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Frank Friend's Blog

Loyal vs. Satiisfied Customers

Frank Friend - Wednesday, March 30, 2011

A satisfied customer is much the same as loyal customer, right? - WRONG.

Many, even most, managers think that satisfied and loyal are synonymous terms and pat themselves on the back when their Customer Satisfaction Surveys show that 80 or 90% of their customers are satisfied with the company.

Most of these customers are satisfied only until they are offered a better price or some other inducement by a competitor. Several studies have shown that 60 to 85% of companies that switched suppliers were satisfied or very satisfied with their previous supplier.

What’s the difference?

Satisfaction relates to the results of a process - as for example when you put a coin in a soft drinks dispenser you expect to get a can delivered, if that happens you are satisfied, if it doesn’t you move on to another dispenser (after kicking the first one!)

Loyalty occurs when an emotional bond is established with a customer either by building human-to-human relationships over a long period, or by the customer having a “moment of truth” experience. This is when the company does something so exceptional (in the customer’s mind) that a bond is established that isn’t easily broken. The loyal customers compared to simply satisfied ones are more forgiving of mistakes, have greater retention and referral rates and give the company a bigger share of their purchasers.

The Lifetime Value of a loyal customer (the net gain to the company over the lifetime of the relationship) can be several times higher than that of the simply satisfied one.

More companies are emphasizing the importance of satisfying their customers but few understand that this is but the first step and they fail to move on to implementing programs to convert the satisfied customers into loyal ones.