Customer Satisfaction Does Not Equal Customer Loyalty/Advocacy

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As this month CustomerThink is focusing on Customer Loyalty, I thought I would use my blog to share some of the results of our 2008 Sales Performance Optimization (SPO) study to demonstrate that if you are equating satisfaction with loyalty and advocacy, you may well be making a big mistake.

Let’s explore this premise by looking at an example most of us in sales can relate to. The vast majority of companies we surveyed have a CRM system installed. And of those who do not, others still have reps using applications they have selected on their own. This means that most of you reading this blog are likely customers of a CRM vendor. Well, how do you really feel about them?

As part of our 2008 SPO survey, we asked the study participants the following question: How satisfied are you with your current CRM vendor?. The responses we received were: 19% Very Satisfied, 42% Satisfied, 27% Neutral, 12% Dissatisfied. Based on these numbers alone you could assume that 61% of users are satisfied (or better) and 39% are less than satisfied, and therefore make the leap of faith that 61% of your customers are loyal to you. But you would be wrong.



The reason I say that is that we asked a follow-up question: Would you buy from again/recommend your current vendor to others? This time the responses were 18% Absolutely, 29% Very Likely, 37% Somewhat Likely, 16% Unlikely. Our benchmarking has shown that if a customer is only Somewhat Likely their loyalty is in serious doubt, as they can be swayed too easily by another player in the market. So we would read these findings as 47% are loyal enough to do business with you again or give you a solid recommendation to others and 53% are not.

In this case, if a CRM vendor just asked the satisfaction question they would be assuming that significantly more of their customers are more loyal to them than they really are. So how do we get the real skinny on what they are thinking? Here are some ideas to consider:

Start a Customer Advisory Board: This is not a user group, because while those are useful the conversation too often focuses on features and functions of the product or service you offer versus all of the factors that can impact loyalty: service levels, terms and conditions of working together, the quality of your people, your reputation in the marketplace, etc. The intent of a Customer Advisory Board is to give you candid feedback on all the aspects of how you engage with clients.

Independent Customer Audits: One computer firm we benchmarked has graduate students from a nearby university do quarterly interviews with a random subset of their customer base. The interviewers have no vested interest in the status quo, and so they are open to really hearing want the customer is saying, versus interpreting what they think they might be saying.



Conduct Lost Customer Interviews: If you lose a client, do you call them and ask them why? Something about how you performed didn’t meet the expectations if they went with another vendor or stopped using your type of offering altogether. Invest the time to find out what that is.

Loyalty is extremely valuable to a company, especially in today’s turbulent marketplace. But as things can change very quickly within our sales ecosystems, we need to really make sure that we know what our customer’s really think of us, and revalidate those assumptions on a regular basis.

1 COMMENT

  1. Jim, good initiatives regarding actions to be taken by companies to complement surveys. My own experience with setting up and running advisory boards is that it not only gives good insights/feedback from customers but also increases the trust level, which positively affects commitment and hence loyalty.

    Going one step back to the actual survey you mention, however, most of these tend to focus on satisfaction rather than loyalty and when they do address the element of loyalty the focus is on behavioral loyalty only and the split pretty much like this:

    90% of questions regarding satisfaction
    10% of questions regarding behavioral loyalty

    Instead, in order to get more insight to actual loyalty, a survey (assuming that people are willing to respond to these types of questions) should include a balance of question addressing the following elements:

    – satisfaction
    – behavioural loyalty
    – attitudinal loyalty

    Now, posting this as criticism of surveys would be too simple. Increasing the number of behavioral loyalty questions and even including attitudinal loyalty question is relatively easy but the following analysis of the data and making the connection between the two loyalty elements can be a (real) challenge.

    An alternative is to complement the actual survey with other initiatives (e.g. the ones you list) that can give insights to the loyalty elements. Similar to you, I often select this approach, but I am curious to see how others manage to get insights into satisfaction, behavioral loyalty, and attitudinal loyalty from a survey (as it in some cases is not possible to run advisory groups etc)??

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