Out of the valley: Some customers just aren't right

How much is a satisfied customer really worth to your company?

How much is a satisfied customer really worth to your company? It's probably impudent to ask the question, particularly when you look at the huge amount of dollars being poured into customer service software development. Satisfied customers, the theorists argue, will stay loyal, provide repeat business and in the long term present themselves as targets for cross-selling. You simply have to spend the money to keep them sweet.

For business pragmatists, of course, nothing's ever that straightforward. Those users still investing in software today are concentrating on cutting costs, closely followed by improving internal efficiencies in areas such as marketing, which has the same net effect. The purse strings are tightly held by the finance department, and if an investment won't make a direct contribution to bottom-line profitability, it isn't going to happen. Because improved satisfaction is such a nebulous concept, it's virtually impossible to prove that link. As a result, the customer service applications that get the go-ahead will most likely be the ones that reduce overheads – for example, by pushing customers away from well-staffed call centres and towards self-service applications on the internet.

Yet the benefits of long-term customer retention are irrefutable, and retention is fuelled in part by how satisfied customers are with the products and services they receive. That's why several software suppliers are now turning their attention to linking the concept of satisfaction with the mechanics of day-to-day business operations. Much of the emphasis is on identifying which customers generate the most profit – something that requires organisations to pool data from across the enterprise and bring the skills of the finance department to bear in areas such as marketing. The next step is to identify what makes those profitable customers tick.

Business intelligence specialist SAS Institute, for example, is working on ways of profiling profitable customers, bringing the findings of satisfaction surveys into a data warehouse where they are analysed alongside operational information. Organisations can then begin to see whether satisfied customers are also the most profitable, what kinds of products or services they buy, how often they contact the company and so on.

Meanwhile Peoplesoft, which has a range of performance management applications, argues that organisations need to be more proactive in their approach to customer satisfaction. It is now looking at specific scorecards that quantify the impact of definable events on satisfaction levels, built around a range of metrics such as how long telephone callers are kept on hold.

The point about these developments is that they bring a pragmatic approach to a fluffy concept. Customer satisfaction per se is not the goal: you need to invest in improving satisfaction where you know it will deliver a measurable return. That means finding out who your valued customers are, and focusing your efforts there. The rest of them – including that chunk of customers who actually lose your company money – should really be grateful for whatever they get.