Does Customer Satisfaction Drive Loyalty?

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The age-old question of whether or not higher customer satisfaction leads to superior economic returns raises it’s head again as companies invest in CRM strategies and CRM software implementations.

CRM, Customer Relationship Management, is all about the customer, and is therefore frequently used to drive higher satisfaction ratings from customers. However, is satisfaction the measure companies should be using to determine the effectiveness of their CRM or for predicting future economic returns?

Let me sight several examples to the contrary. First, is McDonalds. McDonalds owns the fast food (hamburger) market. Sure, they have competitors (Burger King and Wendy’s for example), yet they are two to three times larger than that of Burger King and Wendy’s. If you were to base their success off of satisfaction you would assume that McDonalds has the most satisfied customers. However, of the three listed, McDonalds rates dead last. In fact, in the 18 years of ASCI (American Customer Satisfaction Index) ratings, McDonalds has always ranked lower than Wendy’s and 17 out of 18 years they ranked below Burger King.

For another example, we can look at Wal-Mart stores. In a recent ASCI study, Wal-Mart ranked lowest among discount stores. Yet, with over 140 million American shopping at Wal-Mart is the most popular shopping destination in the country.

Finally, let’s look at the world of Health & Professional Care Stores. ACSI rated Rite Aid, Walgreens, and CVS, with a fourth category of “all others.” Who scored the best for customer satisfaction: All others, of course.

So what does this mean? Should you not care about customer satisfaction? No, but realize that I can increase your customer satisfaction numbers by simply advising you to get rid of your least satisfied customers.

Ultimately, satisfaction surveys can be useful in helping companies know how to improve their products and services, and it helps you to measure whether the changes you make are working, but keep in mind that a previous satisfying purchase does not automatically lead to another purchase. For example, I enjoyed my stay at Ritz Carlton; however, I don’t stay there often, because Ritz Carlton doesn’t always meet my needs (or values) for most of my hotel stays (that being proximity to a location, comfort, and price).

Along the same lines, I was a very satisfied Cadillac owner. I enjoyed the smooth, quiet ride that it offered. However, my life changed, and my needs (or values) for an automobile changed. I had three kids, and needed a vehicle that I could easily transport my children and all of their gear.

Taking the time to understand your current needs and values customers (especially the top 10 to 20% of your customers) will help you to position your products and services to their needs, which in turn will help you to retain them as a customer longer.

Luke Russell
Resolv, Inc. (www.resolvcrm.com)

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