What is the Difference between Customer Satisfaction and Customer Loyalty?

Much has been said about the absolute importance of customer satisfaction and customer loyalty as far as long term prospects of any business are concerned. And this is said, without much heed being paid to the difference between customer satisfaction and customer loyalty in this context, as though the twain are interchangeable and imply pretty much the same thing. But is that really the case? Let’s find out.

Are Customer Satisfaction and Customer Loyalty the Same Thing?

As we analyze and dig deeper, we find that the two are anything but identical. In fact both are quite different from one another. And as far as importance to businesses is concerned, customer loyalty scores far more than customer satisfaction. Why is that so? Read on…

The key to understanding the criticality of customer loyalty vis-à-vis customer satisfaction lies in the emotional connect that customers have in the case of the former; they actually feel an emotional bonding with the business, which comes from within and is not driven by external extraneous factors.

Further, customer loyalty is unnerving and unswerving; it cannot easily be changed, even in the face of remarkably changed situations. Customer satisfaction on the other hand is immensely fickle, and can change dramatically, even with the slightest of changes in situations.

Take for example, a customer who is “satisfied”, perhaps even “highly satisfied” with the services of the mobile phone operator that he or she currently patronizes. Being only “satisfied”, it really wouldn’t take much to move the person on to the network of a competitive mobile phone operator, even with the slightest of change in say services or tariffs. Read more on: Customer satisfaction vs. customer loyalty.

So how does survey software fit into all this and what relevance does it have, considering customer loyalty holds far greater importance to businesses than customer satisfaction?

Well, the answer lies in the intuitive ability of survey software to help bring forth and identify those customers who are actually loyal to businesses, and separate them from merely satisfied customers; in other words, a clear case of being able to distinguish the wheat from the chaff.

Considering that it is the loyal customers who hold center stage as far as long term customer retention and patronage is concerned, such an identification by survey software is not only useful, it is in fact vital.

By deploying survey software to actually recognize loyal customers, businesses can effectively utilize the information that they garner to identify traits that are common to loyal customers. Once that is done, businesses can channelize their efforts towards the creation of many such loyal customers.

How Do You Measure Customer Loyalty?

Simple, Fred Reichheld pioneered a method to measure loyalty.  It is referred to as the Net Promoter score. The Net Promoter Score is calculated by asking customers a very simple question:  ”How likely are you to recommend our company to a friend or colleague?”   This question is asked on an eleven point scale:  0 to 10.

Customers are then segmented into 3 groups:

  • Promoters (9-10 rating)
  • Passives (7-8 rating)
  • Detractors (0-6 rating)

The Net Promoter score is a percentage.  It is calculated by subtracting the percentage of Detractors from the percentage of Promoters.   So what do you do with this score?

Industry experts believe that a score of 75% or above is considered to be excellent, 40% to 74% Very Good, and anything below should warrant deep research into why your customers rate you the way they do.  If you search the net on Net Promoter industry scores, you can see how your company compares to some of the publicly published results.

The most important part about conducting a Net Promoter project is gaining a deep understanding of why your customers rate you the way they do and following the “Five Why” methodology.  Don’t just take this score at face value but get into their heads and Ask, Analyze, and Improve!

Want to contribute with your articles or feature your survey project?  Contact us to send in your article or tell us about your SurveyMethods survey project that you’re doing.

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