Tuesday, January 29, 2013

You strive to keep your customers satisfied – but are you keeping them loyal?


Smart companies know the importance of striving to keep their customers happy.  After all, studies have found that the cost of acquiring a new customer is five to 10 times more than the cost of retaining an existing one.  And so the measurement of customer satisfaction and loyalty becomes an important part of a marketing strategy – for example, an annual survey to customers to gauge how they feel about the business.

But, you may ask, why measure both satisfaction and loyalty – aren’t they the same thing?  A satisfied customer is a loyal customer, right?  Not necessarily.

Customer satisfaction is fairly straightforward.  At a basic level, a measurement of satisfaction tells us how pleased (or unhappy) a customer is overall or with a specific aspect of a company.  Surveys ask customers to indicate their level of satisfaction directly, typically using a multi-point scale (such as very satisfied, somewhat satisfied, neutral, somewhat unsatisfied, and very unsatisfied).

Customer loyalty measures the security of a customer base – that is, how likely they are to remain customers.  Satisfaction certainly plays a part in customer loyalty.  But loyalty is more complex than simply how happy a customer is with a company or product.  Many factors affect how likely a customer is to purchase from the same company again versus going to a competitor.  For example, considerations such as price, the availability of viable alternatives, the difficulty or cost of switching, and even a feeling of connection or relationship with the company, all play a role.  Because customer loyalty is multi-dimensional, it can be difficult to accurately assess through a single survey question.   Therefore, companies often employ a loyalty index – a series of questions addressing loyalty through different angles, the answers to which are later compiled into a single metric that can be tracked over time.

Conducting a formal customer satisfaction and loyalty survey can give you a full picture of how your customer base sees your company, which aspects shine and which are falling short, and – perhaps most importantly – where to focus in order to best solidify your customers’ loyalty.

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