occurred from 2000 to 2002, the average decrease in value was not nearly as drastic for top-performing companies in terms of CSI. In fact, the decline in value was little more than half the fall that the poorest CSI performers encountered. Further, higher satisfaction translates into a greater return on investment.
Essentially, there is a lower acquisition cost because of return customers. Acquisition costs for repeat customers run about $10 on average, whereas the cost of acquiring a new customer is about $40. And happy customers mean returning customers. By that rationale, if customers are coming back for more business, then that should mean that there are fewer problems. That would account for lower problem-resolution costs. Incremental revenue increases as each customer returns, which adds to a company’s total sales. If a customer continues to be satisfied with the treatment he is receiving, then those incremental revenues are likely to spike a bit more. Simply put, data shows that it’s more likely for a happy customer to spend more. And that means spending more on things like upgrades or supplemental insurance coverage.
Satisfaction as Strategy
As a sector, the travel industry lags behind most industries, including auto, electronics and telecommunications, to name a few. But within the industry, car rental pulls out ahead of the hotel, restaurant, airline and airport segments. In such a customer-driven industry as auto rental, each company needs to recognize the relationship between incorporating the “voice of the customer” in its business model and its competitive differentiation. Tying the voice of the customer into a corporate strategy is no small feat and cannot be done in one fell swoop. It begins with ensuring that your measurement tool is effective, not just thinking it is.
Most companies receive customer feedback, good and bad, that should be used as a tool for educating employees. But simply taking in the information or reading a feedback card won’t make a difference. That customer feedback must be indexed and regressed, which Akhavan said is actually listening to the customer response. From there it should be processed, or analyzed to understand the meaning of what the customer says, followed by a plan to change and improve.
The fourth step involves integration of those ideas — designing processes, training programs and employee compensation programs around customer satisfaction. At that point, it becomes a part of the company strategy, which returns as revenue generation and market share gains.
“Of course, the ultimate industry leadership is when the voice of the customer becomes a strategic competency within your organization,” Akhavan said. “It becomes part of your company’s DNA.” And that’s where one company can differentiate itself from another. “Understand the culture of the environment you’re in,” he continued. “It’s about compensation. It’s about the kind of people you’re recruiting. It’s about how you communicate with them. It’s about how your managers are dealing with them. Those are the cultural elements that will help you sustain excellence in customer experience. Ultimately, it begins with the leadership of the organization. If they don’t lead in this direction, the rest will not follow.”