Myra's Customer Service Articles

Forget Customer Satisfaction, Strive for Customer Loyalty

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Don't be lulled into thinking that if you have high satisfaction ratings you are safe from customer defection. These findings point to the danger of relying on customer satisfaction metrics to gauge repeat business and brand allegiance:

• According to a 1991 report by Forum Corp. in Boston , 40 percent of customers who expressed "satisfaction" switched suppliers without hesitation.

• In 1992, University of Texas marketing professor Robert Peterson demonstrated that up to 85 percent of "satisfied" customers are likely to stray to new providers of goods and services, and not look back.

• Research conducted by the Juran Institute of Wilton, Conn. , found that fewer than 2 percent of the 200 largest companies in the U.S. were able to measure a bottom-line improvement from documented increases in levels of customer satisfaction.

Clearly, customer satisfaction and customer loyalty are two different animals. Following are four reasons to be a fierce customer loyalty advocate, and not focus on customer satisfaction alone:

ONE - Customer satisfaction means NOTHING these days. The truth is, today’s customers expect mediocre service. Apathy is expected. Late is expected. Problems are expected. No follow-through is expected. As long as companies don’t go below these very low expectations, customers are satisfied.

TWO - Customer satisfaction = “Sufficient or Adequate Service.”  When a company achieves “customer satisfaction,” what it has really achieved is getting customers to feel that the service is adequate or sufficient—that it wasn’t horrible. The customer’s expectations, typically very low expectations, were met. That’s all customer satisfaction means.

THREE - Customers report being “satisfied” only because their expectations are so low, and no one else is doing any better.

FOUR - Satisfied customers are not your customers. They’re just with you until they find something better.

Customer satisfaction is a feeling…a feeling that low expectations have been met. Customer loyalty, on the other hand, is a set of behaviors that produce revenue.           

§         Loyal customers by definition don’t defect.

§         Loyal customers reward the company by buying from you again and again.

§         Loyal customers buy other products or services in your line.

§         Loyal customers tell people in their network about your company (referrals). That is, they actually market for you and word-of-mouth advertising is the most persuasive form of advertising.

Does loyalty versus a feeling of satisfaction really impact profits? You bet it does! Take a look at this case study.

Ed Peters of the 4Profit Institute, conducted a large customer satisfaction survey that provides irrefutable proof that the difference between satisfaction and loyalty can be a “million dollar difference.” Ed’s survey for a men’s clothing store in the Midwest found that customers who had an “excellent” shopping experience (48%) visited the stores an average of 3.9 times a year and spent an average of $465 per visit. Customers who merely had a “good” experience (49%) visited 3.5 times a year and spent only $397 per visit. Excellent service is what builds customer loyalty. Good customer service results in customer satisfaction. Now look at this…the difference between an “excellent” experience and a “good” experience was half a visit per year and $68 in sales – or about $3.2 million a year in lost sales.

Stop striving for high customer satisfaction and focus on delivering truly “Exceptional” service --service that results in a profitable base of loyal customers. Satisfied customers will give you a “good” ranking on a survey today and leave you for the competition tomorrow. Loyal customers return again and again, recommend your company often and significantly add to your bottom line!

About the Author

Myra Golden is one of the service industry's most prominent trainers and a highly regarded business growth strategist. Companies hire Myra and her team to help them build, recover, and strengthen customer relationships. She can be reached at 866-873-8419 or by email at myra@myragolden.com. She also has a website: www.myragolden.com.