Satisfaction = Perception – Expectations The Best Kept Secret & First Rule of Customer Service

Spanish Version.

Out of all the tools & formulas I share in the invigorating world of business schools, one stands out.

It’s one of the best kept business secrets and the first rule of customer service.

This seemingly simple yet complex equation is indeed a mantra when assessing business department & success models:

Satisfaction = Perception – Expectations

This gem holds an abundance of valuable tools & business lessons.

As an engineer, my mind is always in formulation mode. When I first laid eyes this equation, formulation mode got the green light and here’s what it found:

• Satisfaction is greater than zero when perception is greater than expectations
• Satisfaction is less than zero when perception is less than expectations, i.e. dissatisfaction
• Satisfaction is equal to zero when perception equals expectation, i.e. indifference

It makes both mathematical and business sense. But, let’s push it further by unveiling the equation’s magic and complexity from a business standpoint.

First, let’s kick off with an analysis of each part of the equation to unravel the puzzle piece by piece.

Part 1: Satisfaction

Customer Satisfaction from a customer perspective is often used in marketing strategies to measure the extent products & services fulfill or exceeded customer expectations.

Therein, customer satisfaction is intricately tied to value in the business world.

In our equation, we can see the connection between satisfaction & exceeding customer expectations.

However, customer perception is not implied if the comparison between expectation & perception is inherent.

One unique aspect of Customer Satisfaction is its subjectivity.

No one thing will satisfy all customers and satisfaction itself is constantly evolving.

What’s in today might be out tomorrow.

Sometimes satisfaction is tied to customer mood. Satisfying in a good mood could irritate in a bad, hence the equation’s complexity.

Customer Satisfaction from a business perspective is even more complex because companies must determine which customer segmentation to target therein designing products & services to enhance customer satisfaction.

Naturally, not all segments can be satisfied and attempting so would either devalue or push products & services under the radar.

This makes it essential for businesses to pinpoint specific customer bases & get to know them in order to put in place a pertinent proposition value.

Gaps can also pop up.

Our first gap is the satisfaction gap meaning the difference between actual customer satisfaction & satisfaction businesses interpret customers as having, based on different sources (pilot tests and/or actual product implementation).

Beyond subjectivity, value and customer satisfaction are also constantly shifting & shaping in new ways. 

What’s satisfies today, may not tomorrow.

This can be due to numerous factors: bored customers; lack of innovation in products & services; new industry competitors; the rise new features; tech advancements; negative customer experience; mishandling poor customer service situations, etc.

Companies work hard to see if products & services are rendering truly satisfied customers and have tools to measure such:

·             Customer Satisfaction Surveys

·             Mystery Shoppers / Guests

·             Service-Quality Audits

·             Market Research

·             Direct Feedback

·             Social Media Analysis

·             ‘Happy or Not’ Customer Feedback Panels

Let’s analyze the effectiveness of the measurement tools whilst keeping in mind the satisfaction gap described above.

Surveys: If Excessive & Poorly Designed:

I once consulted an automobile company that would send out a 30-questionnaire survey to customers a few days after they’d buy their new car.

At first, one could think a 30-questionnaire survey isn’t too excessive when assessing a new-car experience.

Buying a car is not any every day task.

In fact, 5 to10 new cars are bought on average for personal use throughout one lifetime.

Therefore, 30 questions to assess sales & check in on how a car dealership is selling a car brand seems reasonable.

Quite reasonable.

But, ask around and the majority of customers would say 30 questions are far too many.

This is indeed a dilemma & poses a challenge in designing brief yet comprehensive surveys with key & follow-up questions.

Ideally, the survey should assess customer satisfaction & gather further details on dissatisfied customers.

The channel & format surveys are carried out is also key as they can be available in-store, sent by e-mail, phone, or simply available online.

Indeed, the mode of survey delivery can determine its quality & success.

For major life purchases, including buying a house or car, a personable approach is best. This can include a phone call or even a post-sale one-to-one session.

Direct feedback is also very helpful here as it provides on the spot gathering of information & proactive versus reactive problem solving in bad customer experience scenarios.

Problems can also stem from the market feedback process being tilted or employees themselves tilting and incentivizing customers to give positive feedback in order to make commission.

A tilted customer satisfaction process poses a serious issue for companies as it greatly widens the satisfaction gap with no one the wiser.

Mystery Shoppers & Guests:

Mystery shoppers can also measure customer satisfaction, or the level of service for a real-life customer.

