Satisfaction Does Not Equal Loyalty

Posted by: on February 11

It is amazing how many companies don’t really understand the long-term value of a loyal customer or employee. They will spend vast sums of money on advertising and promotions trying to attract new customers, while at the same time neglecting or spending little resources on the existing customers who are currently giving them business. Similarly, they will expend enormous resources on the hidden costs of employee turnover while they skimp on employee tools, training, and feedback.

It is important to realize that customer satisfaction and customer loyalty are not the same thing. In fact, a consistent research finding is that 60% to 80% of lost customers reported being ‘very satisfied’ or ‘satisfied’ just prior to defecting. Here’s a summary of the differences:

Satisfied Customers
• Focus on price
• Shop around for bargains
• Run to a competitor if you mess up
• Don’t provide critical word-of-mouth advertising
• Buy less and test your competitor’s products and services
• Are easily lured away by competition

Loyal Customers
• Focus on value
• Reward you with loyal patronage
• Are forgiving of an occasional slip-up
• Shout your praises and recommend you to their friends
• Buy more and sample across product and service lines
• Are resistant to competition

Your goal should be generating loyal customers, the ones who actively choose you, rather than simply remaining your customer because of inertia, or absence of an alternative. Since drivers of loyalty are different across industries, I suggest you invest the resources to determine which parts of your product service mix are the key drivers of loyalty for your business. You’ll be glad you did.

Richard D. Hanks
President
Mindshare Technologies
Salt Lake City, Utah