If customer satisfaction is not enough, how do we create fans?

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Let’s look first at why customer satisfaction is not enough. Or certainly no longer enough.

Satisfaction used to be the standard. People used to be perfectly happy with ‘satisfied’. But something has changed. In fact, a number of things have changed.

The competitive landscape has changed. At the beginning of the last century, we were in the age of the product, with mass-produced items made widely available to consumers. From there, we moved into the age of the brand, with consumers given the choice of a number of different products and their related benefits. With the proliferation of competing brands, organisations realised they could differentiate by improving the quality of the service they provided and including value added services as a way to leapfrog their competitors.

If we thought the twentieth century saw rapid change, in the last 20 years the world has been turned on its head. Fuelled by the rapid development of internet, social media and mobile technologies we have well and truly entered the age of the consumer. Competition is coming from new and distant corners of the commercial landscape and organisations are moving from service to experiences in order to capture customer mindshare and drive loyalty. One such company is Ikea that built a climbing wall out of its own furniture at a new store opening in France and opened a pop-up restaurant in London for customers to entertain 20 friends of their choice – in an Ikea kitchen of course! Ikea believes that by connecting customers to the experience of building and using their products they create a more intense, more emotional, connection.

Customer expectations are also continuing to rise. Customers no longer simply compare competing products, they also look at what suppliers in other sectors can do. They ask if Amazon can organise next day (or even same day) delivery why can’t my bank fulfil my request for a new product or service in 24 hours? The better that some organisations have become at providing good products and services, the less tolerant consumers have become of the performances of weaker competitors. Even some well-established brands have seen their long-standing customer base become increasingly disloyal, a good example being Marks & Spencer clothing.

Customer Satisfaction is not enough

The fact is that today, simple satisfaction is no longer enough for organisations wanting to drive profitable growth. Nothing shows this better than the landmark research by Heskett in 1994 that shows the relationship between loyalty and satisfaction.

Customer Satisfaction isn ot enough

Most significantly, the study shows that there is no straight-line relationship between loyalty and satisfaction. In competitive industries roughly 25% of customers will remain loyal to a brand when ‘satisfied’, however to achieve 70-80% customer retention, organisations need to ensure that their customers are ‘very satisfied’. In the intensely competitive world in which we live, “I am satisfied” no longer means “I will stay”.

With consumer expectations rising and an ever more competitive world, it is clear that organisations need to find better ways to meet their customers’ requirements so that they become truly loyal…….so that they become “fans”.

So, to address the question in the title, if customer satisfaction is not enough, how does an organisation go about creating fans?

  • Be clear about ‘purpose’ and who target customers are. Simon Sinek in his TED talk speaks about the power that leading companies unleash because they are clear about why they exist and the difference they make for their customers, their employees and the world. Being clear about ‘why’ helps identify the customers the organisation will appeal to. Trying to be ‘everything to everybody’ is a dangerous place to be. Many companies do not know who their most profitable (and potentially profitable) customers are – the most successful do and they focus on understanding and driving value for these critical customers.
  • Be clear about where value is created for target customers. One of the biggest dilemmas we hear senior executives articulate is where do I invest in order to drive higher levels of customer satisfaction. Do I spend money improving my call centre, refurbishing my retail stores, training my staff or upgrading our product range? Research, focusing on target customers, helps organisations understand which customer ‘touch points’ are of greatest importance and where the ‘moments of truth’ that offer the greatest opportunity to establish an emotional bond are.
  • Design the experience to deliver both consistency and differentiation and one that creates an emotional connection with customers. Getting the basics right is important for any organisation. Inconsistency drives customers away but consistency alone does not create fans. The big question is how to create distinct and memorable emotional experiences, in addition to functional reliability, along the customer journey. And for those sceptical about the power of emotional connection:

Companies that were successful in creating both functional and emotional bonding had higher retention ratios (84% vs 30%) and cross-sell ratios (82% vs 16%) compared with those that did not

Source: IBM ‘Study’/Ogilvy Loyalty Index/BrandZ survey

  • Build customer focus into the DNA of the organisation. The 64,000 dollar question is how do you keep this all going? How does a company that has managed to chart a path to competitive differentiation stay ahead? Burning customer focus into the ‘everyday’ of the organisation comes from establishing the right behaviours, developing processes and technology that support the strategy, training, coaching and most importantly leadership to shape and embed a customer culture.

We will talk more of these in coming posts.

9 COMMENTS

  1. I’m firmly a member of the camp that stakeholder satisfaction has never been enough. I’m also in the camp that believes the Service-Profit Chain has negligible application, in part because satisfaction is transactional, has little to do with emotional underpinning of customer experience, and does not drive memory or downstream behavior, On CustomerThink, you can find scores of my blog posts to that effect

  2. Really well articulated Ian. I think the tough part is your third point. Consistency can be achieved through good processes and training, but differentiation is a strategic thing that can be hard to find.

    Back in the 80’s, marketers used to try and capture the USP – Unique Selling Proposition. A very similar concept, and made sense. The challenge was that, to use an example, with 100’s of brands of shampoo, there really was no easy way to create a meaningful differentiation.

    The same can be said for customer satisfaction. Differentiation is indeed very important to moving a bar past “satisfied.” But, with so many competitors having the same goal, it is a challenge to create a differentiation that is meaningful, memorable and persuasive.

  3. I want to pick up on your last $64K question. Once differentiation is achieved, how does a company sustain it? Peter Drucker said more than, “The purpose of an organization is create a customer.” He also talked about growth. Growth comes through innovation. Amazon is exploring drones for delivery; Uber is pioneering a self-driving vehicle. These signal a progressive orientation to the marketplace.