In reality, this is an auditor assessing & taking notes on aspects of customer service.

The mystery shopper method isn’t full-proof as these real-life customers solely assess the quality of service in one particular instance.

Results won’t necessarily match up 100% with reality.

Also, consider a mystery shopper showing up at slow times, at rush, or during an unusual and unexpected event.

This will certainty give up results far off from reality. The gap widens.

On another consulting assignment, this time for a mechanics franchise, some workshops would tip off others when a mystery shopper was in their area.

They’d even tell each other the mystery shopper’s car type & license plate number.

Naturally, this tilted mystery shopper results as the workshops would offer up special services to score higher points.

Hence another misleading factor in our attempt to offer solid customer service for customer satisfaction.

Mystery shoppers & guests are normally sent by specialized third-party companies the business itself cannot serve as assessor & participant.

Therefore, it’s important for the third-party company sending the mystery shopper and business to have consistent communication.

This will lead to more reliable results and thus effective measures and corrective actions.

Service-Quality Audits:

Audits have similar issues to the mystery shopper & guest method above.

However, the auditor identifies themselves from the get-go & carries out a series of tests ranging from the store’s external appearance, uniformity of employees, cleanliness, system compliance levels, and documents & file reviews, etc.

Audits are also carried out by specialized third-party companies or by internal staff in bigger companies with their own internal auditing department.

Audits can unveil a lot of relevant information to adequately push forward business development.

However, results may be more inward than customer-centric.

With that said, audits could lean into customer-centricity by assessing customer touch points, i.e. phone calls or direct contact points.

However, on the spot observation prove difficult in audits.

A visible third-party monitor of one-on-one customer-employee interaction may be a bit too, well, invasive.

Social Media / Online Review Platform Analysis. (Google & Trip Advisor for the Tourism Industry)

Some companies now invest and create positions for social media and/or online review platform analysis.

These analysts review posts and even PM dissatisfied customers to resolve claims one-on-one.

Analyzing online platforms provides a great deal of information for companies as they are a customer go-to to post thoughts & opinions on products, services, and experiences.

Through proper analysis, companies can thus create a strong online brand & presence to put out fires.

These fires can burst into flames from crippling posts from customers maximizing on their online anonymity.

Also, companies can directly contact customers to offer compensation, explanations, or simply show their availability in resolving customer complaints.

Online social media analysts must strive to isolate customer complaints in order to resolve them one-on-one through a private channel and avoid public backlash, back-and-forth, or unsolicited attention.

Simply sending a “we’ll contact you via private message in order to further address this issue in a timely manner” is an A-level professional response used by many social media analysts.

‘Happy or Not’ Customer Feedback Panels

These little button faces sure are popping up, here is my take.

Part 2: Perception

The Spanish Royal Academy defines perception as the effect or act of perceiving. It also refers to an internal feeling resulting in a real-life sensory stimulation.

This enlightening definition brings elements of perception into light from a customer perspective:

• Perception is tied to senses meaning customers are constantly perceiving all the little details tied to their 5 senses (sight, smell, taste, hearing, touch) during experiences
• Sensory perception is an internal feeling and generates emotions towards products, services, experiences, and brands. Consider trust/distrust, love/hate, anger/joy, fear, etc.
• Perception is subjective, as in, it is dependent on the person who is perceiving and a host of internal & external factors: customer mood; customer stress levels; customer needs, duration of customer experience, etc.
• Perception in a moment manifests into future expectations. Further down, we’ll explore how expectations are shaped & informed by previous perceptions with service, experiences, brands, competitors, and industries

Analyzing our seemingly simple equation from a business perspective presents managers with an array of complexities.

Let’s break the points down, to make sense of it all.

Businesses want to give customers a positive perception of their products, services, and experiences.

Given perception is sense-based, all 5 bases must be covered.

·     Sight:

A relevant, personable, and stand-out logo.

It’s important to consider the visual aspects of experience throughout channels.

This can be done with corporate colours, in-store lay-outs, a well-designed, visual, and easy-to-navigate website (‘friendly’ in techie), organization, and clean employee and customer service points, etc.

·     Smell:

Ensuring smells are in line during customer experience means not only avoiding bad smells but also having a subtle and refined corporate fragrance.

This aspect is crucial in certain industries such as food retail, restaurants, hotels, home retail, and funeral homes, etc.

Smell greatly influences the customer purchase process and the value customers assign to products & services.

Some companies make the mistake of choosing an over-powering or strong corporate fragrance which could turn some customers off.

