Reflections on customer loyalty and customer satisfaction: not the usual perspective

Posted by Maz Iqbal on January 21, 2012

8 comments | 1487 reads

So much talk, so much confusion – round and round we go

Round and round we keep going writing about, talking about, customer satisfaction and customer loyalty. Some say that the route to customer loyalty is customer satisfaction and others say that the abode of customer satisfaction does not lead to mountain of customer loyalty. Everyone has an opinion and if you look deeply that opinion, the point of view, the white paper is totally in line with what that person is selling. So let’s start there.

I am not selling you anything. I am not even interested in convincing you of anything. And I don’t want to teach you anything. Why? Because the purpose of this blog is simply this: a vehicle for me to get present to my point of view on all things customer and to share that point of view with anyone who wishes to access it. Also, I am open to entering into conversation (and friendship) with you on what I write and which speaks to you. So now that I have shared the context of all of my writing let’s explore the topics of customer loyalty and customer satisfaction. Before I address the customer dimension I simply wish to explore loyalty and satisfaction in terms of my experience.

Are customer loyalty and customer satisfaction two distinct phenomena?

When I look into my living and get present to my experience I notice the following:

Loyalty has been present (to specific people) even when I have been highly dissatisfied with these people;
I have been satisfied (with people and institutions) without being loyal.

This leads me to suspect that loyalty and satisfaction are two different phenomena (and domains of experience) and that the access to each is likely to be different. You might be wondering what the heck I mean? To use an analogy and speak in blunt terms, the access to my wife’s love (of, for me) is through the route of being present, being patient, being interested in her, listening to what she wishes to say without judgement, providing the helping hand as and when she needs especially when she does not ask for it. Now compare that with sex: the access to sex with a prostitute is the right amount of money. If I was to confuse the two then I would be setting myself up for a lot of trouble. It occurs to me that this is exactly what we, the business folks, are doing when it comes to customer loyalty and customer satisfaction.

Loyalty – how/when/where does it show up in our experience?

As far as I can see people are loyal to people, institutions, religions (and other ideologies, and even products. Furthermore, it occurs to be that most of us are thrown into the state of being loyal without actually choosing to be loyal – there are exceptions. Most of us find ourselves being loyal to:

Our family members and our ‘tribe’ (community, race, nation…) – we are indoctrinated that way and when we are not being loyal then we feel some element of guilt;
The same applies when it comes to those born into religious families and communities – not only do we tend to be loyal to the religion itself but also the institution/s that represent that religion. Take a moment to think about how the abuse by members of the Irish Catholic church went on for many decades even though evidence suggests politicians knew, policeman knew, priest knew and the Vatican knew.
Political parties: children born into families where the parents vote Conservative, inevitably end up doing the same irrespective of the policies being put forward, the same is true for Labour, Republican, Democrat etc
Specific products simply because we grew up with them: some people grow up drinking Coke and Coke is all they will drink; my mother always used and continues to use Lurpak butter no matter what.

From the above I assert that loyalty is related to identity and vice versa. More specifically, I assert that loyalty and identity are two sides of the same coin or you can think of them as the yin and the yang. If I strongly identify with family, religion, political party, product then they came part of me. When I am being loyal to these people, institutions, ideologies and products then I am being loyal to me as my identity. Why did I write it that way? Because as and when we change our identities in a significant manner our loyalty also changes.

What has that got to do with customer loyalty? Everything. Apple fans are Apple fans because Apple is such a strong part of their identity. Starbucks loyalists are loyalists because Starbucks is part of their identity not Costa Coffee (competitor in the UK). Burberry is doing fantastically well because Burberry is core part of the identity of the affluent. So the challenge for companies is to get people to incorporate their brands into their identities. And that does not happen simply if you build a product that is a little better than the competition or provide service that is slightly better than the competition. The core challenge is to stand for something that presses the emotional buttons that are already present in human beings. I have given you a clue about some of the buttons and there are plenty more (which I might just write about in another post).

