Monday, September 10, 2007

Customer Satisfaction and Customer Loyalty

It is being observed across the world that customer satisfaction has little correlation with customer loyalty. 80% of customers who defect to competitors score themselves as “satisfied” or “very satisfied” on surveys! (“Turning your Consumers into Die-Hard Fans” by John Blasberg, Vijay Vishwanath and James Allen)

Therefore, customer satisfaction does not guarantee customer loyalty. I am using a Loyalty-Satisfaction Matrix to explain the subject in some detail.

‘Proprietors’ are companies that command high loyalties despite poor satisfaction because probably the customer does not have any other choices available. Most companies fall under the ‘Distracted’ class. Though they try to focus on increasing customer loyalty, they end up concentrating on the wrong activities that eventually lead to customer satisfaction only. It is only a few companies like Starwoods Hotels that are true ‘Winners’ and offer highly customer centric loyalty programs to create highly loyal customer advocates.

The kind of loyalty behavior exhibited out of the nine options of the Product Patronage Matrix ( is highly customer specific. This largely depends on the values, beliefs and attitudes of the customer and this in effect necessitates understanding the customer well in order to design loyalty programs successfully.

This is even more important from an Indian perspective where tastes, preferences and even cultures vary widely. Therefore, customization of loyalty programs according to the product category and the customer values, beliefs and attitudes is important.

It is a high level of customization of loyalty programmes shall aid in the movement of customers from other cells to 'Winners' in the Loyalty-Satisfaction Matrix.


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