MIT Sloan Management Review

Marketing, Service and Quality

Best Practice for Customer Satisfaction in Manufacturing Firms

By Abbie Griffin, Greg Gleason, Rick Preiss and Dave Shevenaugh

January 15, 1995

ALTHOUGH RESEARCHERS HAVE CONCENTRATED ON VARIOUS MEASURES OF CUSTOMER SATISFACTION (CS) AND THE RELATIONSHIP OF CS TO FIRM PERFORMANCE, they have done little to determine what constitutes the best practices of firms focusing on CS as a corporate strategy. These authors report the results of their investigation into the best practices of four manufacturing firms with reputations for delivering high levels of customer satisfaction. They found that, although the firms developed a CS strategy for different reasons, each had similar characteristics that enabled them to concentrate on satisfying the customer. While the firms generally outperformed the average firm in their industry in profits and asset utilization after adopting a customer satisfaction strategy, they were not as successful in increasing market share; nor has the market valued them as highly as it has valued others in their industry. Finally, the authors suggest ways companies can improve their customer satisfaction measures and practices.

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In recent years, changes in the business environment have made it harder for firms to maintain long-term sales growth and profitability levels. Global competition has increased dramatically. A larger selection of products and services is available to the same set of buyers, with little growth in overall markets. Thus satisfied customers are important to companies because, on average, approximately 70 percent of all sales derive from repeat purchases. Firms can no longer maintain volume or profits by seeking out new customers (an offensive strategy); they must adopt a defensive strategy that focuses on keeping current customers as loyal purchasers of the firm’s goods and/or services.1

At the same time, articles in the popular press and the U.S. government itself may be sensitizing consumers to the issue of customer satisfaction. Purportedly “unbiased” publications such as Consumer Reports widely publicize comparisons of performance and overall customer satisfaction for many different products and services. Automobile advertising routinely quotes customer satisfaction figures to sway purchase decisions. The U.S. government may also sensitize consumers to this issue; almost one-third of the points for the Malcolm Baldrige National Quality Award, administered by the National Institute of Standards and Technology, are based on customer satisfaction.

Whether or not customers are truly becoming more demanding, these changes have made companies focus strategically on delivering increased customer satisfaction. A growing body of... To read the complete article, login or sign-up using the form below.

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