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KPIs May Not Be Positively Related

I just read an article in the 2013 September issue of Journal of Marketing titled, “Reexamining the Market Share – Customer Satisfaction Relationship” authored by Lopo L. Rego, Neil A. Morgan, and Claes Fornell. 

Often managers assume that various dimensions of marketing performance are positively correlated, and yet this is not always the case.  This particular study builds on previous research suggesting that there is a tradeoff in designing marketing strategies and programs using market share and customer satisfaction as key metrics.  It can be tricky to monitor Key Performing Indicators (KPIs) and not assume that as you increase one you can hopefully increase the other (in that they are positively correlated).  The authors of this study found that market share and future customer satisfaction are in fact negatively related. 

The authors also found support that building a larger brand portfolio may manage the market share-customer satisfaction trade-off revealed in the study.  If the market is comprised of customers with greater product/service preference variability, it will be challenging for a larger market share firm to achieve customer satisfaction.  The authors provide a solution of offering more brands which enables a customer to find an offering that most closely meets his/her individual requirements – hence, mediating the market share – customer satisfaction negative relationship.  This might be helpful to information to keep in mind.   If you see your company increasing in market share, but subsequently experience periods of lower customer satisfaction, introducing additional brands targeted at specific needs may be an option to consider. 

I also think a key takeaway is to remember that KPIs might not work together as expected; it is important to remember there may be potential trade-offs that impact your overall business objectives.

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