Your customer satisfaction score has never been higher but the churn rate is increasing. Why is this? If customers are satisfied, surely, they must be also loyal?
Unfortunately, customer satisfaction isn’t the same thing as loyalty. In this article, we break down why customer satisfaction isn’t the same things as loyalty, and how can you measure and increase it.
Why Customer Satisfaction isn’t Loyalty
When measuring Customer Satisfaction by CSAT, it only measures the customer’s attitude towards their latest interaction with the company. If the issue is resolved, most customers will reply being satisfied.
However, the customer might still be upset that they had to contact customer service in the first place. If it’s a repetitive situation, the customer might be satisfied with the resolution of each conversation – but probably won’t be loyal for long. Customer satisfaction is a transactional metric. It’s a one time happy face response. It’s not permanent.
What is customer loyalty?
If customer satisfaction is a short term win, customer loyalty is the long term goal. Loyal customers are the ultimate goal – they spend more time with you, they recommend you and they spend more money.
Bain & Company found that ‘’a shopper’s 5th purchase was 40% larger than the first, and the 10th purchase was nearly 80% larger than the first.’’
Customer loyalty has 2 sides – how a customer feels and actually behaves. For example, a customer might recommend you but never repurchase again. On the other hand, a customer might use your product on a monthly subscription plan, but be unhappy that they don’t have another option.
Measuring Customer Loyalty
Measuring customer loyalty can be difficult because customer don’t always do what they say. That’s why you need to measure both: feelings and behavior.
NPS surveys ask customer directly about their willingness to recommend your product.
Measure the number of customers whose first purchase came from a referral. If most of your new customers come from here, it’s a good sign your customers feel loyalty to you.
A newer survey, termed the ‘’product-market fit survey’’ by Sean Ellis, asks customers how disappointed they would be if your product disappeared tomorrow. Loyal customers would be upset to find a new solution, conversely, customers who are primed to become disloyal wouldn’t.
Even if a customer loves your company, their needs change and that’s why it’s important to measure what they do, not only say.
Churn rate – measures the % of accounts cancelling or the revenue lost by cancelled accounts
Active usage – customers that are consistently active tend to be more loyal, if you see a drop, that’s a cause for concern
Measuring loyalty is the first step in understanding whether your customers are sticking around for life – or if they are just satisfied.
Moving from Satisfaction to Loyalty
If customers are satisfied, but not loyal, it’s time to shift the focus to build a long term relationship. Here’s 3 ways:
Reduce effort – The easier you can make it for your customers to purchase from you, the more loyal they will be. Measuring customer effort score is a great way to get started with reducing effort.
Increase engagement – Customers don’t just want to be satisfied, they want to fall in love with your brand. This means more frequent communication and over the usual limits.
Invest in loyalty programs – Sometimes just the smallest external motivation can make customers fall into a loyalty cycle. Nir Eyal’s Hooked method for creating addictive products is a great tip.
Low customer satisfaction can contribute to disloyalty, but high customer satisfaction doesn’t ensure loyalty. To create long term relationships with your customers you need to shift from reactive to proactive thinking. You need to understand how and why they act the way they do. Then, build the value and keep customer engaged.