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Hannah Smalltree, Editorial Director
An excellent question.
I strongly concur that customer satisfaction, and customer satisfaction measures, have little to do with customer loyalty. One study comparing the results of customer satisfaction scores and customer loyalty scores showed very little correlation, under .2. A major international quality consulting organization asked hundreds of executives whether they could see any positive revenue or profit impact for their companies of documented increases in customer satisfaction scores. Only 2% said there was any correlation.
In my customer loyalty practice, I haven't used customer satisfaction measures for over ten years, building in performance and loyalty-based measures instead. When clients who have been using customer satisfaction measures approach my company because they find that their data are not actionable or directional, we make a changeover - sometimes rapid, sometimes paced - to a performance and loyalty-based set of measurement protocols. Performance, to begin with, is a far more rigorous standard of value delivery. When compared with satisfaction scores on the same study, for instance, performance scores are invariably lower.
What is important, though, is to have continuing measures of perceived service and product performance (using attributes that the customers have helped define), latent and registered complaints, performance changes over time, emerging needs, overall performance, future purchase likelihood and purchase levels, and likelihood to recommend. These are the indicators of prospective action on the part of customers. These measures are dynamic and proactive, while satisfaction scores are passive, reactive, and benign.
For some clients, we even set up a Customer Loyalty Index, or C.L.I., to help them quickly monitor the aggregated effect of key metrics. The metrics we use are equal weights of Overall Performance, Future Purchase Intent, and Recommendation Likelihood high scores.
For more information, check out searchCRM's Best Web Links on Customer Loyalty.
This was first published in July 2001
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