By Nigel Hill, Founder of TLF Research and Editor of Customer Insight
The UKCSI (UK Customer Satisfaction Index) is the national measure of customer satisfaction and loyalty for the UK. Owned and published by the Institute of Customer Service (ICS), more detailed results including reports for all 13 sectors covered by the UKCSI are available from https://www.instituteofcustomerservice.com/10560/UK-CustomerSatisfactionIndexUKCSI.html
Based on web interviews with a nationally representative sample of 26,000 UK adults, the six-monthly surveys are conducted for the ICS by The Leadership Factor. This article outlines the latest results and illustrates some of the considerable business benefits of having highly satisfied customers.
Customer satisfaction is going up
Customer satisfaction in the UK has continued to trend upwards, rising slightly to 78.2. The increase is driven by small gains in a number of sectors, notably Retail (non-food), which offset small losses in other sectors, such as Public Services (local).
Overall the message is one of stability, with little change in the relative standing of the sectors. The Retail (non-food) sector continues to excel, with only one scored organisation having a CSI below the national average of 78.2.
Small gains make a big difference
Behind the overall average of 78.2, there is a wide spread of satisfaction. The lowest scoring organisation has a CSI of 48.6, and the highest 92.7. However, as Figure 3 shows, most score within a few points of the overall average—50% scoring between 76 and 82. In other words, the majority of organisations in the UK are providing a level of satisfaction very close to the national average.
Of the 181 organisations scored, 5 achieved a CSI of 90 or more – ASOS, First Direct, John Lewis, Waitrose and Amazon. 23 scored 85 or over, a CSI of 85.5 or more putting an organisation in the top 10%. This means that being only a few points ahead of the average is enough to give an organisation a fantastic reputation for customer service.
The top ten companies on the UKCSI are shown in Figure 4.
Customer satisfaction drives business success
As we have seen, relativelysmall increases in customer satisfaction have a big impact on companies’ ability to climb the league table and differentiate themselves on customer service. They also have a big impact on the downstream benefits of customer satisfaction such as Harvard’s 3Rs – Retention, Related sales and Referrals. As the main components of Customer Lifetime Value, the 3Rs in turn make a big impact on financial metrics such as sales, market share and profit.
We have seen evidence in previous UKCSI results of how customer satisfaction drives business success and the latest results further reinforce this link.
Food retail: market share gains for top companies
Food retailers with the highest customer satisfaction have grown sales most and gained the most market share. Those with customer satisfaction above the sector mean grew sales by 9% and market share by 0.02% on average compared with 4% sales growth and declining market share of 0.05% for companies with below average satisfaction. The beneficial link between higher satisfaction and business performance is particularly striking with Waitrose, Iceland and Aldi who also have the highest customer satisfaction scores.
Automotive: more revenue from satisfied customers
There is also a strong link between customer satisfaction and sales in the car industry, as shown in Figure 6. There is also a very strong relationship between satisfaction and recommendation, with every 1% point increase in customer satisfaction resulting in 2.2% more customers who have actually recommended the brand – a much stronger measure than mere willingness to recommend.
Completing the picture on the 3Rs is the finding that satisfaction is very strongly linked to related sales in the car market. The top five car brands on customer satisfaction all have more than half their customers choosing to get their servicing done at their branded dealership, with Volvo’s related sales as high as 70%. By contrast, the two manufacturers with lowest satisfaction see little more than 30% of their customers returning for a service.
Related sales form a particularly important component of Customer Lifetime Value and hence profitability across many sectors. Volvo is an interesting case in point. Figure 6 suggests that they are not translating their high level of customer satisfaction into sales as successfully as some competitors but they are the most successful at translating it into servicing. In many industries subsequent servicing is more profitable than the original equipment sale and is much more strongly influenced by the quality customers’ all round experience with the brand.
Recommendation is also a big component of Customer Lifetime Value. In the automotive sector it generates more revenue from new vehicle sales and servicing and it reduces customer acquisition costs. In some industries companies delivering a great experience can acquire almost all their new customers through referrals – a very profitable business model. Apart from a couple of slight outliers (Fiat and Land Rover), Figure 8 shows a very strong link between customer satisfaction and advocacy.
Banks and building societies: more recommendation
Again on the stronger measure of actual recommendation rather than mere willingness to recommend, customers who are more satisfied with their bank or building society are more likely to recommend them. On average, improving customer satisfaction by 1% point means that an extra 1.6% of customers will have recommended a bank.
This difference is most striking at the extremes—the worst performer in the sector has 17% of customers who are advocates, whereas First Direct has 51%—but the pattern holds at every level of customer satisfaction.
Insurance: the 3Rs in action
In the insurance sector we can really see Harvard’s 3Rs working well. Customer satisfaction again shows a strong link to recommendation. Insurance companies who improve customer satisfaction by 1% add 1.1% of additional advocates. Related sales are a particularly important element of profitability in the insurance sector, and as Figure 10 shows, there is a strong link between customer satisfaction and holding multiple policies with the same provider. On average a 1% increase in customer satisfaction results in 1.4% more customers with two or more policies.
The insurance industry has a reputation of being price driven, with customers shopping around at renewal time and switching to the cheapest quote. But it’s not true. Some customers don’t just switch less than others they also shop around less and are more likely to accept their current supplier’s initial quote. Clearly, having more of these customers would be of huge financial benefit to an insurance company. As demonstrated by UKCSI data there is a clear route to that business goal. As well as being more likely to use the same insurer for more than one policy, satisfied customers are less likely to shop around when it comes to renewal time. As shown in Figure 11, brands with high levels of satisfaction are more likely to see customers trusting them to offer fair value, and less likely to shop around.
Although 62% of highly satisfied customers are still likely to shop around at renewal time, this is the nature of the market, and it’s a lot less than the 82% of dissatisfied customers who will shop around. When you have a very large customer base like most insurance companies, 20% fewer of them shopping around at renewal time is worth a lot of money. And it’s money that goes straight to the bottom line.
Another highly competitive market, telecommunications companies rely heavily on customer retention as a driver of profitability. On this indicator, Tesco Mobile shows the benefit of building a satisfied and loyal customer base. Its high level of customer satisfaction (85.5) is matched by a high level of intention to remain a customer. Figure 12 shows an almost perfect linear relationship between customer satisfaction and intention to renew in this sector.
In many industries cost of servicing customer is a very important component of Customer Lifetime Value and profitability. This particularly applies where margins are thin and customer service is delivered mainly through call centres. Poor customer service can hugely increase call centre costs and can be the single element that makes the difference between profitable and unprofitable customers. Harvard’s Service-Profit Chain research has shown that for some companies 30% of their customer base is losing them money. Think about the large customer base that most of these companies have, look at Figure 13 and imagine the increased costs incurred if almost 25% of your customers have had a reason to complain compared with only 7%.
More information about benchmarking your organisations with UKCSI
There are a number of options for organisations wanting to get more insight into how customers rate them in the UKCSI. 13 sector reports, available for purchase from the Institute of Customer Service, contain information about how individual organisations in each sector compare on a range of customer satisfaction measures. Organisations can also undertake a survey through the Institute of Customer Service’s UK Business Benchmarkingtool, which will benchmark performance with the rest of the sector. For more information contact the Institute at firstname.lastname@example.org