A Loyalty And Satisfaction Misconception

Many companies struggle to create loyal customers. Even companies with very active customer experience efforts can have a hard time building loyalty. One of the reasons for this difficulty is a fundamental misunderstanding of how loyalty and satisfaction are connected. So I’ve created this graphic to teach an important principle:

Loyalty is not the opposite of dissatisfaction. Eliminating dissatisfaction is often a necessary, but not sufficient step for creating loyalty. Here are some things to keep in mind:

  • Dissatisfies are often “must-have” features (spend a few minutes learning the Kano Model), eliminating them only leaves the customer with a neutral feeling about your company.
  • When you do analysis on your voice of the customer data, you should separately identify (and work on improving) drivers of satisfaction and drivers of dissatisfaction.
  • Users of the Net Promoter Score will also find the same connection; creating Promoters requires a different set of activities than eliminating Detractors.
  • Drivers of loyalty are often more unique across customer segments than drivers of dissatisfaction.
  • You can’t create a lot of loyal customers until you consistently eliminate areas of dissatisfaction, so start there.

The bottom line: Don’t just eliminate dissatisfaction.

About Bruce Temkin, CCXP
I'm an experience (XM) management catalyst; helping organizations improve results by engaging the hearts and minds of their employees, customers, and partners. I enjoy researching and speaking about these topics. I lead the Qualtrics XM Institute, which is the world's best job. We're igniting a global community of XM Professionals who are inspired and empowered to radically improve the human experience. To achieve this goal, my team focuses on thought leadership, training, and community building. My work is driven by a set of fundamental beliefs: 1) Everything starts and ends with human beings, so you need to understand how people think, feel, and behave; 2) XM is a discipline that needs to be woven throughout an organization's entire operating fabric; and 3) Building the XM discipline requires a combination of culture, competency, and technology.

10 Responses to A Loyalty And Satisfaction Misconception

  1. Interestingly, this is the same “beef” I have with employee engagement surveys. Earlier in my career (spent at big corporates), executives used to celebrate “neutral” responses as the same thing as positive. They would lump neutral and positive together always to make the overall employee morale health appear better. I never agreed with that approach. Neutral often means neutral and worse, stagnant on the way to negative.

  2. David Rentschler says:

    Be careful Mr. Temkin. There are so many ‘managers’ that will only read your graphic, and NOT read the text, and they will then say ‘don’t focus of dissatisfiers, as they do not create loyalty.’ Keep Dissatifiers ‘value’ part of the equation by making Loyalty greater than not being Dissatisfied.

    ‘Loyalty > not(Dissatisfied)’ (Loyalty is greater than not being Dissatisfied).

    Re: Parissa comment on employee engagement. I have seen the same behaviors of lumping neutral and satisfied together to get the bigger score. As with customer surveys, companies need to look at the negative score, and minimize those drivers, in addition to doing more with the positive drivers. What makes employees and customers happy is not necessarily the same as what makes them unhappy (Kano model).

    • Bruce Temkin says:

      David: Thanks for your observation. I’ve revised the graphic to have a title; so that the message will come across more explicitly.

    • Agreed! David’s adapted equation is a much better reflection of the message. I love the Kano model and as customer experience and employee experience are so tightly coupled, I think it is important to encourage this discussion around both.

  3. patrick buono says:

    Hi Bruce,
    I’m a big fan of yours….keep up the great work. Just a quick (personal) comment from the sidelines: customer satisfaction is all about the EXPERIENCE…well dah! But to optimize each customer interaction one must look at that interaction (aka: experience) from the customers POV. No new relevation there…but I find all too often companies create metrics and benchmarks on satisfationin dicies that are suppose to measure or gauge the experience from what the COMPANY thinks the customers trigger-points or hot buttons are…or wosre they lift trigger points of hot buttons from another industry or interaction/transaction type. Case in point: what matters to a customer standing in the check out line @ the local grocery line and the customer ordering flowers via the internet are vastly different. I see companies look at the demographics of these two as the same and categorize them as “retail” transactions then apply approachs to improving the experience while missing the point that it is as much about the process (and the differences of these processes) and the cusomters expectations while engaged in the process. They start with the transaction and seem to undervalue / under appreciate the value of the preconceived expectation of the process by the customer. Here is another way of looking at the problem: .everyone moans and groans when they have to CALL a company for help…especially when they are forced through a maze of IVRU hell. In that “process” while the customers does NOT want to go thru IVRU hell…their expecation is it WILL happen and they will probably spend way more time than necessary on hold or passed from one agent to the next…repeating themselves. Imagine IF their call was answered on the 3rd ring and resolved to ther satisfaction on the first call….? Imagine the NPS result! Imagine the # of NON -REPEAT calls for that problem. Now is that what the customer wants? Its probably not what they expect, but may be what they want. What value is there (for the company) if they meet that customers’ want (not expecation)?

