Satisfaction vs. Loyalty

Bob McGlynn forwarded me a column from Jeffrey Gitomer called “If your customers are satisfied, why are they leaving?” Jeffrey’s claim is that customer satisfaction doesn’t matter; only customer loyalty does. He recommends that you should ask your customers three questions to measure loyalty:

  • Will they do business with me again?
  • Will they refer someone to do business with me?
  • Will they give a testimonial?

This approach is essentially a variant on the popular Net Promoter Score whose ultimate value is subject to debate.

Hyperboles aside, Jeffrey has a reasonable point. As I mentioned in a post last year, customer satisfaction can be a leading indicator to future loyalty but it’s usually better to measure loyalty directly.

With that in mind, I would encourage you to avoid simple questions of satisfaction and instead which of the three goals above you are trying to achieve. For example, if your objective is to up-sell or cross-sell more products to your existing customers, you may want to ask them how likely they are to do so in the next 12 months. That question is probably a better gauge of their happiness.

In the end, the debate between loyalty and satisfaction may miss the point. Both loyal and satisfied customers can be unprofitable. If the goal is increased market share regardless of profitability (e.g., during a new product introduction), loyalty might be an appropriate measure. If you’re more focused on overall profits, then loyalty is probably misleading. Individual customer profitability – or likelihood to influence other profitable customers – would be a better measure.

As always, the decision on appropriate measures should be based on first understanding the objectives.

One Response to Satisfaction vs. Loyalty

  1. Amy Madsen October 9, 2007 at 3:43 am #

    Thanks for an interesting post. If any of your readers would like to learn more about Net Promoter, we’d like to point them to the official site – http://www.netpromoter.com – for blogs, discussion forum, general info, newsletter, job board, conferences, certification, and more.

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