The first question to enhance smell businesses must ask themselves is if a fragrance is needed in the first place as per the industry and customer segmentation.

Naturally, a spa, beach-side hotel, and home-improvement store are clear examples where a corporate fragrance would enhance customer experience.

·     Hearing:

Off the bat, this would be reducing customer exposure to irritating noises.

Irritating noises can include employees yelling at one another, excessive use of the megaphone with excessive sound & volume, or constant pitching.

As an example, take a well-known low-cost airline that used the plane megaphone system to sell in-flight products & pitch new destination offers.

Many passengers use their in-flight time to read in peace, work, and rest. Any excessive megaphone announcements lead to fed up passengers & negative perceptions.

Certain businesses such as spas, getaways, amusement parks, and hotels can and do use ambiance music to evoke positive perceptions and emotions.

Even grocery stores or big supermarkets use music to shape customer perception.

This can be to ebb along preferred customer behavior; relaxing music at slow times makes customers extend their time in the store giving off the perception that there are more shoppers than actually present.

On the flip side, at rush, livelier beats are played to get customers to speed up their grocery shopping & head to the cashier.

These techniques are company-centric over customer-centric as they aim to align customer behaviours with business interests.

Companies must also consider music choices keeping in mind both customers and employees.

I’ve worked in offices who’d play a mix of instrumental & classical ambiance music and after a while irritation, hate, or sadness would often ensue.

If customer experience is important, so is employee experience.

·     Taste:

Taste isn’t used across the board in customer experience as it doesn’t always apply.

On the other hand, taste has different interpretations. When selling a car, taste is indeed style or attitude.

However, even in situations where taste doesn’t directly apply, it could still be applied.

Consider offering a fresh brewed coffee to customers at pertinent touch points to create a pleasant moment or to get customers in the mood to buy, tailor products, or negotiate purchase terms.

On that point, I’ll never forget a trip to the Istanbul Grand Bazaar in Turkey. While scouting out carpets, an avid Bazaar merchant was offering up the renowned Elma Chai to passersby in a sort of sales ritual.

On another consulting assignment, this time for a famous hotel chain in Colombia, I recommended customer experience through coffee.

It only seemed natural given Colombian coffees reputation in superior taste & quality.

The idea was to have fresh coffee available for guests in the hotel common areas, equipped with blind taste tests, professional baristas, and tips on how to make and drink coffee.

Descriptions of Colombia’s main coffee growing regions along with grain varieties were also incorporated.

Numerous 5-star hotels dot the world with a range of standardized 5-star services.

Shaking things up means tailoring products and integrating with the local culture to a high level.

The coffee project was a huge success given guests would come away with a wonderful perception through connecting with a sensation-filled product, coffee.

The food & beverage industry (cheese, wine, cured meats, beer, etc.) is another industry enhancing customer perception using taste.

The industry is captivating customers taste and senses alike through experiential product tasting visits.

Touch:

Like taste, touch doesn’t always apply. But by letting our imaginations flow we can certainly implement innovative practices to incorporate touch in places we wouldn’t necessarily think to touch.

IKEA’s famous show rooms allow customer to touch and feel products out.

The touch of fabric fingertips, the feel of wood on a couch, testing out a chair by sitting, or a mattress by lying down (where a good chunk of life is spent) makes customers more confident in their purchases, in turn reducing returns.

Making fitting rooms accessible for shoppers with a speedy rotation system and with employees knowledgeable on fabrics used in clothing make customers feel confident in a company’s expertise in taste & touch.

Touch plays a fundamental role in shaping customer perception in higher-end markets such as luxury goods.

Aspects linked to customer senses go beyond physical spaces & websites and include support & front-office customer service.

Presentable front-office employees using proper language and emitting the right smells goes a long way.

One only has to imagine how a customer would feel faced with an employee wearing a stained uniform, having sour body odor, bad breath, or poor communication skills.

Customer senses are quite insatiable and relentless, meaning they are always picking up on what’s going on.

Perception is difficult because a job can be done 98% well and yet one slip-up paints a negative overall picture.

Does the story of the famous restaurant with the best food & ambiance which ended up closing its doors because of one poorly-trained and rude employee ring a bell?

Mastering customer senses is critical to enhancing perception. Indeed, Sensory Marketing is the marketing branch dedicated to breaking perception as it ties into the 5 senses.

Companies strive to implement protocols & adequate processes to provide positive customer perception in searches, purchases, use of products and services.

