I spent time recently with one of my clients who had just recently spent considerable time and resources to survey the satisfaction levels of his respective customers and employees. The results were in and overall they were very positive for both internal (employee) and external customer groups.
But the client had mixed emotions. While he was pleased with the ratings indicating high levels of customer satisfaction, he was disappointed that his customer and employee turnover rates continued to be very high despite these recent findings. “How could that be?” he asked. “Is it possible that satisfied customers would leave me?” he added.
The answer to his question is a resounding YES!
Why? Satisfied customers will stay until there is a better alternative offered to them. This is true for both external and internal customer groups. When ex-customers are surveyed in exit interviews, they typically reveal that they left because they received a better deal or offer. They did not feel committed to the prior company. No emotional connection.
On the other hand, loyal customers are a different breed. Loyal customers will stay with you as long as possible. The mistake that we make is confusing loyal customers with satisfied customers. Much research over the years has indicated that there is no connection between customer loyalty and customer satisfaction. None. Just because a customer indicates a high level of satisfaction does not mean that they are or will be loyal to you. Customer loyalty entails an emotional state of mind. You have imbedded yourself in the heart and mind of that customer.
Two examples. I am satisfied with my gas station. It is the closest station to my house and is located on a convenient corner for me to stop in when my gas tank is near empty. The store is clean. The people are friendly. I have yet to have a bad service experience there. Yet, I would never go out of my way to fill up there. At least 50% of the time I end up purchasing gas somewhere else during the week with no guilt whatsoever. If this station closed tomorrow, I would painlessly go to the station across the street.
When it comes to a great steak dinner, I am very loyal to Hal’s in Buckhead. Why? First, they have great food with outstanding service accompanied by a terrific dining ambience. But more importantly I feel an emotional tie to this restaurant. When I first considered moving to Atlanta I came to visit the city and spent my first evening with friends at Hal’s. We had a remarkable dining experience. Ever since than, I find myself returning for special occasions such as birthdays, anniversaries, and friends in town. I am certain that the employees at Hal’s don’t know me, but I know them. When I am there I feel at home. I recommend this eating establishment whenever possible. If they were to close, I would feel genuinely saddened. In Ken Blanchard’s terms, I am a “Raving Fan” of this dining establishment.
What is the difference between the gas station and the restaurant? It’s all on the emotional level. In order to get my loyalty you need to engage my mind and pierce my heart. It’s that simple.
How can you differentiate between your satisfied customers and your loyal customers? Here are eight ways. They are equally relevant to your external customers as they are to your internal employee customers.
#1. Pricing. You negotiate prices with satisfied customers. You negotiate costs with loyal customers.
#2. Payment. Satisfied customer pay at their discretion. Loyal customers pay on time.
#3. Referrals. Satisfied customers become referrals to your competitors. Loyal customers willingly provide referrals to you.
#4. Turnover. Generally, you will experience turnover rates of 15% or higher of satisfied customers. The turnover rate of loyal customers will be less than 15% and will be for reasons outside of your control.
#5. Competitive data. Your satisfied customers are seeking competitive data. Your loyal customers are sharing competitive data.
#6. Perception. Satisfied customers perceive you as a commodity provider. Loyal customers perceive you as a partner.
#7. Contract. You will need a contract to keep many satisfied customers in place. You have a virtual lifetime contract with your loyal customers.
#8.Difficult times. Satisfied customers will leave you. Loyal customers will stay by your side.
My advice to my client: maybe it’s time to stop measuring customer satisfaction and start tracking customer loyalty. There is a difference.
Tim Fulton is a nationally recognized small business consultant and management trainer. He is also a very popular public speaker. Tim can be reached at timfulton@hotmail.com.