Customer-Loyalty puzzle - Rez

Customer Loyalty ≠ Customer Satisfaction

Customer-Loyalty puzzle - Rez

“Keeping one more loyal customer is the equivalent of gaining 95 new customers!” – Bain & Co

The quest for the Holy Grail of customer loyalty has led to a proliferation of loyalty programs and wallets bulging with loyalty cards. The loyalty boom has been around long enough now to be measured against ROI. In general, loyalty programs do raise the level of customer engagement with the company, and they do lead to increased sales per customer, or “loyalty” from customers who participate in the program. For many customers, having a loyalty card which builds points for achievable and reasonable rewards actually does influence their buying behavior.

However, simply making regular purchases is a fairly loose definition of customer loyalty. There is a tendency to equate customer loyalty with customer satisfaction. After all, if your customers keep coming back and are therefore “loyal”, doesn’t that automatically mean they are also satisfied?

No, it doesn’t.  

Customer loyalty is measured by companies by the number of purchases per customer and they can track if those purchases increased, perhaps across product lines, because of a loyalty program. Loyalty then is simply reduced to purchasing behavior and doesn’t relate to the customer’s experience or their satisfaction with those purchases,

How can companies find out about how loyal their customers really are?

Many resort to online customer surveys for this. Your customer gets an email shortly after their purchase which says, “Thanks for purchasing X from us. We are grateful for your business. Can you take a few seconds to let us know, how did we do?”  But that will likely result in fairly vague answers.

True customer loyalty is based upon longer term appreciation of the customer experience and satisfaction with products and services. It is a relationship built over time.  To determine a customer’s level of loyalty, you need to ask them the right questions about the reasons for their ongoing purchases.  Here are some of those vital questions:

  1. What is the main reason you purchase from our company?
  2. Under what circumstances would you choose another company?
  3. In your experience, what is the main difference between our company and our competitors?
  4. On a scale of 1 to 10, how likely is it that you would recommend our company to someone else?

Question 4 is the Net Promoter Score question which is also a vital indicator of a customer’s level of loyalty. If they respond with 9 or 10, that indicates your customer is loyal enough to endorse you to others.  When followed up with, “Why would you recommend?”, you may learn some of the reasons your customer is not just satisfied, but also loyal.

At Client Insight Inc., we gather in depth, high quality customer feedback through phone conversations with our clients’ customers. We help our clients understand why their customers purchase from them, and if they are satisfied with the customer experience and with the services and products provided. We discover that sometimes customers buy out of genuine loyalty. And others buy out of habit, convenience, or a company history of using that supplier which has minimal resemblance to true “loyalty”. These customers might appear to be loyal based on their purchasing habits, but their loyalty is on thin ice. They are not immune to the pull of the competition.

So if you are interested in knowing how loyal your customers are, in addition to knowing how satisfied they are, contact us.  

At Client Insight Inc., we understand all the pieces of the customer puzzle.

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Image source:Surveyrock.com 

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