  4. I agree that the elimination of dissatisfaction does not instantly guarantee the creation of loyalty.

    Satisfaction and loyalty have a very complex relationship. It seems to me that satisfaction and loyalty don’t always vector towards the same point. I’ve always wondered: what happens when you have loyal customers who are dissatisfied? There’s the notion of grudging loyalty. In those cases, loyalty can guarantee repeat business independent of satisfaction.

    If anything, humans are habit-driven animals. For my part, I have a habit of going to a very small set of grocery stores, irrespective of the quality of my experience there on a given trip. Do I ever walk out dissatisfied? Yes, it does happen. But, over time, my loyalty to this small set has been rock solid.

    Given the choice, is it better for a company to have a dissatisfied yet grudgingly loyal customer, or a satisfied yet promiscuous customer?

  5. Robert Bacal says:

    I don’t disagree, but my take on it is a little different, and I can’t summarize it all in a few words (yet), but I suspect that customer loyalty as it existed even ten years ago is largely gone. I believe that the majority of customers rarely become “loyal” to one company anymore, even when they stay they do so in surveys.

    So, there’s a danger in simplifying the customer service/loyalty equations.

  6. The relationship between satisfaction and loyalty and profitability is complex. Most companies view the concept of satisfaction and loyalty as the same; however, they are quite different.
    One of the most misunderstood things about customer satisfaction and loyalty is that each operates on an independent set of variables. In other words what makes a customer satisfied does not necessarily make them loyal and vice versa. Satisfaction & loyalty are not identical concepts:

    – Satisfaction relates to the result of a process. It measures something that has happened in the past.
    – Loyalty relates to a relationship and focuses on the overall customer experience. Loyalty is about the future.

    Sadly, most customer sat / VoC research being conducted today is flawed as it is based on the premise that improving satisfaction is the key driver of brand advocacy and loyalty (and ultimately profitability). This is simply not the case. The correlation between satisfaction and loyalty is not as linear as one might expect. Customer satisfaction may be a necessary prerequisite of loyalty, but it is not a sufficient condition per se. Dissatisfied customers may buy from a company nonetheless, but we cannot guarantee that satisfied customers will automatically do so. So while companies with high satisfaction levels tend to have greater levels of loyalty, the correlation is more curvi-linear in nature. Its effect is not quite as direct as we would like or as previously thought.
    Research over the past decade has clearly shown the weakness in the link between customer satisfaction and loyalty. Consider the following:

    – Reichheld/Bain (The Loyalty Effect, 1996) found that 60-80% of customers who defected said on a survey that they were actually satisfied or very with the vendor.
    – In another study over 70% of customers rated price as 1st or 2nd in terms of least satisfaction. However, interviews with customers who defected showed that less that 10% did so because of price.
    In a nutshell: Companies must understand how customer satisfaction translates into loyalty, increased market share and enhanced profitability. Companies need mechanisms and metrics to monitor both satisfaction and loyalty attributes. Simply assuming that satisfied customers lead to loyalty and greater profits can be misleading.

    Richard Pridham

  7. @ Michael – That’s a great point that loyalty can help overcome dissatisfaction. Bruce says above that removing dissatisfaction is necessary, but not sufficient to create loyalty. I would argue that it’s not even necessary. Maybe in a single engagement, sure, but loyalty is about a long term relationship across many engagements. Some of those engagements may result in dissatisfaction, but loyalty can get you through those bumps in the road.

    It’s like a marriage – people (I hope) don’t have to be satisfied with every aspect of their relationship at every moment to stay married because loyalty allows them to get past periodic disappointments.

  8. Bruce’s distinction between satisfaction and loyalty is important. In fact, understanding the difference between satisfaction, loyalty (future purchase behavior), and profitability is key to influencing future outcomes.
    Here are two additional thoughts to consider:

    1. Customers vs. Individuals – it’s best to understand the “drivers” of loyalty and profitability at the customer level. Not only do the “drivers” vary between individuals, but the actions that your company should take will be different for each individual.

    2. Customer Insight to guide Customer Interactions – to operationalize a business strategy designed to improve customer loyalty and profitability, it’s important to have “prescriptions” for each customer available at all customer touch-points. This empowers employees to take appropriate actions, during in live customer interactions, that maximize value for the customer and the company.

    While these two items require huge efforts to build, the payoff can be huge! Because…Improving loyalty of the customers that matter most is the key to success.

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