    Long term success comes through continually reinventing yourself. Customers are always changing. Smart organizations keep one eye on where the customer is in terms of their needs and expectations and one eye on where they might be in terms of their hopes and aspirations. That takes a culture of innovation and reinvention. It requires a spirit of pioneering experimentation and disruptive revolution. It takes leadership that sponsors courage over compliance and creativity over status quo. It requires leadership that models and encourages non-stop growth. In the words of folk singer Bob Dylan: “He who is not busy being born is busy dying.”

  4. While the concept of a fan may sound intriguing, this piece does nothing to define or operationalize what constitutes a fan. The term clearly is a metaphor, evoking images of the dedicated supporters of sports teams (go Giants!). But while the metaphor stirs the pot by conjuring up visions of fanatacism and devotion, the piece seems to lapse into simply accepting that a fan is nothing other than those who index high on loyalty and satisfaction. The intersection of loyalty and satisfaction (yawn) scarcely rises to the level of fervor one would associate with a fan.

    SInce satisfaction is essentially part of the definition of loyalty, moreover, this becomes a totally circular concept and reduces to saying nothing other than a fan is someone that is highly loyal.

    OK: call these people loyal or fans or engaged or committed or whatever term you prefer. but changing the lingo without altering the underlying construct doesn’t do much. Sorry.

  5. The turn of this dialogue has motivated me to break out one of my most-read blog posts. As noted, one of the reasons the Service Profit Chain is less effective, maybe even archaic, today is that it is built on a foundation of customer satisfaction. What companies are looking for is not a fan, a cheerleader, or someone who may recommend, but an advocate, whose downstream brand-related vocal and purchase behavior is based on previous experience: http://customerthink.com/marketing_case_customer_advocacy_measurement/

  6. The comment chain shows that you have struck a nerve. Thanks for posting such an interesting and provocative blog. I agree with Howard. For marketers, Is customer fandom a worthy nirvana? And when I read the initial question, my first reaction was not enough for what?

    A confession: I’m fixated on goals – probably to a fault. So my issue was whether customer sat was enough for . . . meeting revenue goals? for profit attainment? for achieving service level targets? for optimizing strategy? Or simply to create a better than even probability that a next purchase will be made within a planning period.

    As I commented on one of Shaun’s blogs – I don’t look at ‘loyalty’ (however that’s defined) or ‘fandom’ (same question) as connoting imperviousness to competitive overtures. Executives need to disabuse themselves of that notion. Agreed – reducing customer churn is a worthy objective for a business. That depends on achieving a baseline level of customer satisfaction, and consistent delivery of positive experiences.

    To me, satisfaction means meets expectation. In a revenue strategy context, satisfaction is a useful and necessary word. If what you’re suggesting is that a new “standard” for satisfaction needs to be established – one involving customers being delighted, wowed, super-impressed, happier than a pig in poop, or similar, as a baseline, then we need to re-define what those conditions mean operationally. From what you have written, it appears that you believe satisfaction table stakes have increased.

    Which brings me to my last point. Many bloggers have posited that we’re in the “age of the consumer.” I think that’s a popular illusion, often shared because customers can compare things more easily today than in the past, and they have heightened expectations for getting things quicker. Fair points. But I’ll argue that – more than ever – it’s the age of the company, or more specifically, the age of the data enriched company. In the history of commerce, the asymmetry of information power between providers and consumers has never been more lopsided in favor of organizations that collect and and manage customer data.

  7. Differentiation is the key part where company is hard to find. Differentiation is a famous strategy for company to attract more customers and the same time create entry barrier. The case today is differentiation is hard to achieve but the entry barrier is lower, due to changes in business landscape. Smart companies are agile and in no way big corporations have the flexibility to bend over. If a company cannot differentiate its product, differentiate its service and company.

  8. A belated thank you to everyone for your comments. Being a little new to this I am not sure if this is how it is done but I would like to add a few points stimulated by your comments on my post.

    In answer to Andrew’s comment, as I say in the article, satisfaction is not enough for organisations wanting to drive profitable growth through customers who stay loyal. I read a while ago about a survey of customers who had defected from one supplier to another. The research found that 54% of customers defecting had said they were “satisfied” with the company they left. It illustrates the point I made in describing the Heskett graph showing how satisfaction is a poor indicator of loyalty. As Michael notes ‘satisfied’ customers are generally those who are functionally/transactionally ok for the moment …. until a better offer comes along.

    I do believe customers’ expectations have increased and that presents a challenge for organisations because unless they can provide something that is useful to their customers and deliver it in a way that is memorable/appealing/distinctive then they will get lost in the sea of sameness that characterises so many industries. Retail and small business banking in the UK is a good example of a sector where most consumers feel there is nothing (positive) to choose between the four major banks.

    In terms of language, “fans” is simply a term that a number of organisations I have worked with have favoured to describe customers who are super loyal. In the world of organisational change, language and the way leaders describe the challenges their organisation faces does matter. Inspiring teams to delight customers and create fans is much more engaging – more of a call to action – than asking employees to meet operational targets designed to satisfy the customer. It is also output rather than input focused.

    My last comment (it’s getting late on Friday afternoon) relates to Chip’s comment on innovation and re-invention. In my view the organisations that will thrive and survive in the future are those that learn, adapt and change, re-invent as Chip says, given the changing landscape that all industries are facing. That may or may not mean being a leader in terms of product innovation like Apple or Dyson – being second rather than first to market is a perfectly legitimate strategy and a lot less costly.

    Thanks again for all the comments. I look forward to reading and writing more in the future.

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