Despite Weak Customer Experience, Costco Dominates Satisfaction

Customer experience has become the pinnacle priority for many organizations, and with good reason: survey after survey, case study after case study, confirms the immense business impact of keeping your customers more satisfied and engaged than your competitors do.

But customer desire for friendliness and responsiveness does not totally eliminate their savvy. For all the feedback customers give about difficult merchandise return policies, long checkout lines, unfriendly reps and hard-to-navigate storefronts and websites, when push comes to shove, many will be swayed by something far more basic: value.

In essence, there are some things money can buy. For everything else, there is the customer experience.

Loyalty, undoubtedly, comes from delivering an experience that makes customers want to spend money with the brand. It comes from showing that engagement matters and that the feedback and advice they provide during such engagement matters.

But those loyalty factors are not all it takes to lead a happy horse to the water. In fact, they might not even be the main driver.

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The newest Consumer Reports study on the retail market, which measures data from 55,108 customer ratings, names Costco the unequivocal winner on "satisfaction with the overall shopping experience." Its 84% overall satisfaction score tops 81% for runner-up Kohl’s and significantly bests bottom-dwellers like K-Mart and Wal-Mart, both of which achieved only 71% satisfaction.

Yet when it comes to experiential factors like checkout and service, Costco is the third-worst of the ten major retailers profiled.

"In-store shoppers found a few chinks in Costco’s armor," notes Consumer Reports. "The chain’s walk-in stores scored below average for selection, checkout (because of long lines), and service."

Converted to a 5 point scale, with 1 being the worst and 5 the best, Costco received a 2 for checkout and 2 for service.

Comparatively, Kohl’s (2), JC Penney (3), Target (4), Macy’s (5) and Sears (7) all received 3s for both categories. Meijer (6) received a 2 for checkout but a 3 for service. Sam’s Club (8) delivered a 1 for checkout and a 2 for service, while K-Mart (9) matched Costco’s scores and Wal-Mart (10) received a 1 for both categories.

The difference-makers, it appears, were product quality and value. Costco received a 5 for the former and a 4 for the latter, besting the "product" score of any other establishment. Its closest competitors were Kohl’s (2), which received a 3 for quality and a 4 for value, and Sam’s Club (8), 4 for quality, 3 for value.

Yes, Costco’s significant advantage over the similarly-valued Sam’s Club proves there is likely some benefit to delivering on customer experience metrics, but at the end of the day, its dominance seems most associated with opinion of the actual goods being offered. If people believe they can get the best products at the best possible prices, they will be comfortable overlooking a mediocre in-store "experience."

And "best products at the best possible prices" is an important qualifier. Even though they are known as discount chains, K-Mart and Wal-Mart did not score well for value. Despite the impact of economic toughness still weighing on many Americans, today’s customer, it seems, is able to overlook the numerical price in favor of getting a product that maximizes value by minimizing the price to quality ratio.

Given that, it is far from a conclusive fact that brands should start ignoring service and responsiveness on the ground that simply bombarding customers with great prices will be enough to succeed. The customer experience can absolutely add value to a brand’s offerings, and as customers work to maximize that value, it makes sense to complement great product lines with superior service.

But companies must approach their customer management strategies from a pragmatic perspective. No matter how Zappos-like one renders his organization’s customer service culture, customers are ultimately interacting with brands for the purpose of acquiring desirable goods at an attractive price point. If the brand’s product line does not facilitate that goal, quality customer service is unlikely to be a saving grace.

Photo credit: Stu Pendousmat