Properly managing customer experience touch points is essential through a Customer Journey Map.

Operations Management has a direct influence on customer perception and emotions. To explore further, delve into the inside & out of emotions & operations management.

Another aspect to perception is standardizing our products, services, and experiences so as to streamline perception.

Given perception turns into future expectations, over-servicing customers, by giving a larger than average meat portion, free home delivery, or waiting for late passengers, will mean customers come to expect the above and beyond each and every single time.

To illustrate further, a local Spanish airline running island flights (30 to 60-minute routes) decided to give passengers a little token; a chocolate bar and a cup of water, free-of-charge.

After a month of the chocolate-bar water system, it decided to give out little candies instead.

Although both nice gestures, customers started asking, “where is my chocolate bar and cup of water?”

Fair enough.

Standardization is key, not only in shaping realistic customer perception but to ensure consistency in products, service, and experiences.

Imagine McDonald’s Big Mac without standardization; some restaurants putting on less lettuce & tomato than others nearby.

This wouldn’t make much sense.

Given franchise companies are inherently standardized to ensure consistent protocols and processes, perceptions and expectations will be consistent across the board.

The second gap is the perception gap meaning the difference between actual customer perception (from an objective customer or per industry standards) and perception businesses interpret customers as having.

Companies analyze customers to provide anticipated value and design products, services, and experiences to bring their value proposition to life.

However, actual customer perception can differ from what companies interpret their customers as having.

A business could have processes down to the last sensory t designed to bring on positive perceptions, but customers may still ill-perceive products, services, and/or experiences.

Perception is subjective; therefore, customer reactions & displays should be carefully observed to ensure perceptions align in customer and business perspectives thus reducing the perception gap.

Part 3: Expectations

It’s worth understanding the definition of expectations in order to unveil the third and final part of our gem of an equation.

The Royal Spanish Academy defines expectations in three ways:

1.   The hope of doing or obtaining something

2.   Reasonable probability for something to occur

3.   Probability of gaining a right, inheritance, employment or another thing through which an anticipated event comes to fruition

As before, let’s delve into expectations from both customer & business perspectives.

Expectations from a customer perspective,

Customers (shoppers, users, or consumers) all have expectations. As with the definition above, they hope to do or obtain something from products, services, and experiences.

But what are expectations anyway? Let’s see how they are created in the first place, hitting on elements giving rise to customer expectations.

1.   Press & marketing efforts carried out by companies: ads, promotions, and press on various channels to generate expectations for potential customers

2.   Product & service pricing create customer expectations. Customers expect more from brand names. A higher-end watch with a price to go sets a different standard than a no-name watch

3.   Brand image creates customer expectations

4.   Word of mouth & reviews by friends and acquaintances. Take the everyday example of a friend telling another to go see a movie

5.   Social media and online review platforms. Customers post comments & opinions on social media & online review platforms such as Trip Advisor, in turn shaping expectations

6.   The industry linked to the product & service also creates expectations. Once you take a flight with an airline, you create expectations around flying & general expectations on airline products, services, and experiences

7.   Product and experience perceptions held from previous interactions also shape future expectations. Circling back to our equation, when customers have formed perceptions through interacting with products, services, and experiences, expectation levels begin to rise, making customer satisfaction more difficult to achieve each time after the next

Expectations also have various attributes:

·     They form before customer experience

·     They are inevitable as all customers imagine how a particular product and/or service experience will play out

·     They are subjective, as in, shift as per customer types, moods, previous experiences, and standards, etc.

·     They aren’t always real as they can be imagined or based off expectations with similar products, services, experiences, and public opinions

·     They fall in line with expectations placed on an industry and brands

Expectations from a business perspective

Now let’s flip the coin and look at expectations from a business perspective as a number of factors must be kept in mind.

1.   Press & Marketing Efforts:

It’s important not to create over expectations. If so, achieving satisfaction will provide more difficult as perception will be less than the expectations.

Press and marketing efforts should be honest and realistic.

Take a fast food joint as an example.

Imagine stepping up to the counter and seeing a picturesque burger on the menu, topped with fresh lettuce, a perfect tomato, juicy meat, on a round sesame bun.

Then imagine being handed a smooshed-up burger. Not very appetizing, nor honest.

Through ads, we can concoct realities far off, throwing customer way off as well.

A student of mine asked an interesting question during class once, tied to the burger scenario above:

What happens if our competitive advantage is price and not necessarily the way the burger looks?

