The New School of Thought On Improving Customer Satisfaction Through Smarter Queuing

William Bleuel, PhD
Posted: 05/02/2010

In the previous article I discussed the first leap of faith with respect to satisfaction at the call center. That leap was to believe that improvement in queuing performance at the call center could have a positive impact on customer satisfaction. With the help of some real world research data developed by the Florida Power and Light Company, there were some measurements that supported that leap of faith. From there the next leap is to believe that improvement in queuing performance at the call center can also have a positive impact on customer retention. When there is sufficient evidence that this leap of faith has validity, call center economics can be more accurately assessed in terms of the net present value of extended customer retention resulting from the call center performance.

American Customer Satisfaction Index (ACSI)

One strong piece of statistical evidence that relates quality performance measures to customer retention is the results reported by the American Customer Satisfaction Index (ACSI). This organization was developed jointly by the National Quality Research Center (NQRC) at the University of Michigan and the American Society of Quality Control. The NQRC developed the Swedish Customer Satisfaction barometer that was established in 1989. To quote from the ACSI literature, "The American Customer Satisfaction Index is a new economic indicator that measures customer satisfaction. It's based on customers' experience with the quality of goods and services that are purchased in the United States and produced by both domestic and foreign firms that have substantial U.S. market share." Their major objective is to provide firms with accurate assessments of their products and competitive products along with the methodology for linking quality performance measures to economic returns. A key point made is these measures of performance quality are essential for correctly interpreting price and productivity measures used to describe other aspects of the U.S. economy.

The real benefit that accrues from ACSI is the voice it gives to those evaluating the products and services bought and used. It quantifies the value customers place on products and services thus driving quality improvement in performance. The Index also provides a benchmark for a company so that it can consistently compare its performance to others in the same industry. Secondly, the literature states that it helps companies to understand the impact of performance quality on customer satisfaction and customer retention. For those readers with broader vision, the ACSI will also aid economic policy by adding a measure of performance quality to identify strong and weak sectors of the economy. The benefit perceived for those in the call center business is that the indicator provides a link between satisfaction and economic value. While the link may be general with respect to a specific company, the relationships provide insight into the call center when coupled with an appropriate survey which links the ACSI results to the call center.

ACSI comes complete with data and a software model and predictor. The model estimates the impacts between the variables of the model. The variables included in the model are perceived quality, customer expectations, perceived value, satisfaction, customer complaints and customer retention. The good news is that the model looks at both the direct and indirect effect of one variable on another with each impact calculated separately for each company and industry in the Index.

Thus, perceived value will directly impact customer satisfaction. Perceived quality, on the other hand, will indirectly affect customer satisfaction through the perceived value variable. The payoff of using this model is the ability to examine how a change in one variable affects the others. For example, if the level of perceived quality is increased as a result of improvements in the call center, what impact will that have on the percentage of customer complaints. While the relationships may appear to be obvious, the quantification of the relationships between the variables is the benefit of the Index since the values can be used to forecast the economic analysis of the impacts of the improvements.

Case Study on Customer Satisfaction and Queuing

As a way of demonstrating the value of this model, consider the relationships for a PC manufacturer based on the survey data from 1996. For this example, I used Quality as the independent variable and moved it in increments of 5 percent from 75 percent through 90 percent. For each of these quality levels the model indicated the level of satisfaction, retention and the percentage of complaints forecast for that quality level in the PC manufacturing industry.

Quality Satisfaction Retention % Complaints
75 68.4 58.5 20.4
80 73.0 64.0 17.6
85 77.6 69.0 14.8
90 82.2 73.4 11.9

One of the aspects of the Index is the normalization of the measures of quality, satisfaction and retention. Since different industries have different perceptions of quality, satisfaction, retention, etc., the Index is normalized for each industry so that each scale is 1 to 100. Thus, each industry can be compared on the same relative scale. While this helps in some ways, it is a detraction in other ways.

One of the observations that comes from the Index model is that quality of product or service is a driver for customer satisfaction, customer retention and the percentage of customer complaints. The scale for PC manufacturers indicates that for every 1 percent increase in perceived quality, there is a corresponding 1 percent increase in customer satisfaction and 1 percent increase in customer retention. Further, the relationship between quality and percent of complaints indicates a 2 percent drop in complaints for every 3 percent increase in perceived quality.

Consider the case where it has been determined (through an audit or other accounting action) that the cost of each call in response to a customer complaint in the PC manufacturer's support center is $50. If the call center has an average of about 50,000 complaint calls per month, there should be a reduction of approximately 2,000 calls per month when a 6 percent improvement in perceived quality is implemented. This translates to a savings of $100,000 per month or about $1.2 million per year.

Quantifying Cost of Call Through Quality, Satisfaction, Loyalty and Complaints

If each customer purchases a new PC every 3 years, then the manufacturer who sells 1,000,000 units each year has an opportunity of an additional 10,000 units for every percentage increase in the perceived performance of the product and associated services. If the margin per computer is approximately $100, the incremental margin is $ 1,000,000 per year. Thus, these relationships between quality, satisfaction, loyalty and complaints can be used to quantify the cost of the call center operation and its value to the corporation in terms of customer satisfaction and retention. There are statistics that indicate customers with no problems have a loyalty of about 83 percent whereas those customers with problems that are satisfactorily resolved have a loyalty of about 90 percent. Thus, a strong complaint handling system is worth about 7 percent loyalty. That means if 83 out of every 100 customers would normally return to buy another product from the same company, the extra 7 percent customer loyalty would mean that 90 out of every 100 would return to buy another product.

While the above example was created for the PC industry, the Index provides similar information for the seven sectors making up the national economy. These sectors are: (1) Manufacturing Nondurables (SIC 2), (2) Manufacturing Durables (SIC 3), (3) Transportation, Communications and Utilities (SIC 4), (4) Retail Trade (SIC 5), (5) Finance and Insurance (SIC 6), (6) Services (SIC 7 & 8), and (7) Government and Public Administration (SIC 9). Within these seven sectors 40 industries were selected. The sectors not selected for inclusion were Agriculture/Forestry and Fishing (SIC 0), Mining (SIC 1), Construction (SIC 1), Wholesale Trade (SIC 5), and Real Estate (SIC 6).

Walking The Talk In the Call Center

The Index aggregates satisfaction indices at the company level weighted proportionately by company sales. The aggregation continues to the sector and national levels using the same weighting method of relative sales contributions.

While the ACSI is not specifically directed toward the call center, it does provide strong statistical evidence that relationships appear to exist between the level of quality provided by a company and its ability to retain its customers. With the knowledge that evidence does exist that relates service performance to customer complaints and customer retention (in the form of the ACSI), the next task is to examine the call center from a strategic perspective. Is there a call center strategy? Is the strategy consistent with the corporate strategy? Does the operation reflect the strategy; i.e., does the call center "walk the talk." Some of the questions you might want to ask include (1) is the call center considered in the long range plan for the company, (2) is there a call center strategy that will allow for planned growth, and (3) what are the key quality measures of the call center. Of course there are a great many more questions that could be asked.

First published on Call Center IQ

Don't miss Dr. William Bleuel's Seminar on "Call Volume Forecasting Made Easy: A Non Mathematical Approach" on May 10, 2010. For more information please email click here.

William Bleuel, PhD
Posted: 05/02/2010

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