Think you know your customer? Maybe not.

Every manager knows that happy customers mean better business. But despite decades of in-depth research, elaborate customer satisfaction monitoring systems, and extensive customer service support teams, managers still struggle to understand their customers’ desires and needs, leading them to make misguided decisions that can hurt their business.

From misinterpreting data to undervaluing what drives purchasing decisions, our research shows managers get more wrong about customers than they get right.

Managers think they know their customers

Managers might want to think twice about how well they understand their customer. Even some highly confident managers don’t understand all the levels and drivers of customer satisfaction.

In the aggregate and on average, the managers we surveyed significantly underestimated their customer’s propensity to complain, and thereby failed to address the customer’s complaints. Additionally, they overestimate their customers’ satisfaction and loyalty while misunderstanding what drives both customer expectations and perceptions of value.

With the importance most companies place on customer feedback, how can these misunderstandings be so widespread? Managers should look to the type of feedback they’re measuring, to start. Not all feedback is useful (no matter how pretty those 5 stars on Yelp appear).

For example, what does having a high average review score tell you about your customer? Many managers make the mistake of blissfully accepting a positive review, but either don’t take the time or don’t have the data to understand why the customer gave them a particular rating. When implementing customer feedback monitoring systems, managers should emphasize specifically catered feedback that will provide relevant insights into their product and service decisions.

The data has the answers, but you still don’t

Implementing a customer satisfaction monitoring system – such as market research or consumer data collection and analysis — to evaluate customer feedback and communicate the data throughout the organization is a solid first step in understanding customer satisfaction and motivations. However, for many organizations, these systems often don’t live up to their potential. There are two reasons for this:

  1. Some managers aren’t exposed to the data these systems collect.
  2. Some managers receive the data, but they misinterpret and misunderstand it.

Both cases result in frustrated customers, falsely confident managers, and ultimately, the loss of business. Monitoring systems only work if managers have access and training to accurately interpret the data.

Additionally, to extract all the benefits from monitoring systems, managers should inspect the current extent and nature of their customer perception level to help minimize any manager-customer disconnects. This baseline will uncover the holes in understanding and facilitate more informed decisions to close them.

Once managers understand where lapses in data and interpretation are occurring, they can take corrective actions that make sense for their business, and ultimately, for their customers.

Going beyond what the customer wants

Understanding what your customer wants is the first step, but to truly bridge the gap in manager-customer misunderstanding, managers need to take it a step further. Beyond what your customer wants, why do they want what they do?

In many oversaturated and competitive markets, like retail, simply knowing what your customer wants isn’t enough anymore. There are five, 10, even 100 other firms selling the same exact product or service for a better price. And yet, the more expensive option might sell better and produce more satisfied customers.

Why? Lower prices are not the deciding factor in winning over the customer. Instead, quality drives customer satisfaction and loyalty, along with perceived value and customer expectations. So before scrambling to stay competitive in the short-term by reducing prices, managers need to take the time to find out why the customer feedback says what it says.

Learn from Netflix’s mistake. In 2011, Netflix CEO Reed Hastings pushed for a premature split between hard copy DVDs and the company’s new streaming service — a move that resulted in 800,000 fewer subscribers and more than a 25 percent stock plummet. The split not only divided customers, but required them to pay for both services separately. Turns out, the new business model combined with the price increase was enough to warrant a “no” from the “Are you still watching?” prompt.

Hastings apologized a few weeks later, admitting he was overconfident in the push to streaming and assumed that the divide had already been presented to customers via feedback platforms (clearly, it had not), and that the price increase wouldn’t come with backlash (wrong again).

Following this misinterpretation, Hastings made a swift recovery by focusing on why the remaining customers were interested in streaming services over DVDs, leading to an amazing comeback in 2012 that’s held up through today.

Making the change

Winning over customers is about more than implementing fancy monitoring systems and simply relying on the data without context; it’s also about understanding the customer’s desires and needs, and — as a manager — checking your ego at the door.

With the plethora of data available today, it’s easy to misinterpret information and direct precious resources to well-intentioned but needless tasks. To avoid making this mistake, it’s time for managers to reassess data, determine key drivers of customer satisfaction as well as complaints, and fix gaps in interpretation and information sharing. If managers make the effort now, they’ll have happier customers — and better bottom lines — in the long run.

Mobile apps help drive satisfaction with insurance and investment services

Every year we take stock of customer satisfaction in the financial and insurance sector. In recent years, we’ve noted digitalization is driving the success of retail banks, and technological advancements are improving satisfaction across the sector. Our latest report supports those points.

In particular, mobile apps – which we measured for the first time this year — are improving customer satisfaction even as other online resources, like websites, dip within the sector.

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Based on our 2018 finance and insurance report, here are a few ways mobile apps are already contributing to the finance and insurance sector’s success.

