Why Customer Satisfaction Doesn’t Mean Loyalty: 10 Prescriptions

 

 

 

 

IT’S ALL ABOUT THE RELATIONSHIP.
Everyone talks about it: “We’ve got to make sure our customers are satisfied.” Some businesses go to great lengths to define what they think it takes to satisfy their clientele and then spend lots of time and money on comment cards, online surveys, focus groups or just in-the-moment chats with customers or clients to measure how well they have done at delivering what was expected. What’s wrong with that? Well, it turns out that just because you’ve satisfied your customers doesn’t necessarily mean they will be back. And isn’t the normal assumption that, if you have satisfied their expectations, they will reward you with their loyalty?

The problem is that too many people use the terms “customer satisfaction” and “customer loyalty” to mean the same thing. They don’t. And consumer behavior research shows why this distinction is important: Frederick Reichheld of Bain & Co. found that, in a series of studies of a variety of businesses, between 65 percent and 85 percent of customers who “defected” — i.e. switched to the competition — reported that they had been “satisfied” or “very satisfied” with their original provider, but they left anyway!

Don’t get me wrong — I’m not suggesting that you don’t need to be concerned with satisfying your clients, attendees, or sponsors. On the contrary, if the goal is to inspire repeat business, you need to go beyond merely meeting expectations and consider what really motivates people to be loyal. After all, satisfaction is just an attitude or opinion a customer has, but loyalty has to do with the customer’s behavior. And their behavior is what we’re ultimately interested in, not just what they think of us.

Loyal customers do more than just come back again. They are also less price-sensitive; they are more forgiving of occasional slip-ups in the product or service or experience you provide; they are more resistant to the allure of new competition and, perhaps most important, they provide crucial word-of-mouth advertising, whether it’s face-to-face or online.  Clients or guests who are only “satisfied” do not. In an era of increasing competition, we need to be looking at customer satisfaction as merely the entry fee for playing the game — sort of like the ante that allows you to sit at a poker table. If you don’t deliver satisfaction, then you don’t get to play. But “satisfying” your customers — i.e. delivering what they already think they should get anyway — only avoids chasing them away to the competition. If you want to truly inspire loyalty, you have to build a lasting bond with them.

So why do people develop loyalties to a particular company? A few years back, I conducted a study on the issue of customer loyalty at Champlain College in Burlington, Vermont. After studying a group of “loyal” restaurant customers, it became clear that loyal behavior is closely related to feelings of affiliation and personal connection that the client establishes with a business and its employees. These loyal customers were satisfied customers, for sure, but they also consistently expressed an appreciation for being recognized, for receiving personalized service and for being treated like valued individuals. Individualized attention like using the guest’s name, offering their regular drink, providing personal recommendations that you think this particular guest might appreciate or delivering a swift and sincere response to any problems that might arise all appear to go a long way toward establishing a sustainable relationship.

10 PRESCRIPTIONS FOR LOYALTY
I think we often put too much emphasis on hiring “experienced” customer service personnel, rather than on selecting people who are natural rapport-builders. Then we spend most of our training time on the mechanics of service, instead of on activities that will really promote loyal behavior. What kinds of action could we be taking? Here are a few suggestions:

(1) Raise awareness among both staff and management. Employees can’t be expected to appreciate loyalty’s importance on their own; it is management’s job to make them aware of its impact on everyone’s success and how their own behavior can increase loyalty. Use stories of “legendary” service incidents to help illustrate the kind of behavior you’re looking for.

(2) Hire people who have natural rapport-building skills. If it’s part of their job to build relationships with clientele, then management should be careful to recruit, hire and retain staff who have a natural talent for it.

(3) Teach and reward the learning and use of guest’s names. Bring in a memory expert to instruct your staff in memorization techniques. Build a list of guest names and personal preferences. Provide financial incentives for staff who collect new names for the list. Coach staff members on how to incorporate individual guest names into normal service encounters.

(4) Train employees to “read” guest needs and to personalize each service encounter. Stress the fact that suggestive selling should be used to make personal recommendations of items that the server thinks the client might enjoy or appreciate. Your staff should be encouraged to get creative; try to anticipate things that might appeal to the client before they ask.

(5) Go out of your way to respond to service failures or guest complains. Problem situations can be exploited for the opportunity they offer to provide a highly responsive, personalized service experience to the client, which reinforces feelings of being noticed and valued as an individual. A weak or nonexistent response will produce the opposite effect.

(6) Expect and empower employees to respond to problems without waiting for management’s approval. Data collected by the Technical Assistant Research Programs show a close link between resolving the client’s problem on the spot and their intent to patronize your business again. Staff members need to receive instruction in handling a variety of scenarios, and they also should be given clear parameters to define what corrective actions they are authorized to take.

(7) Reinforce relationship building through employee incentive and reward programs. Recognize and encourage employees who demonstrate success at building repeat patronage. For example, restaurant servers who are most often requested by guests at the door deserve credit for it. Likewise, employees who are skillful at collecting the names of repeat customers or attendees can be rewarded for their extra contribution. In both cases management is pointing out the kind of results they want their staff to be shooting for.

(8) Invest in employee retention. Studies have shown a strong correlation between high customer ratings and low employee turnover. When an employee leaves, any relationships they have built with clients are in danger of being broken. Consider taking steps to protect your best “people people” by earning their loyalty.  (By the way, these same principles apply to employee loyalty. They’re human, too!)

(9) Adjust your customer feedback tools to measure for loyalty indicators. Instead of just asking clients whether they were satisfied with their experience, find out if they would be willing to recommend your services to others. Why or why not? Do they know any of your staff or management by name? Did they feel as if they received personal attention? Were they made to feel like they matter? These may be the kinds of things that will determine whether loyalty will be produced.

(10) Provide clients with opportunities to “connect” with staff members beyond normal business transactions. Inviting guests to receptions, seminars or public-relations events will offer the possibility for social interaction not possible during normal business interactions, enhancing the potential for social bonding. You will build closer relationships by getting to know your guests as individuals, rather than as relatively anonymous consumers and providers.

Where loyalty is concerned, it’s not just what we do for people; it’s how we treat them while we’re doing it. The key question is, how do they feel when they’re walking out the door? One thing is for sure: to the degree that your clientele are allowed to feel anonymous in their interactions with you, you’ll have a hard time inspiring their loyalty.



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About Peter Straube

educator, experience designer, writer, speaker and explorer, specializing in the power of events to create positive change View all posts by Peter Straube

2 responses to “Why Customer Satisfaction Doesn’t Mean Loyalty: 10 Prescriptions

  • Joan Eisenstodt

    Thanks for writing this.

    A few observations:
    #s 3 & 4: If one can read customers (internal and external) better, they will be able to determine if a customer wants her or his name used! Sometimes it sounds so phoney and I know I involuntarily flinch. If someone were observant, they’d see that and realize perhaps it is not the best thing to do.

    And if someone can read that some simply do not want to engage in conversation, it is smarter to do “just the facts” with that customer. (I admire many cab/car drivers who have learned to take cues and talk or don’t based on how the passenger/customer leads.)

    Customers are internal and external. As an external customer, observing internal customer service tells me more than even my experience might.

    One last thing: meeting sponsors need to fine-tune their customer service and be aware how all customers (meeting participants, vendors, etc.) are being treated.

    • Peter Straube

      Joan, I like your comment about sponsors needing to be aware of how all customers (i.e. stakeholders) taking part in an event are being treated. Because the only way an event is truly successful is if everyone ends up getting what they expected, or maybe a little more! Truly a win-win-win-win situation.

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