At some point in your efforts to evaluate the impact and success of your customer and business strategy, you need to ask the question “Are we sure that our customer value proposition is: giving our customers what they need and expect; differentiating us in the marketplace and attracting a growing number of customers to us; and translating into a growing base of loyal customers?” Answering this question through measurement has been both an evolution and a battle that persists today with different measurement camps supporting different approaches and favoring different metrics.
While some people feel strongly that measuring customer satisfaction should be the primary way of answering our question above, others dismiss customer satisfaction as an imperfect or misplaced measure. In fact, many feel that customer satisfaction is the wrong thing to measure (and therefore a waste of time). The folks who argue against measuring customer satisfaction generally favor customer loyalty as their preferred measure. Based on the correlation between the strength of relationship between customer loyalty and growth in sales revenues (and profits), they argue that customer loyalty metrics should be the focus of customer measurement.
However, what’s the difference between customer satisfaction and customer loyalty? What do we actually mean when we talk about each of these elements? And do they predict whether a customer will continue to be a customer in the future? Let’s explore each of these important elements more closely.
What is Customer Satisfaction?
Quite simply put, customer satisfaction is the customer’s sense of satisfaction with your company. More specifically, customer satisfaction is concerned with whether a customer’s expectations were met or not. When you measure a customer’s level of satisfaction with your company, you are receiving feedback on whether you are meeting (and hopefully exceeding!) their expectations or falling short and disappointing them.
It’s important to realize that satisfied customers are not necessarily loyal customers – they are just not the same thing. It turns out that satisfied customers will keep buying from you until they receive a better offer or until there is a better alternative available to them. Surprisingly, this is true even when customer satisfaction levels are in the high range indicting that customers’ expectations are being exceeded on a consistent basis!
I know this from experience - several companies I have worked for, and with, have experienced this phenomenon. That is, despite obtaining consistently high customer satisfaction rating results through quarterly customer satisfaction surveying they saw no change (and in some cases, increases) in their customer turnover rates. The story would often go like this: when they decided to focus on solving their customer retention problem they put a great deal of time and money into getting back in touch with their customers’ needs and expectations. This knowledge was channeled into developing new products and services that would satisfy those needs and expectations and they designed just the right delivery methods to make their customers happy. After launching these new initiatives, these companies generally saw customer satisfaction levels rise, indicting that they were, in fact, exceeding their customers’ expectations - yet their customer turnover rates either held steady or they continued to rise. How could this be each and every company wondered?
It turns out that, as I mentioned earlier, exceeding customer expectations, as evidenced by high levels of customer satisfaction, doesn’t automatically translate into loyal customers. It takes something more.
What is Customer Loyalty?
A loyal customer is a customer that you should cherish. Why? Because a loyal customer will stick with you, your company, and your products and services no matter what. Even when something comes along that’s cheaper, cooler, and/or easier to access, loyal customers will stay with you. And when times get rough, your loyal customers will keep coming back – no matter the difficulties and sacrifices required.
How can you account for the difference in customer behavior? It has everything to do with the emotional connection that exists between your company and your customer - a connection that runs so deep that each and every customer is absolutely invested in your company and brand.
When you have established this level of relationship with your customer, you have successfully embedded yourself in their hearts and minds. When they need what you’ve got, they think of you first and foremost – no one else will really do! When you have invested yourself in getting to know your customers, remembering their preferences, and giving them a personalized experience, your customers know that you care and this helps develop an emotional tie with your company. It turns out that customer loyalty only happens with this level of connection and the way to develop it is by investing in each and every customer and showing it through the customer experience every customer has with you every time they engage with your company.
Measuring Customer Satisfaction AND Customer Loyalty
While customer satisfaction is not synonymous with customer loyalty, you cannot achieve loyalty without satisfying your customers. That is, you’ve got to exceed their expectations and then you’ve got to do more – you’ve got to give them an emotional experience that endears your company to your customers at a deep level. Because of this truth, customer satisfaction is one of the drivers of your desired ultimate outcome – customer loyalty. As a result, it is important to measure and pay attention to the level of satisfaction in your customer base. If something is amiss with customer satisfaction, you need to address it before you can hope to achieve customer loyalty.
However, remember that customer satisfaction is just one of the pillars of customer loyalty – loyalty also requires an emotional connection, generated through interactions and experiences with your company’s people, processes, products, and services. Therefore, it’s important to consider (and measure) both customer satisfaction and customer loyalty when answering the important “are we sure?” questions relating to your customers, the impact your customer and business strategy is having on them, and whether they will engage in a sustained, loyal relationship with your company.
This is an excerpt from my book Business Results Revolution: 3 Critical Questions and the Conversations That Transform Business Performance Every Day. To learn more about the book please go to www.businessresultsrevolution.com