Why CX Does Not Always Drive Loyalty

December 4, 2015 3 Comments

We recently published the Temkin Loyalty Index (TLi), which examines five areas of loyalty for 293 companies. So I looked at how that data related to the Temkin Experience Ratings (TxR) for those same companies. To normalize the data across industries, we compared company scores to the averages for their industries. As you can see below, there’s a very high correlation between the two.

1512_LoyaltyIndexTxR2

For most companies, their CX is fairly predictive of their loyalty. But this connection is not equally strong for all companies. We took a look at the outliers, the companies that have loyalty levels that are much stronger or much weaker than their CX would suggest.

1512_CXLoyaltyOutliers

Why is it that some companies have a much higher or lower loyalty than their CX would suggest? Here are some reasons:

  • Brand halo: Sometimes consumers’ view of a brand is stronger or weaker than would be supported by their experiences with the company. For some reason, there are emotional drivers that make consumers love or hate the company.
  • Loyalty latency. When consumers have an experience that is not reflective of their expectations for a company, they often treat it as an exception. So it can take time for consumers to recognize that a company’s CX has improved or declined, and to adjust their loyalty accordingly.
  • Switching costs. The harder it is for a consumer to move from one provider to another, the less effect bad CX will have on loyalty.
  • Perceived alternatives. The fewer direct replacements that a consumer thinks he/she has for a company’s product or service, the less effect bad CX will have on loyalty.

The bottom line: CX has a strong, but not complete effect on loyalty

Filed under CCXP6 Metrics, Measurement, and ROI, Customer experience, ROI of Customer Experience

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.

3 Responses to Why CX Does Not Always Drive Loyalty

  1. Kellee Everts says:
    December 4, 2015 at 1:30 pm

    Fascinating analysis, with a conclusion that I’ve experienced to also be true. Thank you!

    Reply
  2. Charles Shillingburg says:
    December 4, 2015 at 6:12 pm

    You have an R2 of 74. This a very predictive score and should not be discounted. Yes, there is not 100% predictability, but the article plays, probably inadvertently, to those that believe there is no predictive value.

    Reply
  3. Faryal Hassan says:
    December 9, 2015 at 5:07 am

    Nice read! This article provided a different perspective altogether. We often fail to understand why good customer experiences don’t sometimes lead to loyal customers. Now we might begin to understand why!

    Reply

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