Nationwide most improved among insurers, thanks to cutting-edge mobile app

In early 2018, Nationwide became the first company to enhance its mobile capabilities with a new blockchain framework. Designed specifically for the risk management and insurance industry, the framework enables Nationwide to offer customers real-time policy verification and eliminates the need for hard-copy documentation—streamlining a historically cumbersome process.

The app, which also allows consumers to start and process claims from their mobile devices, scored exceptionally high marks in customer satisfaction in 2018 and propelled Nationwide’s 5 percent gain in overall satisfaction, which is the largest improvement by any property and casualty insurer this year.

Industry-wide, the quality and reliability of mobile apps, which can be used to pull up policies, document accidents, and easily reference claims, rank near the top of all benchmarks measured. Customers give mobile app quality an ACSI score of 87 and the reliability of mobile apps, defined by minimal downtime, crashes, and lags, an 85.

Life insurance leads in mobile app satisfaction

Life insurers are getting creative with mobile options, too. For instance, John Hancock has developed a program, available via its app, that encourages policyholders to be more proactive with their health. For every 10 workouts they record, policyholders earn the chance to spin a wheel of fortune in their mobile app and accrue points they can redeem for gift cards. These incentives are improving customer engagement, experience, and satisfaction.

Across all insurance industries ACSI measures, life insurance scores highest for both quality (90) and reliability (89) of mobile apps. Driven in part by these scores, satisfaction for the industry rises 2.6 percent to an ACSI score of 80.

The flip side: Technical glitches hurt satisfaction

While some companies are satisfying customers with mobile options, other companies can’t seem to master the basics. Vanguard, the previous customer satisfaction leader in the investment services industry, is one example. The company drops 4 percent to a score of 79 following system issues like phone and website connection problems that left customers fuming, as well as automated texts that incorrectly stated loans were being processed.

Vanguard’s technological hiccups weren’t enough to bring down the industry as a whole however. Reliability and quality of mobile apps (both 82) top the charts and life insurers continue to hold steady at a score of 79.

Digital technologies make strides

Mobile is high on customers’ priority lists, and with a few exceptions, insurance and investment companies are delivering. As our data shows, those companies investing in their customers’ digital experience and expectations are reaping the rewards in terms of customer satisfaction.

It’s a digital world, and whether policyholders are looking to file insurance claims or make changes to their investments, companies would do well to meet the demands of the on-the-go customer.

Health insurance continues to cause headaches for customers

There’s a correlation between lower customer satisfaction and the frequency of use or touchpoints with a product or service. The more often you interact with a specific product or service, the greater the chances that something is going to go wrong.

Few things encapsulate this concept more than customer satisfaction – or lack thereof – in health insurance.

Following two years of growth, customer satisfaction with health insurance is unchanged with an ACSI score of 73 (out of 100), according to our most recent Finance and Insurance Report. In fact, as it turns out, health insurance is far and away the least satisfying category in the entire sector.

Trending in the wrong direction

Humana and Kaiser Permanente continue to lead all insurance companies in customer satisfaction with an ACSI score of 78. Policyholders note that Humana has better access to primary and specialty care, while Kaiser Permanente offers the best prescription coverage and is the fastest to process claims. But these few positive marks aren’t enough to keep customers happy — both insurers fall 1 percent over last year

This downward trend plays out across much of the industry. Blue Cross and Blue Shield falls 1 percent to an industry-low 70, and “all others” also dip 1 percent to an ACSI score of 74. Only Cigna and Aetna saw gains in customer satisfaction. Meanwhile UnitedHealth stayed put with an ACSI score of 73.

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The industry as a whole saw no change in customer satisfaction in areas such prescription drug coverage, ease of submitting claims, the speed with which claims are processed, and access to specialty care.

A bright spot for insurers

The overall complicated nature and complexities of health insurance, makes it much more difficult to provide excellent customer satisfaction. Yet, some insurers are finding success, specifically through consolidation.

The only companies that experienced improvement in customer satisfaction also happened to be the only companies in the midst of separate mergers and acquisitions. Aetna, up 1 percent to 75, is in the midst of merging with CVS, and Cigna, up a staggering 11 percent to 73, is in the process of purchasing Express Scripts.

As a whole, the health insurance industry has seen customers more satisfied with access to primary care doctors and coverage of standard medical services.

Where health insurance can improve

The health insurance industry doesn’t have the best reputation. From the logistics of using it to questions surrounding what (or who) is covered, health insurance is known for causing ample amounts of unwanted stress.

Insurers would be wise to make it easier for customers to understand information on insurance statements, which ranks at 74. And most notably, companies need to improve the entire experience of interacting with a call center. This area sees the largest dip in customer satisfaction, dropping 5 percent to an ACSI score of 71.

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Health insurance is in the bottom 10 of all the industries we measure, but it doesn’t have to be that way. By simplifying the process, ensuring access to physicians, and upgrading websites, insurers can create a more seamless, satisfying experience and ultimately improve their long-term relationships with customers.