Should Customer Satisfaction Measures Correlate with Customer Defection?


Share on LinkedIn

There are many models for measuring customer satisfaction, as well as numerous indices of customer satisfaction, loyalty, advocacy and effort (that is the ease of dealing with the company and its representatives such as Call Center Agents, for example), all of which purport to have predictive power when it comes to customer retention/defection. Few have been able to demonstrate with certainty that their indices are predictive of customer retention/defection.

But why should these indices predict customer retention or defection?

The purpose of measuring customer satisfaction (or loyalty or advocacy or effort) is to provide the information and insights you need to accomplish two things:

1. detect customers-at-risk of defection, and

2. correct the conditions causing customer discontent in order to rescue the relationship.

If customers with poor measures of satisfaction (or loyalty or advocacy or effort) subsequently leave your organization it suggests that the actions taken to improve or remedy the situation were ineffective (or possibly non-existent).Of course there will be exceptions. Some customers will die, some will move away or leave their job, some will switch to a friend or relative who provides the same products or services as your company, but these situations likely represent less than 10% of your lost business.

The Dunvegan Group has compared B2B Customer Satisfaction measures to actual customer behavior prior to the point of contract renewal. Here is what we found:

  • 80% or more of the customers who gave the highest satisfaction rating possible renewed, and
  • about 60% of the customers who gave the worst dis-satisfaction rating possible renewed.

And, yes the difference between 80% and 60% was statistically significant, indicating that the higher the satisfaction rating the greater the likelihood of renewal.

But, let’s think about these numbers.

First of all, if only 80% of the customers who gave the highest satisfaction rating possible actually renewed, we know that high customer satisfaction is not sufficient to guarantee customer renewal. We need to clearly understand what is causing one in five highly satisfied customers to leave.

Secondly, consider that about 60% of the customers who gave the worst dis-satisfaction rating possible also renewed. If the relationship between customer satisfaction and customer renewal was linear, we would expect much lower rates of renewal (or even no renewals) among those who said they were as dis-satisfied as they could possibly be.

When companies take action to address customer discontent, and remedy dissatisfaction successfully, the likelihood that the customer will renew their contract is much improved. And, it is through such efforts that a 60% renewal rate among completely dissatisfied customers can be achieved.

If no action was taken to address customer issues and concerns, would there be a higher correlation between customer satisfaction measures and customer defections? Possibly, but would any business owner knowingly allow customer concerns to persist so that the hypothesis could be tested? I certainly wouldn’t recommend it.

Having detected customers-at-risk of defection, you will want to take action to correct the causes for dis-satisfaction and prevent the customer from leaving – that is, take action to resolve the customer’s issues and concerns in order to retain their business. The actions taken to remedy customer dis-satisfaction interfere with the process of hypothesis testing and that is why customer satisfaction and customer defection are not strongly correlated.

Republished with author's permission from original post.

Anne Miner
Anne Miner, the founding partner of The Dunvegan Group, first entered the field of marketing and survey research in 1974. Since then, she has been the lead consultant on assignments across virtually all product and service categories, from diapers to transportation. Anne is respected for her ability to work closely with her clients' teams to identify the issues to be investigated, focus on what is actionable and develop creative solutions.


Please use comments to add value to the discussion. Maximum one link to an educational blog post or article. We will NOT PUBLISH brief comments like "good post," comments that mainly promote links, or comments with links to companies, products, or services.

Please enter your comment!
Please enter your name here