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.
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.
Michael…you raise great points. Especially the part about customer expectations constantly changing. One important consideration is the actions (not intentions) of loyal customers. Retained customers come back; loyal customers sing the praises of the service provider to friends and associates. When was the last time you called up a friend or sent them an email about your exciting news: the power company (or bank or restaurant or any service provider) met all your expectations! The economic payoff of loyalty has been well documented. And, raving fans rave because they were delighted, not because their expectations were completely met.
Michael, satisfaction is the result of meeting expectations. So I don’t understand when you say satisfaction doesn’t matter (to loyalty) but meeting expectations does.
The CEB study was about call center service experiences, and was about a specific attempt to delight. This shouldn’t be extrapolate to all types experiences.
Furthermore, their methodology was flawed. What they basically found was that placating a customer after a service failure didn’t increase loyalty. Then they concluded somehow that delight doesn’t matter.
The real conclusion should have been: People don’t feel their expectations are exceeded when something breaks and they get a make-good. Since they are not actually delighted, it’s not going to increase loyalty.
It’s certainly fair to say that an “all delight all the time” strategy doesn’t work. Exceeding expectations on every interaction isn’t feasible and is too costly to even try. But just meeting expectations is hardly a path to building real loyalty, unless you’re fortunate enough to work in an industry where everyone else sucks.
More on this at: KEEP Trying to Delight Your Customers.
“Zappos, Nordstroms, USAA and others are laser-focused on delighting their customers.” Really? From my perspective, don’t think so. What these companies, and other loyalty-creating exemplars, are doing is focusing on optimization of the customer experience and customer-perceived emotional and functional value, whatever that is determined to be in each case. http://customerthink.com/what-does-it-take-to-achieve-optimum-customer-perceived-value-decommoditize-the-experience/ Further, just meeting expectations, i.e. delivering experience basics, is frequently table-stakes value provision. Companies would be well-advised to identify customers’ decision-making and experience ‘hot buttons’, and deliver accordingly
Bob (and Chip), thanks for your comments – and appreciate your perspective. Now that I’ve read your post (and many others! 🙂 I see where we are – and perhaps aren’t – in alignment. Short story? A new post using old data grabbed me. And re-reading mine above, the points I wanted to draw from that aren’t as clear as they could be. I’ll try to (briefly) reframe here…
First, when I’m discussing the relationship of satisfaction to loyalty, I mean that it doesn’t equal or drive or necessarily lead to loyalty. As a metric, high CSAT scores don’t mean high loyalty, or drive loyalty behaviors.
Related to that, I don’t think “satisfied” necessarily equals “met expectations” (which would actually be an interesting study to run…. hmm) though I have only directional data to support this. Regardless, we discourage CSAT as a key measure, as it is (still!) used by many orgs to assess the quality and strength of the customer relationship. Why? Because satisfied customers aren’t necessarily loyal.
What I do know is that where dissatisfiers exist, you can’t get to loyalty. Think “basic factors” in a Kano model. And that most companies don’t understand what these dissatisfies are… even as they drive towards “delight” as a cross-org/cross-segments strategy.
From my perspective, the major issue is that most companies have very little idea (or no idea at all) of where they should be focusing or in what order they should be focusing… because they don’t understand the customers view of the experience. So as I noted, the biggest challenge is staying ahead of customer expectations.
And of course, I’m in complete agreement with you that conclusions reached from customer service channel experiences don’t directly translate to all other channels. After all, most people call only after they’ve been dissatisfied somewhere else. And there’s no doubt that delight does matter. As we both point out, delight does lead to loyalty, and no company can afford to deliver “all delight, all the time.”
So if I were to do a better job making that point (which I will try to do), it’d be something like “don’t bother trying to delight your customers… until you’re meeting their expectations – across the board. And when you do, focus on those interactions that actually do drive loyalty, for those customers that actually drive value.”
Etymology of the word “Satisfaction”:
The origin of the word “Satisfaction” comes from the Latin word SAT meaning ENOUGH or ADEQUATE. It means the quality of being able to be satisfied; to give as much as is needed.
Giving a customer “as much as is needed to be considered adequate” does not sound like the foundation of affinity, loyalty, or the emotional commitment needed to cause customers to go out of their way to advocate.
Michael, if meeting customer expectations doesn’t result in satisfaction, then what exactly does produce satisfaction?
Really thought provoking piece Michael. In my opinion (and that is exactly what it is), for any organisation to be successful they must consistently and continuously MEET and sometimes EXCEED customer expectation. Meeting expectation is done through the ability to deliver the BASICS consistently well – the things that customers ‘take as given’. Exceeding expectation is achieved through a ‘sprinkling of fairy dust’ – it is the fairy dust that provides the best opportunity to differentiate.
However, too many businesses focus on the ‘fairy dust’ before they have even got anywhere close to getting the basics right. I often use the analogy of a fairy cake. Many fairy cakes look beautiful – wonderful icing and decoration that make the cake extremely desirable and appealing. Yet when you bite into the cake, it tastes awful. I would rather have a fabulous tasting cake with no icing!!
That brings me back to the subject of your post. A satisfied customer is one who is likely to have had a perception that an organisation ‘did what it said it would’ – one that is likely to have got the basics right. The more satisfied a customer is, the more likely they are to have this perception. I have seen on many occasions in multiple industries that the higher the level of customer satisfaction, the greater the propensity has been to re-purchase. In the UK, a study commissioned by the Institute of Customer Service has also found this – you can find out more about the UKCSI here – http://www.instituteofcustomerservice.com/10560/UK-Customer-Satisfaction-Index-UKCSI.html
Is it true to say that customer satisfaction does not lead to loyalty? I personally disagree. Customer Satisfaction DOES have an effect on loyalty, but it is one of many factors. In the same way that ‘likelihood to recommend’ does not guarantee that a customer actually WILL, customer satisfaction is an undeniably good indicator of the likelihood that a customer will use the services of an organisation again.
As a practitioner of Customer Experience for 17 years and a consultant for 3, I have found that business leaders spend too much time trying to delve into the theory and structural components of measurement systems to try and disprove them, rather than seizing on the opportunities that chosen customer feedback mechanisms indicate. I use the word INDICATE intentionally. No measurement system is bullet proof. What they all can do though is provide an organisation with an incredibly powerful indication of what drives customer engagement and what does not. They key is to ACT on the information and continuously get better at delivering the basics whilst determining how you can sprinkle the fairy dust on top to stand out from the crowd!