On the surface, it seems like a logical business
conclusion: Keep customers and employees satisfied, and an organization can
expect to earn their long-term loyalty.
According to industry experts, that’s actually a huge leap of faith.
For starters, many people mistake customer satisfaction and customer loyalty for
each other—assuming that they’re essentially the same thing. Actually, they’re
quite different, and it’s important for professionals to understand the
difference, says William Bleuel, Ph.D., a well-known expert in survey services.
Definitions—and
surprising statistics—from
industry experts.
“Experience tells me,” Bleuel writes, “as do the definitions in several
dictionaries, that
satisfaction relates to the results of a process,” whether
its the process of sales, service or product performance. In service
industries, for example, satisfaction is often based on the on-site repair
process.
Loyalty, on the other hand, is a much longer-term proposition.
Loyalty relates to a relationship—one that can actually
survive a negative product or service process. (Just think about how loyal
parents remain to their children, even after the inevitable challenges.)
Truly loyal customers look beyond the occasional negative experience, continuing
to purchase a company’s products or services. Not surprisingly, the converse is
also true. As many studies have shown, satisfied customers do not necessarily
become or remain loyal customers.
In a recent Harvard Business Review article, noted loyalty expert
Frederick Reichheld of the Bain Company noted that between 65% and 85% of
customers who defect said they were “satisfied or very satisfied” with their
former supplier. He specifically noted that while satisfaction scores in the
automobile industry average 85% to 95%, only 40% of these customers purchase
their next vehicle from the same supplier.
Case
Study—Frequent travelers go
“hotel hopping,” cite
staff attitudes
A recent article on CNN.com, “Executives can be fickle guests,” discusses just
how razor-thin the line between satisfaction and loyalty can be.
Based on a study by Cornell University’s Center for Hospitality, which examined
the habits of several hundred guests at two typical Midwest hotels, the study
found, among other things, that while 36% of business/leisure travelers were
“satisfied” with their hotel—and even professed loyalty to it—they weren’t sure
they’d stay at the same place on a subsequent visit.
Interestingly, the study also uncovered another, unexpected trend—“unsatisfied”
guests that continue to patronize the same establishments, even while spreading
word of their dissatisfaction to family, friends and associates.
Finally, the researchers also found that satisfied guests who described
themselves as “not likely to switch” noted the importance of the attitudes of
hotel staff, which the article cited as “a finding that underscores earlier
studies that have argued for the ‘people factor’ in services.”
Different—but
intrinsically linked.
Of course, just because satisfaction and loyalty are different doesn’t mean
that they’re completely unrelated. Just the opposite; they’re closely linked.
Bleuel notes that as more and more companies wisely jump on the
customer-satisfaction bandwagon, “It’s time to realize that “customer
satisfaction is a cornerstone in building the bridge between company and
customer.” Unfortunately, until now, most companies haven’t moved beyond
building this cornerstone. They’ve failed to see that customer satisfaction is
a worthy goal—but not the only goal. It’s one of the primary ingredients for
creating customer loyalty in the first place, but moving forward, it’s also
necessary to examine company operations to find out which are having the
greatest impacts on loyalty.
To change your organization’s vision from one of initial satisfaction to
overall, long-term loyalty, it’s critical to change how you measure customer
satisfaction. More detailed cause-and-effect relationships need to be examined.
Two simple, accurate metrics from measuring customer loyalty are:
-
Retention
rate.
Loyal customers come back and make additional purchases from your company. It’s
as simple as that.
-
Purchase
share.
If a customer typically splits its purchases among several suppliers, it’s
extremely valuable to track the percentage of purchases allocated to you.
From
satisfaction and loyalty to true
customer value.
To some industry experts, the debate goes far beyond satisfaction vs. loyalty.
Braun Consulting, a leading Customer Relationship Management (CRM) firm,
actually advises that for many companies, resources devoted to measuring
customer satisfaction would be best diverted to more relevant metrics—“from the
loose proxy of customer satisfaction to analysis that provides better insight
into the business.”
To Braun Consulting and others, the framework of “customer value” drives the new
model. They’re pioneers in the emerging field of Customer Value Management
(CVM), which allows companies to identify and track specific metrics that
differentiate customers and their relative importance to the organization.
The challenge is to develop a customer value model specific enough to
differentiate their most profitable customers. With a proper model in place,
companies can compare such metrics as revenue, acquisition costs, service costs
and even lifetime customer value. More importantly, it allows you to truly
understand your customers—and the business impact of every business
interaction.
Satisfied
employees are critical, too.
Many companies make the mistake of measuring only customer satisfaction. In
fact, customers’ perceptions of a company are often driven by the performance
of its employees, and research shows that organizations with engaged,
enthusiastic staff have more satisfied customers. It’s a direct, irrefutable
link, because your employees are part of your brand.
But how can you effectively—and objectively—measure employee satisfaction and
promote long-term loyalty? Many companies conduct internal research with
opinion or attitude surveys, but these often devolve quickly into complaint
sessions, creating a negative downward spiral. Not only are resources wasted;
employee morale actually goes down, precisely the opposite of the
intended effect.
It’s important to work with a professional service provider that has the
experience to help you avoid these pitfalls in measuring employee satisfaction.
They key is to provide a positive, open line of communication that allows
employees to positively impact customer experience—and the organization’s
bottom line.
SUMMARY
It’s critical to focus on measuring both the satisfaction and long-term loyalty
of your organization’s customers and employees. It’s more than just another way
to gather statistics—it’s part of the never-ending cycle of constant business
improvement.
For more information including how you can more accurately measure the
satisfaction and loyalty of your customer and employee to benefit your bottom
line, contact us at www.surveymethods.com/contactus.aspx
today!.
Quotes::
“Satisfaction
relates to the results of a process;
loyalty relates to a relationship—one
that can actually survive a negative
product or service process.”
—William Bleuel, Ph.D., survey services expert
“It’s
time to realize that customer satisfaction
is (only) a cornerstone in building
the bridge between company and customer.”
—William Bleuel, Ph.D., survey services expert
“To
effectively drive business performance,
companies need to move from the
loose proxy of satisfaction to analysis
that provides better insight into
the business.”
Braun Consulting, “Customer Value Management”
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