Once more with feeling: Satisfaction doesn’t lead to loyalty.
We’ve seen (time and again) that customers who are satisfied are anything but loyal. I wrote about this a few years ago for CMO.com, and recent research by the Corporate Executive Board (CEB) not only supports our conclusions but presents some other pretty radical perspectives that profoundly affect the “common knowledge” about customer experience improvement.
I want to start with satisfaction though, because here’s where science and opinion begin to fight each other in the worlds of customer experience-related belief. Despite years of significant support for the fact that satisfaction doesn’t drive loyalty, many still mistakenly believe that it does. One of the findings of the CEB research is that “companies strongly believe customer satisfaction leads directly to loyalty— by a margin of 83 percent to 12 percent (with 5 percent unsure).”
Let’s settle that, so we can put another sacred cow on the block. Satisfied customers simply aren’t loyal. They’re happy to leave, and they often do – depending on the industry, between 20 and 60 percent of customers who left or said they intend to leave also said they were satisfied.
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I bring up satisfaction for the fact that – despite opinions to the contrary – it doesn’t lead to loyalty. What does lead to loyalty is a good customer experience… or more accurately, customers having their expectations met and not having a bad experience.
Delighting customers may lead to loyalty, but it certainly doesn’t pay
There’s no doubt that delivering a better experience than your competition is an advantage, and helps affect loyalty. But how “good” does that experience really need to be? Many seem to believe that wildly exceeding customer expectations is the way to deliver an ideal customer experience. After all, companies like Zappos, Nordstroms, USAA and others are laser-focused on delighting their customers – and much of the rest of the business world appears to be scrambling to figure out how to get some of that magic. At nearly 90 percent of companies CEB polled, the majority of organizations believes that delighting customers will lead to higher customer loyalty.
Good news, folks. The data is in – and the most effective thing you can do isn’t to beat customer expectations, it’s to meet them. The CEB study unequivocally demonstrates that there is virtually no financial benefit in over-delivering on customer experience. (Turns out that attempting to deliver “delight” adds a solid 10 to 20 percent to operating costs.) This aligns with the business reality of almost every organization; no one can afford to delight all their customers. Given the cost, time and effort involved in doing so, it simply isn’t possible.
What does pay? Meeting customer expectations.
When it comes to delivering an “ideal experience”, the truth is customers don’t usually need to be delighted. But customers very much do need to have their expectations met. Simply put, any interaction between a company and the customers it serves can go one of three ways:
- Their expectations are exceeded (but it costs a LOT to deliver this, and doesn’t increase loyalty)
- Expectations are met (Your customers get just what they want and need – win/win)
- Expectations are not met (Better get cracking. Nearly 90 percent of customers will walk after a bad experience – and it’s far less expensive to retain vs. acquire a customer)
When we work with organizations to quantify and improve customer experience, one of our key analytical lenses is based on identifying the “gap” between desired and delivered experiences – using analytics to measure the degree to which customer expectations were, or were not, met at any given touchpoint, or across any journey stage or journey.
Prioritizing the closing of these gaps is then based on how important any given interaction or journey is to a particular customer segment. It’s also based on the value of that segment (which is why understanding which customers to focus on is so important). Another key prioritization lens is to focus first on removing dissatisfiers. Though there’s no correlation between satisfaction and loyalty, the fact is that customer dissatisfaction means that a) their expectations are not being met, and b) you can’t drive customers to loyalty if they’re dissatisfied.
The biggest challenge is understanding and staying ahead of customer expectations.
Not feeling the pressure to “delight” all customers should be a relief to some. But make no mistake – clearly understanding customer expectations isn’t a simple task. And if you don’t have a handle on that, removing dissatisfiers (much less delighting customers) is going to prove very difficult indeed.
The reality is that the increasing pace of innovation and digital disruption tremendously changes expectations for what represents good customer service and what customer experience comprises.
Hey, we all know that today’s business and consumer buyers are increasingly bringing their experiences with and expectations of “the best” experiences to every other experience they have.
But the evolving nature of these expectations is where the challenge lies. What once was considered “nice to have” (mobile commerce, for example) is now a basic requirement. As expectations change, so must we. Which is why those who don’t make the effort to understand what their customers expect today will be scrambling the hardest to catch up tomorrow.