The other point that I wish to make with regards to loyalty is that the real test of loyalty is when I am presented with a choice (just as good or better than my existing choice) and I can take it at no cost to me. Imagine that I am a married businessman often away on business and I am presented with a no-cost, no-risk, opportunity for sex with a woman that I find attractive. I am tempted, really I am tempted – it occurs to me that it would be a great experience at no cost/risk to me. If and only if I decline that opportunity am I loyal to my wife. In this case (one of no cost/no risk) my loyalty arises out of my declaration of loyalty to my wife. In the same as our loyalty to our country arises out of our oath of allegiance and to betray our country is termed treason.

Lets press on. Once I am operating out of the context of loyalty I can dissatisfied with you and yet continue to be loyal to you. Lets make that real. I am loyal to my brother and yet there are many aspects of my experience with my brother that I am dissatisfied with: when we meet each other we are as likely to ignore each other or to trade unkind words. Yet when it matters we are there for each other – this is not talk, it is what is so because it has happened several times and will happen again. Or think about the Irish Catholic Church. Why did the politicians, the policeman, the priests do anything? I suspect they were highly dissatisfied at what was going on yet they did not break ranks with the Church. Why? Out of their sense of loyalty?

Satisfaction: it can lead to repeat behaviour and not necessarily loyalty

Let’s go back to the analogy I used earlier. I visit a prostitute and when I came out of her chambers you ask me to complete a survey and I give her a score of 8,9 or even 10. Does that mean I am loyal to this prostitute? Not necessarily! I might turn up next week and see a new member of the brothel that is younger, more seductive, more/different in one or more ways that get my attention. And I switch. You are confused: why did you switch? And you are perfectly ok with switching yet you scored 10 in the last customer satisfaction survey! I switched because I did not incorporate the first prostitute into my identity. Now if I had then it is not likely that I would have switched and if I did switch then I would have felt some element of guilt, of remorse.

Here is my assertion: improving the customer experience (the product, the service across the customer journey) is most definitely likely to improve satisfaction. It will make your customer happier and a happier customer is that much more likely to return and come back to you. Yet, that absolutely does not mean that the customer is loyal to you despite giving you a 10/10. I know because I scored my osteopath 10/10 and yet ended up going elsewhere because it was more convenient to me. If you look into your experience you will see this for yourself – you are human just like me.

Conclusion

customer loyalty and customer satisfaction are two distinct phenomena. The access to each is different. If you do not get this then you are in for interesting times. Most of the people I read and listen to are doing a good job of not getting it or pretending that they do not get it. I wonder if in 10 years some of us will look back and ask how come customer loyalty did not improve despite all of our investment in social media, customer experience, CRM and product development.

Republished with author's permission from original post by Maz Iqbal.

Maz Iqbal

I define myself as a 'customer based strategist'. My focus is on helping organisations to generate-define-design-execute customer based strategies that create superior value for customers and competitive advantage for the enteprise. You can access my thinking at The Customer Blog (www.thecustomerblog.co.uk).

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Bob Thompson

January 21, 2012

What does "satisfaction" and "loyalty" mean?

Maz, thanks for another thought-provoking post.

However, I'm not sure exactly what you mean by "satisfaction" and "loyalty." Although it seems that based on how you discuss loyalty, that you mainly mean "sticking with" another party. In business terms, retention.

So, before commenting further, would mind defining what you mean by these two terms?

Thanks!
Bob

Maz Iqbal

January 23, 2012

Loyalty = ties that bind, Satisfaction = Did I feel good

Hello Bob
Thank you for giving me an opportunity to clarify how loyalty and satisfaction show up for me.

Loyalty shows up for me as 'ties that bind' me to another person, group (tribe) and/or organisation. The ties that bind me may come about because these people, groups and organisations were an integral part of my identity simply by virtue of the fact that I was thrown into the world. So when I was growing up I was loyal to: my parents; my wider family including aunts, uncles, cousins; close friends; culture of my parents (who come from Kashmir); the religion of Islam; and teachers who believed in me and made me feel special.

