Customer Satisfaction versus Customer Loyalty

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It has been so nice to see people happy with their Holiday- shopping carrying their purchases with a smile. But, is a happy & satisfied customer really what any merchant should be after?

You are happy with what you bought. No question about it. What will you buy gain the same thing (if it is a consumable) – same brand/ same service from the same merchant or vendor? Or, will you even go back to the same store/ vendor to buy something else?

You see, a happy, delighted and satisfied customer is not ‘automatically’ a Loyal Customer.

And, it is a lot cheaper and more profitable to ‘create’ Loyal Customers than to keep acquiring and delighting all those 1-time buying Satisfied Customers.

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Client Satisfaction versus Client Loyalty.
On an average day Kwame goes to his local Waakye seller around the corner. He purchases the usual amount that he buys. His purchase includes; Waakye, noodles, an egg and a piece of fish. Today’s serving of the meal was not the best he had tasted. The Waakye seemed overcooked and the fish tasted a bit odd. But Kwame has been buying this particular brand of Waakye consistently for about a year now. He doesn’t complain because he knows tomorrow will be better.

A careful analysis of this anecdote shared above tells you a few things about Kwame

  • Kwame has been patronising the waakye for some time now hence his ability to compare its current taste to previous purchases
  • Kwame is a loyal Client of the waakye seller hence his decision that the waakye will be better next time
  • It can also be deduced that Kwame was not satisfied with his purchase but has decided to remain loyal to the waakye brand he purchases.

This brings us to the topic of client satisfaction and loyalty.

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What is Client Satisfaction?
Client satisfaction pertains to delivering on the promise a seller of a product or service has made. Any product or service we purchase be it a phone, clothes or tickets to a concert has a level of utility to it. For example a mobile phone is expected to have certain basic functions such as the ability to make phone calls, store contacts and support basis sms (text messaging. In the case of a smartphone we expect it to support applications (apps) and have large storage spaces. Hence if as a consumer you purchase a smart phone and it is not able to make phone calls. The product has defaulted on one of its core functionalities therefore you won’t be satisfied with the product. Likewise a billed concert where the headline artist does not show up will leave patronisers unsatisfied.

The first step in the client satisfaction process is to deliver the exact specs that a product or service is billed to deliver. After that has been achieved, other factors such as Client service, brand affiliation and after-sales services can then influence client satisfaction

Client satisfaction is a great way for producers of goods, marketers and business owners to measure whether their product performing up to expectation.

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What about Client Loyalty?
Client loyalty exists when a client continues to purchase a particular brand of a product or service when there are other alternatives of the products. Client loyalty for a brand can be said to be exceptionally strong when there are cheaper and/or better quality versions of the same product available. Client loyalty allows entrepreneurs and business owners to calculate important metrics such as Net Promoter Score and Client Lifetime Value. In the story provided above Kwame can be described as a loyal Client of the waakye seller because he shows clear characteristics of being loyal to the Waakye seller’s brand. Although he did not like the taste of the food he purchased, he decided that the next day’s purchase might be better

When clients are loyal to a brand, they tend to be the core marketers of that brand. As the mantra goes “It is easier to maintain old clients than acquire new clients”. Therefore building brand loyalty must be at the heart of every goods and service provider.

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What is the difference?
The difference between these 2 key concepts is not very vast hence the reason why most people use it interchangeably. But simply put, client satisfaction is a necessary condition for client loyalty. Entrepreneurs and business owners must work had to increase client satisfaction which can be achieved by delivering on brand promise and going the extra mile. Only after that has been achieved will the brand have loyal fans.

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Can they be measured?
Yes, both Customer Satisfaction and Customer Loyalty are measurable. Surely you are aware of all those customer surveys, questionnaires, etc measuring Customer Satisfaction.

Customer Loyalty is usually measured by NPS, the Net Promoter Score – a loyalty metric developed by Fred Reichheld from Bain, the same man that came up with Customer Satisfaction measurement as an idea, an idea that he has long ‘rejected’. Basically the NPS tracks how your customers represent your organization to their families, friends, neighbours and even professional connections / associates.

Customer Loyalty Measurements have long been evolved since the introduction of the NPS; but that’s the topic of another posting.

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The Client Satisfaction Trap.
A lot of time, we hear people or even business themselves boosting that they have achieved 95%, 96% or even 99% Customer Satisfaction.

What is really so great about this? Absolutely nothing! If you have achieved 96% Customer Satisfaction, what that really means is that in every 100 Customers, 4 of them will badmouth your business -from now to eternity- to all their family, friends, neighbours and even colleagues at work. So, you will have permanent damage from these 4 customers. The other 96? Well, they bough something, they are happy and be sure that next time most likely they will go to a competitor. Let’s ‘rephrase’ it: don’t you ever go to new restaurants or not ever return to one tat you had a nice meal? But again, nothing stops you to turn those 96 Satisfied Customers into 96 Loyal Customers- that’s what Customer Loyalty is all about!

All that aside, all data -including Customer Satisfaction Measurements- can be manipulated and interpreted the way someone wants them to ‘look like’.

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In Conclusion
Every time you make a sales, yes there is a revenue associated with it, but there is also always an acquisition cost. And there are so many studies showing that it is cheaper and more profitable to turn an existing Satisfied Customer into a Loyal Customer instead of going on with the acquisition of new Satisfied Customers.

Also the opportunity to cross- & upsell to a Loyal Customer is a lot higher (some people claim 4 times higher) than cross- & upselling to a Satisfied Customer.

A Loyal Customer is a long term relationship that generates a constant stream of income over the years.
So, would you really want 1000 Satisfied Customers? Or 1000 Loyal Customers?
Good Luck + a Happy New Year,
Thank you
Kwaku & Spiros

 

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