By Pete Babich
Published: December 1992
The business question is how much satisfaction is good enough? (If you had 3 pizza parlors that all opened within the same neighborhood on the same day, and one had 90% satisfaction, another 95%, and the other 98% satisfaction the others (those under 98%) over time would loose thier customers and eventually be put out of business.)
It’s 5X more costly to recruite a new customer…. customers will buy a substitute product if they are dissatified with your produt… (ie If there was only one airline, Terrible Airlines, then they would choose to take the train or a bus.)
This observation would imply that higher satisfaction levels make a company more resistant to competitive moves.
This model proves (to Pete Babich) that continually improving customer satisfaction over time is the best way to go.