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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:
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
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
Salt Lake City, Utah
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