Editor's note: Kenneth Long is the director ofPenton Research Services, a full-service research group in Cleveland. The study findings presented in this article are taken from a series of PRO Reports published by Penton.

Spending on customer satisfaction research by American industry has grown tremendously in recent years, and a number of trends suggest that the need for this type of research will continue to rise in the years ahead, particularly among firms that sell to other organizations.

Companies are buying more, but from fewer suppliers

Business and government markets are growing, but getting tougher to sell to. Organizations bought more than $8.3 trillion worth of goods and services in 1993, according to Penton Research Services' estimates. Spending has increased every year since 1982, even during the 1990-91 recession.

Companies forced to downsize in recent years are now buying many of the goods and services they used to produce internally. Goods-producing industries outsource the most, although government - which is privatizing a number of operations - and many service firms expect to do more outsourcing in the years ahead (Figure 1). Total business and government purchases are expected to double over the next decade, reaching $17.5 trillion by the year 2005.

However, it's also becoming more difficult for suppliers to get - and keep - customers. A Penton Research Services study found that 40% of large business and government units are buying from fewer suppliers than they were five years ago, even though the amount purchased is up. And nine out of ten purchasing executives at Fortune 1000 companies surveyed by the Center for Advanced Purchasing Studies (91%) expect to use fewer sources of supply in the year 2000.

Business and government buyers want to establish partnerships with their suppliers. Properly-conducted customer satisfaction research can help a company build stronger relationships with both current clients and key prospects.

Customer power is increasing

The balance of power in business transactions is shifting to the customer. According to a study conducted by Arthur Andersen in conjunction with the Distribution Research and Education Foundation, the buyer's ability to dictate such terms and conditions as billing and pricing is expected to increase during the '90s, while the power of suppliers/manufacturers and wholesaler-distributors decreases (Figure 2).



As buyers gain power, they'll have increased leverage to set standards for product quality and specifications, delivery time, and service. More than half of the executives surveyed by the Gallup Organization (53%) report that demands from their company's customers are rising or changing a great deal. Research allows a supplier to truly hear the voice of the customer and tailor its product/service mix to changing buyer needs.

Suppliers need to satisfy multiple buying influences

Companies selling to industry have to please a number of different individuals within customer organizations, each with their own needs and agendas. According to a Penton Research Services survey, the number of people involved in a buying decision ranges from about three, for services and items used in day-to-day operations, to almost five, for such high-ticket purchases as construction work and machinery (Figure 3).


 
A Forsyth Group analysis of buying decisions at one large firm, Harnischfeger, showed that the number of individuals involved in the purchase of a single type of product can exceed 50. And it's not going to get any easier for suppliers. A Center for Advanced Purchasing Studies survey found that 87% of the purchasing executives at Fortune 1000 companies expect teams of people from different departments and functions to be making buying decisions in the year 2000.

A well-designed customer satisfaction measurement program that targets key buying influences can help keep current customers sold and identify ways to win over non-customers.

Quality is still job one

Customers want a good price, but refuse to sacrifice quality or service to get it. A Penton Research Services survey of business and government decision-makers found that quality is the single most important factor in choosing a supplier. Price received the second largest number of mentions, followed by reputation, delivery time, and technical assistance.

In fact, nine out of 10 business buyers believe that paying a higher price for quality is more cost-effective in the long run (Figure 4), and according to a study conducted by Kane, Parsons & Associates, most executives (86%) prefer to do business with suppliers that have made a formal commitment to quality improvement and customer satisfaction.



The buyer, not the seller, determines what attributes of a product or service constitute quality, and research can provide an objective measure of what customers think, correctly or incorrectly, about a company and its competition.

The rate of change is fast and getting faster

American industry is in a continual state of flux. There are more than 8,200 new business incorporations, failures, acquisitions, address changes, and name changes on the average business day.

The buying influences that suppliers need to keep satisfied are also constantly changing. A Penton Research Services analysis of changes among managers, engineers, and purchasing agents found that more than 20% leave their company, change job titles, or transfer to another location over the course of a year. This means that more than half of the buying influences will probably change in some way within three years.

Most of the executives surveyed by the Gallup Organization believe that the current rate of change at their company is rapid or extremely rapid, and 61% of them think that the pace of change will accelerate in the future (Fig. 5).


Companies selling to industry have to continually monitor the marketplace to be able to respond quickly to changes in buying procedures, factors influencing the purchase, and the people making the buying decision. Customer satisfaction research will be needed more than ever by firms that want to survive - and thrive - in the challenging years ahead.