Relationship Between Customer Satisfaction and Profit 

We have always believed instinctively that there is a direct relationship between customer satisfaction and profits. My company had an opportunity to demonstrate this correlation to a client several years ago.

One of the Midwest’s largest men’s clothing stores had a mailing list of over 60,000 customers. The problem was, the list contained only names and addresses…no vital customer profile information such as sizes, style preferences, or attitude about the stores.

We sent a personalized letter to those 60,000 customers asking them to return a brief survey with questions such as “Why do you shop here” and “What is your overall satisfaction with the shopping experience?” When we processed the responses, we were shocked at the result. We found that the reasons 90% of the customers shopped at other men’s stores were the same reasons 10% of the customers shopped only at our client’s stores.

“Price” and “selection” were both the heroes and culprits. Our client charged the same prices to all customers and offered the same selection to all customers as well. Yet, customers experienced each differently.

Without this good information, our client might have rushed to lower prices or increase inventory when what he really had was a perception problem. We created a newsletter to better communicate the origin of the pricing decisions and to communicate the vast selection of merchandise the client offered.

One of the relationship marketing strategies we implemented was to send a thank you note to every customer – about 500 a week! 

The appreciation note also asked the customer to return a brief satisfaction survey. Response to the survey was a staggering 21%!

Ten thousand surveys later, we had both an extraordinary problem and opportunity to deal with. As you can see from the graphs, customer satisfaction had a huge impact on both the number of times a customer visited the stores each year and amount of money customers spent each visit. 

Customers who had an “excellent” shopping experience (48%) visited the stores an average of 3.9 times a year and spent an average of $465 per visit. Customers who merely had a “good” experience (49%) visited 3.5 times a year and spent only $397 per visit. The difference between a “great” experience and a “good” experience” was half a visit per year and $68 in sales– or about $3.2 million a year in lost sales!

We moved immediately to improve the shopping experience: better signage, increased product training, and most of all, better interpersonal relations between the salespeople and the customers. Exchanging “sales” commissions for “satisfaction” commissions, the salespeople were rewarded financially every time a customer’s satisfaction survey was returned with a rating of “excellent” and the included the salesperson’s name.

While our client’s competitors spent huge resources looking for new customers, we focused on moving customers from a “good experience” to a “great experience.” 

In eighteen months, customers who had a great experience increased from 48% to 67%, and our client realized nearly $1.2 million in additional sales at a marketing cost of less than 10% of that gain!

There should be no surprise that satisfied customers will “frequent” you more often and will spend more money with every “visit.” Today, a customer or client who merely has a “good” experience is a customer at risk. They’ll keep shopping around until they find that elusive “great” experience. And when they find it, they’ll never leave because they’re not willing to take a chance that the new experience won’t be as great.

Relationship Between Customer Satisfaction & Profit: What are the Lessons To Be Learned?