Chapter 2: The Story of Customer Loyalty

Overview

Many books that claim to deal with customer loyalty are actually centered on customer satisfaction. These books promise loyal customers if the reader will only achieve a high level of customer satisfaction.

Customer satisfaction is an opinion, and the only activity associated with customer satisfaction is the completion of a survey. Customer loyalty is the activity of your customers buying from you repeatedly. It is important to note that satisfaction and loyalty are two different things.

When I appear at seminars and workshops, I first ask my audience to raise their hands if they are concerned about customer satisfaction. Most of those in the audience usually respond by raising their hands. Then I ask them to raise their hands if they have a customer loyalty program in place. Invariably there is a pause and then someone hesitantly asks, "Aren't they the same?"

I assure my audience that customer satisfaction and customer loyalty are not the same and then I ask them to participate in an exercise. For the exercise I ask them to write down their last 10 business transactions. I want them to write down where they made the purchase, not what they actually purchased. For example, if they bought a can of soup, they would write the name of the grocery store. If they bought a car, they write down the name of the dealership. I give the audience a few minutes to complete their lists. People generally write down the name of their barbershop, a car dealership, an airline, or perhaps a Realtor or a restaurant.

When they finish that part of the exercise I ask the audience to put a check mark by each vendor with which they have done business more than once. I ask them to put two check marks by vendors with which they do business on a regular basis. When they have finished, I ask them, "How pleased are you with these businesses? Did you get what you expected? Did you have to wait in line? Were the bathrooms dirty? Was the food cold? Was the food prepared the way you ordered it? Was the clerk attentive? Did your luggage go to Denver while you were traveling to Omaha? Did the bank send the right forms?"

Most often my audience will tell me that for more than half of their last 10 business transactions they really weren't totally satisfied. They felt like their satisfaction was, at best, relative. It wasn't so bad that they would never return, but they didn't feel any compunction to return. Yet these same businesses that they claimed they were not satisfied with are the businesses that have two check marks next to them. They're not satisfied but they continue to be loyal (repeat) customers! The folks who complete this exercise also learn that they do not necessarily buy again from businesses where they were very satisfied. They were satisfied but they are not loyal! The point is, customer satisfaction does not equal customer loyalty. Loyalty and satisfaction are two different things and most businesses are really interested in creating loyalty.

Your understanding of how to create customer loyalty must start by knowing you cannot create loyalty in your customers by focusing on customer satisfaction. The things you do to create customer satisfaction are not the same things you need to do to create customer loyalty.

This is not to say that customer satisfaction is not a worthy goal, but don't expect your customers to be loyal solely on the basis of their satisfaction. Keep in mind that satisfaction is relative. Customers may continue to buy from you when they are not totally satisfied, but seldom will they buy from you when they are totally dissatisfied.

While customer satisfaction is not one of the five principles that compel customers to come back, it can be a supporting asset of the principle Value and Assurance. We'll talk more about value and assurance in Chapter 5, but for now you may want to consider customer satisfaction only as a validating element of Value and Assurance. I am not suggesting that you totally ignore customer satisfaction but I am saying that there are only five principles that create customer loyalty.

Now when we reexamine the results from the "last 10 business transactions exercise" it becomes more apparent why buying habits and satisfaction levels do not match up. At best, customer satisfaction is only a supporting reason why someone becomes a loyal customer. A business could score 100 percent on customer satisfaction, but score poorly on the principles that really do create loyalty. Then, as the results from my audience show: people may be satisfied, but do not return to become loyal customers.