Harvard has a strong tradition in Services Management. Their faculty have harnessed satisfaction data with some interesting results. The team were able to put together nearly 60,000 banking transactions. For each they knew the local market, from 679 different areas. The branch, out of 3536 branches and the type of transaction (balance enquiry, check cashing etc.). They were also able to identify the teller involved. Finally they knew the satisfaction score and the “length of their perceived wait” from that particular customer for that transaction .
The question they asked themselves was simple. How much of the variation in satisfaction level came from where? They found that they could explain about 25% of the total variation. That was with the few variables they had available. Of that less than 5% could be explained by area, branch, transaction, wait or even the teller. 95% was explained by the differences between consumers. The levers that managers usually focus on to improve satisfaction were having little effect.
Satisfaction is a Habit
They could follow the same consumer over a number of years. They found something even more interesting. Consumers tended to give the same satisfaction rating no matter what the occasion. This was especially the case if they used the same branch. Branch managers often see variation in their their monthly satisfaction scores. This happens because they are getting different consumers. Some on average gave higher scores, others lower.
The same team took 3.7m ratings of fast food outlets and repeated the analysis. There were difference in satisfaction levels between different brands. Individual consumers rated them more highly or lowly. Within a brand or brand/outlet combination the scores from any one individual hardly changed.
At least for these kinds of services. Satisfaction is a habit. Older consumers operate much more on “autopilot” (Newsletter #021 “Older People Make Smarter Decisions”). They will be even more prone to this phenomenon. Satisfaction scores of older consumers tend to rise with age anyway (See Newsletter #035 “Are You Satisfied?”) . Now we also know that they are a habit.
The team were looking for ways to explain the differences between consumers. This raised a major issue for firms hoping to adapt to serve different age segments. They asked whether it mattered how homogeneous were the customers. Operations manager know that the more focused an operation the more efficient it can be. Manufacturing focuses on standardizing inputs to gain those efficiencies. Consumers are part of the production process for services. If their needs are more aligned with the capabilities of the operation, they will be less likely to add complexity. For example, to ask for customization from a system that is not built for it. Homogeneity matters to an operations manager but does it affect the consumer?
They had other satisfaction results from 150,000 bank transactions at different branches. What they did is to build a demographic profile for the “catchment area” of each branch. People tend to use the same branch and one that is convenient to them. They could compare the fit of an individual consumer with the surrounding area. They used that "fit" to try to explain satisfaction. The closer an individual was to the average the higher their satisfaction. Their explanation is that homogeneity allows the outlet to operate more effectively. As a marketing person I would suggest that the experience is better when all customers are the same.
Branches trying to serve diverse groups of consumers had lower satisfaction scores. It was not the differences in the operation across branches but the mix of customers. They assessed the level of focus of a branch based on the homogeneity of its customers. They rated the branches accordingly. They could then look for each at the satisfaction of those customers who did not “fit”. The more homogeneous the branch, the more dissatisfied were those who did not fit.
Finally they were able to show that homogeneity drove growth. They looked at the growth in deposits at a particular branch over long periods. Branches with homogeneous customers bases grew their deposits faster.
Coping with an Older Segment
Fast food outlets and bank branches are very focused operations. What they deliver is standardized. They are much less able to customize to fit the needs of the older consumers. To a very large extent they count on consumers “self-selecting”, choosing a service that will fit their needs. That works if there is a lot of choice in a geographic area.
I have often used the example of hotels. They learned long ago to cope with diverse segments within the same physical setting. They are almost at the other end of the spectrum to a fast food restaurant or bank. They can cope with a diverse range of overnight guests. They have “rack rate” customers, tours, families, singles. They are also full of different segments who only use part of the facilities. They have restaurant guests, congress guests, wedding guests and banquet guests. On top of that they have a wide range of services. Somehow they have learned to cope. For that kind of operation dealing with an older segments is easier. What do you do if run a bank branch?
They can change the physical branch to cope allow different segments to “build their own service”. Those segments can include older consumers. New designs offer sophisticated machines which can do much of the work of the teller. They can be in dedicated mini-branches or part of a bigger branch. Consumers who want “customer contact” can self- select. Specialized teller windows/ booths can be selected by those wanting more complex advice. Of course the alternative is also to use on-line banking. The use of branches is declining.
The Operations Management Professors also argue for not “hiding” the operation. Customers are more appreciative of the value-add of a firm if they can see the work put in to their service. It is no accident that on line travel sites show how many airlines they are checking. Seeing the chef prepare your order makes you appreciate it more. The customer may also understand more of the operational constraints if they see it. What they can and cannot do in preparing your fast food. This should aid self-selection.
Satisfaction is the difference between what we expect and what we get. If we have chosen a fast food restaurant, no matter how old we are, we will have expectations that are a better fit.