Customer Satisfaction Index

Description

The calculation of the Customer Satisfaction Index is based on the assumption that when customers are satisfied, they have higher likelihood of making repeat purchases, maintaining loyalty to the organisation, or providing positive feedback. This therefore makes it a suitable measure for the success which an organisation is getting in delivering their goods and services to the market. Since the cost of attracting new customers is high when compared to the cost of retaining current ones, customer satisfaction is an important performance metric for most companies. Customer satisfaction also acts as a measure of the gap that may exist between the standard of service/products which is delivered and the standard which is expected by the market. A mix of qualitative and quantitate assessments are considered to provide the most accurate assessment, this may be obtained from a survey immediately following the delivery of goods/service or after a given period of time (e.g. Annually)

Calculation

Data for the purpose of calculating the Customer Satisfaction index is collected using a Likert scale designed for the purpose. The customer scores satisfaction with criteria such as expectations, perceived value, waiting time and other attributes. The scores may then be weighted to reflect relative significance to an organisation and combined to form a single numerical score identifying the customer’s overall level of satisfaction or dissatisfaction. Sample size/survey method must also be selected to ensure it is representative of customers.

Example

For a retail outlet: Post-purchase questionnaire. Score 1 – 5 (1 = poor/dissatisfied) (5 = Good / very satisfied) Perceived quality Perceived value Satisfaction with sales assistance provided No returns – actual data obtained during the survey period. No customer complaints – actual data obtained during the survey period.

Customer Satisfaction Index is thus calculated by dividing all the positive responses by the total number of responses and multiplying by 100. This results in your CSI percent. For example, if you have 35 positive responses and a total of 50 responses, your CSI would be 70%.

The main issue with this approach is determining how important each attribute is in driving customer satisfaction. For example, in reality, your customer satisfaction may be 60% based on price and 10% on each of the other attributes. If that is the case the index created above would give an inaccurate result.

CSI addresses many of the weaknesses associated with standard customer satisfaction measurement

Benefits

Uses existing customer satisfaction measures

No changes to current customer satisfaction survey measures

Can use previously collected customer satisfaction data in CSI

Choice based measurement

Appropriate trade-off technique that derives weights from choices

Statistical methods used for modelling are based on underlying behavioural theory

Carefully constructed experiment allows for independent measurement of the relationships between the drivers / attributes and overall satisfaction

Accounts for problems with scales

Does not treat each scale item as equal or linear -e.g., a score of 7 (very satisfied) is not treated the same as a score of 6 (satisfied)

Weighted results take into account the importance of each attribute

Weighted results allow for relationships between the attributes, they do not assume each attribute is independent

Index for each customer

Weighted index can be calculated for every individual customer

Distributions can be viewed and used for segmentation

Links operations to satisfaction

Operations can be linked to the scale so management are aware of what it would take (operationally) to change satisfaction scores

Decision Support System

CSI is not a static measure

Management can use the DSS to perform ‘what if’ scenarios