As I grew up and I got to know more about the world I lost my loyalty to the religion of Islam. Why? Because I no longer identified myself as a 'muslim'. Rather I identified myself as a scientist (I studied Physics at university) and saw all religions as superstitions and all followers of organised religion as uneducated sheep. Since that time I have moved on and I have deep respect for religions of all kinds. On the other hand I went from making fun of the French calling them 'frogs' to staunchly defending the French if they are criticised/made fun of/put down by my English colleagues. Why that big change? Because I consider myself to be French as much as English. Why this change? Because my wife is French, a large part of my family is French and I am happy/comfortable in France. Now the stuff that showed up as 'irritating' or 'stupid' or 'puzzling' when it comes to France and the French shows up as eccentric or simply that which makes the French the French - differences worth standing up for.

When it comes to organisations I notice that I am loyal to people and organisations that stand for missions (purposes) and live by value that I feel strongly about because these purposes, these values are a part of me - they play a large part in constituting my identity. And I am loyal towards those people and organisations who act as 'secure bases' (Bowlby coined this term). A 'secure base' is any entity that you can turn to when you are uncertain, afraid, insecure in life.

So I am an Amazon loyalist because Amazon keeps it words - again and again. Also because the one and only time Amazon did not deliver I found it quick and easy to get hold of someone when I really needed to get hold of someone and they made it right without any fuss - in the process treating me as friend. This was a moment when I really needed Amazon to come through (as I was stressed out and time was running out) and Amazon came through. I came loyal to Amazon only after this incident even though I had been satisifed customer. Why did I became loyal only after this incident? Ony after this incident did I label Amazon as a 'secure base' - a company that has showed me that it is there for me and not simply there to make money from me.

I find myself having an affinity and loyalty towards Apple the company. Why? Because I consider myself to be a 'maverick' - that is a part of my identity. Steve Jobs occurred as a maverick and Apple occurs as maverick. Also I value beauty and good design: Apple embodies beauty and design. Finally, I do not believe that making profit is the be all, end all of life. It is to create something awesome, to touch human lives, to contribute to a better world to live in. It occurs to me that Apple's mission (at least whilst Steve Jobs) was at the helm was exactly that. Giffgaff is another company that I am proud to be an advocate of. Why? For a start I am a member and not just a customer. For example, I was invited (along with other members) to come along to their Christmas Party. No other company has ever invited me to do that. It is the values and practices of giffgaff that have won my heart.

Looking at other organisation I find that I am a lifelong member of AntiSlavey International (UK based charity). It is the ONLY organisation that I am a lifetime member of. Why? Because human freedom, that others should have the same degree of freedom that I experience, is part of me. In part that is because I know what it feels like to grow up under oppressive circumstances.

So I am arguing that the route to customer loyalty is standing for a purpose and living by values that speak to me. I am also arguing that sometimes you have loyalty by default because you (person, tribe, organisation) were part of my identity when I was growing up. For example, I bought Lurpak butter for many years simply because that is the butter my mother bought and used when I was growing up.

Now satisfaction, I am saying, shows up as something completely different. I interact with you and your product and I simply make a statement about how much or little I like that interaction. So I turn up and buy a car from you, the dealer, and at the end of the experience I rate you on how I feel about our interaction. Yet, I might have bought from you because you were the only dealer around. And whilst I am happy with our interaction it is possible that I will not buy from you. Maybe because another dealer sets up shop nearer me. It could be because another brand comes up with a better car by the time I want to purchase. It could be because whilst my shopping experince was great I label you at some level as 'not being my kind'.

Further, I am clear that if you are part of my identity and I am loyal to you then I will let you off the hook when you mess up. I will find reasons to excuse you. After all you are part of me and how can I criticise myself!

I hope that makes things clearer.

Maz

Brian Hodgson

January 22, 2012

Building Loyalty

Very good piece. Always good to break things down to fundamentals. I would also add that satisfaction is meeting expectations, while loyalty and brand building is exceeding expectations, but with a twist of differentiation. http://wp.me/piOvI-9P

Maz Iqbal

January 23, 2012

Exceeding expectations does not build loyalty

Hello Brian

I thank you for taking the time to read the article and commenting - sharing your perspective.

