Profitability…

Email: High customer satisfaction but low increase in profits? Urgent college project. (Canada)

Tough to comment without details. A few humble thoughts. The question is how are we measuring customer satisfaction (complaints, ratings, reviews, surveys, NPS)? Is it accurate, comprehensive? Targets the right segments? Clearly descriptive, deductive?

Is customer satisfaction actually correlated with profitability? Generally, high levels of customer satisfaction bring good results. Problem? Despite positive correlations, customer satisfaction explains only a limited part of firm’s overall value, performance.

Intuitively, we’d think the more satisfied the customers are, the happier they are to do business with us. Hence, profitability should be higher? Perceive the link between satisfaction & profitability as a straight line. So, if we keep increasing customer satisfaction, profitability will keep rising? In fact, it’s much more complicated.

Increased customer satisfaction initially increases profitability. But, the firm may actually be on the flat part of the curve, business as usual, a saturated sector. A big flat region where increasing satisfaction doesn’t increase profitability as much. Breaking through to the ‘zone of delight’ is rare. What it means is they’re not linked linearly. Rather, non-linearly.

Finally, it’s predictive analysis (ROI, churn, sales, price). Does the metrics captured connect with specific managerial outcomes, strategies, goals? Where are the gaps in data, evidence, factors, analytics, operations?

Hope this helps a little. Good luck…

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