Is Satisfaction Or Loyalty Better?

Jeffrey Gitomer starts an article titled If your customers are satisfied, why are they leaving? with the provocative statement:

Customer satisfaction is dead.

Gitomer claims customer loyalty matter whereas customer satisfaction does not. Instead of measuring satisfaction, Gitomer recommends you should ask customers three questions to gauge loyalty:

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

This approach, especially the second question, is a variant on the popular Net Promoter Score whose ultimate value is subject to debate.

Hyperbole aside, I agree with the basic premise. 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 of of whether satisfaction or loyalty is better 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, loyalty is likely misleading. Individual customer profitability – or likelihood to influence other profitable customers – would be a better measure.

Is satisfaction or loyalty better? In abstract, it’s an unanswerable question. The decision should be based on first understanding the objectives.