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Are You Overestimating How Happy Your Customers Are?

Are You Overestimating How Happy Your Customers Are?
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Despite the millions of dollars businesses spend gathering data about how happy their customers are, company leaders often don't understand, or know what to do with, the information they receive, new research finds.

The study, which was recently published in the Journal of the Academy of Marketing Science, discovered that after reviewing customer feedback, data senior managers frequently have an unrealistic view of just how satisfied their customers are.

Neil Morgan, one of the study's authors and a professor at Indiana University's Kelley School of Business, said they found that based on the feedback they receive, managers tend to misjudge customers' true level of happiness.

"Either the messages aren't being disseminated, or they aren't being understood within organizations," Morgan said in a statement. "Otherwise, managers would have a better understanding of both the level and drivers of dissatisfaction among customers."

By overestimating customer satisfaction, managers are relying on unrealistic expectations when making marketing decisions and allocating resources to address marketplace issues, according to the study. [Getting customer complaints? Here's how to get the most out of them]

"That means that there are customer satisfaction problems that are not being solved, because managers don't know or don't believe that they exist," Morgan said. added. "Even if they did, they try fixing the wrong things."

For the study, researchers used data from 70,000 American Customer Satisfaction Index surveys and compared it with responses to the same questions posed to 1,068 marketing managers and those in customer-facing roles at the American Customer Satisfaction Index-measured companies.

The study's authors found that even though many of these companies have invested heavily in customer-satisfaction monitoring and feedback systems, the senior managers in charge of acting on that data either aren't seeing it or aren't understanding it.

"These overly optimistic managers are likely to miss trouble signs when they appear," the study's authors wrote. "This is compounded by managers significantly underestimating the proportion of customers who have complained about the firm's products or services in the recent past."

The study's authors said by not fully understanding what the customer satisfaction data is saying, company leaders are hurting the ability to properly react to problems. One area they point to as an example is how many organizations don't invest enough resources into raising customer quality perception as a way to enhance customer satisfaction.

"Our findings may also provide an explanation for overemphasis on cost-cutting and efficiency observed in firms' strategies relative to that on quality improvements or achieving differentiation," the study's authors wrote. "Where managers overestimate their own customer perception of the firm's performance, cutbacks that undermine the quality of service, for example, may seem less dangerous than they really are."

In addition, Morgan said too often companies don't believe the complaints they receive are representative of the level of satisfaction that exists among general customers.

"This data suggests that they shouldn't be treating complaints as something different," Morgan said. "They should be used as part of an overall customer feedback system."

With previous research showing how much customer satisfaction can impact an organization's bottom line, the researchers believe companies should take note of the study's results and determine whether or not their customer satisfaction and complaint-monitoring systems are providing a solid return on investment.

"Despite often being the single biggest line-item of most firms' market research expenditures, existing customer feedback systems are not performing an effective management control role," the study's authors wrote.

The study was co-authored by G. Tomas Hult, a professor at Michigan State University, Forrest  Morgeson III, director of research for the American Customer Satisfaction Index, Sunil Mithas, a professor at the University of Maryland, and Claes Fornell, a professor at the University of Michigan.

Chad Brooks

Chad Brooks is a Chicago-based writer and editor with nearly 20 years in media. A 1998 journalism graduate of Indiana University, Chad began his career with Business News Daily in 2011 as a freelance writer. In 2014, he joined the staff full time as a senior writer. Before Business News Daily, Chad spent nearly a decade as a staff reporter for the Daily Herald in suburban Chicago, covering a wide array of topics including local and state government, crime, the legal system and education. Chad has also worked on the other side of the media industry, promoting small businesses throughout the United States for two years in a public relations role. His first book, How to Start a Home-Based App Development Business, was published in 2014. He lives with his wife and daughter in the Chicago suburbs.