To establish the difference between customer satisfaction and loyalty, look at the basic definition of each word:
Satisfaction: “state of being gratified, compensation for a wrong, act of fulfilling a desire or need or appetite.”
Loyalty: “feeling of allegiance, the act of binding yourself (intellectually or emotionally) to a course of action, commitment, dedication.”
What does this mean? What usually comes to mind is that if good customer service is provided, then the results are additional business, customer referrals and great customer satisfaction scores on surveys.
Does this guarantee increased profits and long-term customer loyalty? Not necessarily so. Many times customer satisfaction is about short-term results and metrics that are diminished or achieved at the expense of a long-term relationship with the customer.
As soon as someone comes along with a lower price or better deal, the customers move in that direction. In many cases this ultimately benefits the customer but not the organization or company.
More dollars are spent and profits sacrificed to chase the customers or to acquire new ones. Some companies are successful at this and have the resources to play this game.
What You Can Do
The question is: What can you do in your business to increase customer loyalty? It’s not an easy question, but there are steps that you can take. These steps have been validated by companies that have been recognized as leaders in customer loyalty.
Start with your employees. Research and studies find that companies with a loyal customer base also have loyal employees. Loyalty starts with the interview process when bringing new employees into the organization. Training, some authority when dealing with customers, and listening to and implementing employees’ ideas are ways to establish employee loyalty. Incentives and rewarding employees for customer satisfaction and customer retention are things that have been shown to impact customer loyalty. These financial incentives should be tied to the overall financial success of the company. This gives employees a “stake in the game.”
Products are becoming more similar, technology is leveling the playing field, and a lot of information is available to consumers and decision makers. Developing customer relationships that result in customer loyalty is what will make the difference. It starts with your employees.
Have a service recovery plan. Mistakes will happen, and customers will become upset from time to time. When this situation occurs, you want to have a well-defined process that empowers your employees to resolve the customer’s issue swiftly. Everyone that interfaces with customers should know what the service recovery process is and what authority they have with customers. Every employee should have a level of authority. Customers hate hearing “I have to get my supervisor’s approval.” Not empowering your employees will make developing their loyalty difficult. Have one manager with ultimate authority that employees and customers can go to when the problem escalates.
Have a simple customer loyalty rating. The traditional customer satisfaction surveys don’t really identify true customer loyalty. The most important question to answer is: Would your current customers recommend your company to others? If so, what do you do that has created that relationship? If not, what do you need to do that you are not doing?
Focus on building customer relationships, not short-term satisfaction. Profitable growth comes from loyal customers and their referrals. Loyalty is an emotional connection that has been established with the customer.
The front-line service people are in the best position to ask the question after delivering exceptional service. This has more impact and value than the traditional surveys that are sent out after the service interaction has taken place.
Key to Loyalty
In summary, customer loyalty is different from customer satisfaction. Loyalty takes a while to establish by delivering consistent service and adding value to the customer’s business. Loyalty can be earned quickly if exceptional service is delivered in a service recovery situation and you take care of the customer properly.
The key is to have front-line employees delivering the service and interfacing with customers, and to provide training and incentives for employees.