Measuring happiness: what do your customers value?

Competitive tender is the norm in our building and construction world. Awarding a contract to the lowest price bidder may seem to be both the easiest and fairest way. However, there are adverse side effects to this practice. The most obvious issue is that the whole industry becomes far too cost-focused. Everybody is trying to be more productive whilst delivering the job at the lowest cost, and as a result they are sometimes cutting corners without considering the long-term impact of this attitude, including on their customers.

Customer satisfaction is widely known as being crucial to a company’s success, and can impact the following areas within a company:

  • Driving market share
  • Customer retention ratings
  • Stock price
  • Process improvement

Customer satisfaction surveys can provide a useful wake-up call if you are not really satisfying your customers, and also provide a good way forward for process improvement. Surveys can establish areas for development in a company and help you to stay ahead of the competition (techniques include the Likert scale, and tools like the ACSI, below).

Competitive Advantage

Recent research studies show an important relationship between customer satisfaction and economic performance (Fornell et al., 2006). Firms that receive positive customer feedback are likely to improve the level and stability of their net cash flows, and even benefit from high return with low risk.

Customer satisfaction, as measured by the American Customer Satisfaction Index (ACSI), can be correlated to the market value of equity. It has therefore been suggested that securities research needs pay closer attention to customer satisfaction and the strength of customer relationships. From a corporate CEO perspective, it is clear that the cost of managing customer relationships and the cash flows they produce is fundamental to value creation.

Customer Value Models

Achieving higher customer satisfaction may require more resources and incur higher costs. So, it’s important to invest well. With data from a carefully designed customer satisfaction survey, we can develop a Customer Value Model for our customers and find out what services or produces they most value.  For example, should you invest in hiring more engineers or instead invest in new technologies? Customer Value Models can help a company focus on the highest value areas, and hopefully benefit from the bigger financial return.

Example:

A client has asked for a quick response on a service request. A.) Your engineer could spend a few days preparing a thorough quotation whilst the customer is waiting. B.) Alternatively the engineer could respond with a basic quote and deliver the service with a short lead time.

You know your customers – your Customer Value Model indicates that they place a high value on quick results. Go with B.) and as a result the client will feel you listened to their needs, and your company will be the winner.

Yes, it can be that simple! Do you have a model in place – and when’s the last time you measured your customer satisfaction? Are they happy?

The next question is how can you put a proper process in place to work things out?

References

[1] Claes Fornell, Sunil Mithas, Forrest V. Morgeson III, & M.S. Krishnan (2006), “Customer Satisfaction and Stock Prices: High Returns, Low Risk,” Journal of Marketing Research, Vol. 70 (January 2006), 3-14

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[2] Claes Fornell, Donald C. Cook Professor of Business Administration and Director of the National Quality Research Centre

Sustainable Housing – defining zero carbon

In the last budget on 23rd March, the UK government, quite discretely, changed the definition of zero carbon.  The 2011 budget changed the requirements from having to balance all the regulated loads plus an allowance for cooking and appliances, to simply balancing the emissions from the regulated loads only.  In essence this is just the heating, hot water and lighting loads.   There appears to be a split in opinion on this issue, with some for the change arguing that it is a more realistic target for the construction industry to meet, while the other camp argue that the new definition isn’t really zero carbon.

I have been involved in a project that has just completed the construction of a Code 6 vicarageLevel 6 of the code for sustainable homes requires the building to meet “zero carbon”.  The new definition is effectively the requirement for Code 5 in the 2009 version of the Code for sustainable homes on the dwelling emission front.  With the old definition, there was no way out of producing a small power station for a house.  In the vicarage the south facing roof was covered in around 8 kWp of photovoltaic panels. The cost of these panels still significant, even with the feed-in-tariffs it is going to put a lot of people off the thought of installing them, and even thinking about going for Code 6.

2016 is still the target date for all new homes to be zero carbon, and built to Code 6 standards.  The pressure to meet this target is probably behind the change in the definition of zero carbon.  With this new definition, it is feasible to build a dwelling with minimal generating capacity, and so reducing the cost.  I’m sure the Passivhaus approach will come more into the frame – a more fabric first approach.  Reducing heat loss (or gain for summer months) simply makes sense.

Even with the definition of zero carbon changing, making it cheaper to build to Code 6, it will still be difficult.  Whether using the Passivhaus approach or not, the correct site is even more important than ever.  The Code for Sustainable Homes includes other issues, not just energy, that needs to be taken into account.  Things like ecology, cycle storage, water use and the lifetime homes standards have rarely stopped a house from being built in the past, but this may happen once Code 6 becomes the mandatory standard.

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