Content area
Full text
The most satisfied customer may not necessarily be the most loyal.
NOTE: This article is an expansion on a paper titled "Satisfaction be Damned, Value Drives Loyalty" presented to the Advertising Research Foundation's Week of Workshops during October, 1998.
For over a decade American business has been focused on customer satisfaction as a way to become customerfocused and improve customer loyalty and thus profitability. The assumption has been that the more satisfied a customer is, the more loyal they will be. Loyal customers consume fewer marketing and sales resources, buy more, and buy more often from the organization that has gained the customer's loyalty.
Well, that's not quite right. Customer satisfaction measurement and tracking are fine methods for monitoring process and product performance and for providing a quantitative feedback loop for process improvement. However, customer satisfaction has little to do with customer loyalty.
In a November 1995 Harvard Business Review article, Thomas Jones and Earl Sasser explained, at least partly, "Why Satisfied Customers Defect." A year later Fred Richheld published "The Loyalty Effect" where he demonstrated that satisfaction was not nearly enough to insure loyalty. Then Brad Gayle in Managing Customer Value told us that we need to transition from customer satisfaction to customer value and customer loyalty to improve customer retention. Unfortunately, these seminal works were long on theory and antecedents and short on measurement and methods (although Gayle did illustrate some basic measurement systems.)
Regardless, we researchers and managers of customer relationships have generally failed to deliver large numbers of loyal customers to our clients by using the typical customer satisfaction measurement systems in place today.
Customer loyalty is the proportion of times a purchaser chooses the same product or service in a specific category compared to the total number of purchases made by the purchaser in that category, under the condition that other acceptable products or services are conveniently available in that category. Real customer loyalty is a behavior. It is measured as a proportion.
Customer satisfaction is the attitude resulting from what customers think should happen (expectations) interacting with what customers think did happen (performance perceptions). Customer satisfaction is an attitude and it is typically measured using some sort of attitudinal scale.