This made me step back and after opening the floor up for debate, the class arrived at the following conclusion:

If price is the competitive advantage, the price should stick out in the ad, not the way a product looks.

Ideally, price should have been highlighted over the way the burger looked on the fast food joint’s menu, in order to ward off false expectations and disappointment.

Not all companies compete along the same lines. Therein, businesses must determine what lines they do compete on and be sincere in their efforts.

An honest and clear ad generates a trustworthy image that customers can realistically anticipate upon and come to expect.

2.   Product & Service Pricing

Price always creates expectations, meaning proper pricing management is key. Value is creating products, services, and experiences that customers are willing to pay for while also generating revenue.

In-depth pricing research and implementing a suitable pricing model reflecting our proposition value and brand is essential.

Pricing above what both potential and targeted customer segments are willing to pay will result in very high expectations, meaning failure to deliver and dissatisfied customers.

In competitive sectors such as retail or the automobile parts industry, a consistent pricing policy review is fundamental as customers constantly compare prices.

Setting below market prices could be a dangerous approach as it may lead customers to believe the product is of little value.

Product & service pricing is constantly shaping expectations as customers often compare what they paid, and value obtained through their purchase.

Many companies fail to periodically review their pricing & value strategies to account for both internal & external factors.

These factors are competitors, consumer behavior changes, rise of new technology, etc.

3.   Brand Image

Brand image needs to be properly managed as it shapes customer expectations.

Dior having a parallel cheap clothing or fast fashion line would likely comprise it’s higher-end brand image.

Brand image is difficult to build, but easy to destroy. Customers are well-informed nowadays and consider social aspects like never before: respect for the environment; employee working conditions; corporate social responsibility, etc.

Brand image sets a certain standard thus expectations.

4.   Word of Mouth

This is another angle business cannot directly manage, as a company can’t control what friends say to one another.

However, positive word of mouth can be generated by offering the best possible products, services, and experiences.

5.   Social Media & Online Opinion Platforms

Nowadays, more companies create and invest in social media and online review platform analyst positions.

These analysts monitor comments and even directly contact customers to resolve complaints, claims, and issues to avoid the viral snowball effect or a rotten apple spoiling things for everyone.

6.   Industry Linked to Product & Service

Certain industries come with their own set of expectations.

Companies jumping onto the scene to shake things up raise industry standards. 

Zara raised expectations in the clothing industry in terms of quickly getting the latest fashion trends into stores.

Amazon has certainty and continues to raise the bar on package delivery times.

Companies must be aware of these evolving demands and adapt accordingly.

7.   Previous Perceptions & Experiences

Previous product & service interactions also set expectations. As such, consider these two points:

o  Businesses must strive to make customer perception the best it can be

o  Product, service, and experience standardization will lead to realistic and consistent expectations as overdoing it also warps future expectations

The third gap is the expectations gap meaning the difference between actual customer expectations and expectations businesses interpret customers as having.

Some companies go above and beyond what they can realistically provide to exceed customer expectations, ending up with dissatisfied customers on their plate.

Take a courier service company as an example.

It could tell its customer that delivery takes 7 days, knowing all well packages tend to deliver in 3-days on average.

Another example is an amusement park. It could say wait time is 80 minutes all while knowing it tends to be 50.

This tactic is indeed a double-edged sword.

The company sets a good impression, but a couple things occur:

1.   Customer feel lied to and begin questioning the brand

2.   Customers decide to go with a competitor because delivery or wait time, as advertised, is far too long

In other words, customers lose confidence and businesses lose potential customers. The sword can cut both ways.

Once again, honesty is the best policy.

To shake an industry up, a business could advertise slightly less than what they usually deliver to set a good impression and beat out competitors.

However, perception in the moment manifests itself into future expectations meaning customers will draw their own conclusions and come to expect what they got the first time around, every time.

Conclusions

The first rule of customer service is a seemingly simple equation.

However, scratch the surface and a world of complexity from both customer and business perspectives is unveiled.

By analyzing & understanding the three parts of our little gem, businesses can equip themselves with the tools to truly generate satisfied customers.

A few catalysts exist in successfully developing & implementing a plan based off our equation.

o  Integrate & Eliminate Silo Mentality so all business aspects align with the equation, i.e., customer satisfaction

o  Put Customer Experience Front & Centre by creating a Customer Journey Map within a customer-centric framework on all fronts

o  Apply Lean Thinking to offer up value to customers while simultaneously reducing waste & optimizing resources