Satisfied – or Loyal – Customers?

Is there really a question?

According to author, Jeffrey Gitomer -”Customer Satisfaction is Worthless, Customer Loyalty is Priceless”

Apparently companies like Costco understand the difference. They have been recognized as the leader in customer loyalty among warehouse retailers, rocketing from start-up to Fortune 50 status in less than 20 years, while spending next to nothing on advertising and marketing because of word of mouth referrals. They know that companies with the highest customer loyalty typically grow at more than twice the rate of their competition. And, by raising customer retention rates by 5% it is possible to increase the value of an average customer by 25% to 100% (The Loyalty Effect, F. Reichheld). Rather than spending time trying to remember if you’ve ever seen a Costco advertisement, let’s talk about behavior and why emotions matter in the customer experience.

Regardless of how high a company’s satisfaction levels may appear, satisfying customers without creating an emotional connection with them has no real value. This should be a red flag issue, especially when you consider that it’s reported that 90 to 96% of customers won’t complain. They simply walk away. Emotions Matter…because customers and staff are always emotional, and in service industries where the interaction with customers is often personal and stressful and the emotions are more intense. A healthy way to view emotions is not as a problem But as the basis for forming relationships – This is how to develop loyalty!

Start with a discussion about the vision of the company. If it’s written, you can usually find a statement about customers under glass on a conference room wall. It often goes something like this – “We believe Customer Satisfaction is our #1 Priority.” But when you ask people inside the organization what that statement really means and how it is measured, the silence is often deafening. If the people in the organization don’t have a clear definition of what you mean by customer satisfaction, then how do they convey it to your customers?

I have come to the realization that “Customer Loyalty is all that matters,” especially when you define loyal customers as people who will do business with you again, tell others about you without hesitation, and refer people they care about to do business with you. Hugh McColl, founder of North Carolina National Bank, ultimately became Bank of America had a simple philosophy: “I take care of my people, my people take care of my customers, my customers take care of my shareholders.” He never said, “I want to be the number one bank on the planet.” Loyalty is earned. It stems from actions that are taken and the words that are spoken by employees. It’s not just business as usual!

By Norm Gauthier. Reprinted and adapted with permission for Sorrell Associates.