From my experience I can say YES exceeding expectations does build loyalty and NO exceeding expectations does not build loyalty. For example Amazon did exceed my expectations and I am a loyal customer - attitude and behaviour. The Harrison Clinic did exceed my expectations and I am no longer a customers.

Secondly, I know people who choose to buy from their 'own kind' who offer/deliver a poorer service (but good enough) than someone who is perceived as not being 'our kind' and yet does deliver a superior service.

Another example is supermarkets. There are supermarkets that offer/deliver a much better experience than my local supermarket. Yet it is only five minutes to the local supermarket and twenty five minutes to the one with the superior experience. Being human, being lazy, I stick with the one that is five minutes down the road.

Assertion: customer delight does not engender customer loyality necessarily though it can.

Next assertion: poor service experience does not necessarily impact customer loyalty.

How is that? Experience suggests that we downplay / discount service lapses from products/brands/organisations that we have a special place in our heart - those that are a part of our identity, that we are loyal to. Put differently we forgive them. We consider a one-off mistake by an organisation that is doing right by us - committed to doing right by us. To loosen that grip of customer loyalty the product/brand/organisation would have to disappoint us regularly. And even then our first line of defense would be to complain - to ring and to write - and thus give the organisation to set things right. Only if our complaints go unheeded are we likely to move on and switch: giving up parts of our identity are not easy!

To conclude: I am challenging the very viewpoint that you are asserting as it does not accord with my experience. I totally get that my experience may not reflect your experience. So we can agree to disagree - I am totally ok with that and hope you are of the same view.

Thanks again for taking the time to enter into a conversation and enriching it. I wish you the very best.

maz

Michael Lowenstein

January 22, 2012

Satisfaction and Loyalty: Two Different Defiinitions

Maz -

Agree that satisfaction and loyalty, especially in the context of customer experience and behavior, are two different concepts. In my first book, Customer Retention, written almost 20 years ago, I simply looked at the dictionary definitions. Satisfaction speaks to fairly tactical and passive customer response to an experience, and represents a low bar of acceptable vendor performance. It often deals with the more functional and tangible aspects of perceived value delivery. Loyalty is a far more strategic, active and involved state for a customer. As you note with the examples cited, there's often more exclusivity and wallet share in loyalty, and it extends beyond retention. Retention pretty much means continuing to give a vendor at least some of your business, i.e. you can be a retained customer and be both unsatisfied and disloyal.

In my original CustomerThink article on the value of customer advocacy, in July, 2010 - http://www.customerthink.com/article/marketing_case_customer_advocacy_me... - there was a discussion of the differences between satisfaction, loyalty, and advocacy. As key customer behavior metrics, all have decision guidance value; however, in virtually every industry customer advocacy tends to have more signficance and actionability around business outcomes such as overall retention, share of wallet, and new client acquisition rate.

Michael

Maz Iqbal

January 23, 2012

Cannot fault your article Michael!

Hello Michael

I thank you for reading my post and then taking the time to comment and share your perspective. I have read your post and I cannot fault it.

Furthermore, what I particularly like is that you transcend the whole debate by focussing attention on a metric that is workable: that is measurable, reflects the customer's orientation to you / your brand.

Perhaps where I see things differently is that there is natural advocacy and there is advocacy that is bought. By being you and in the natural course of events my mistress tells everyone I am a great lover - option 1. Or I 'pay' my mistress to tell everyone I am a great lover - option 2. The issue with option 2 is that few people will believe my mistress if they know that she is being paid by me. Furthermore my mistress is likely to stop advocating if I stop paying her or more likely she will render her services to the person who pays her the most. And sometimes she simply wants a change - to sing a different tune.

I thank you for entering into the conversation and enriching my experience of it. I wish you the very best and look forward to our next encounter.

Maz

Michael Lowenstein

January 23, 2012

Customer Advocacy Behavior is Uncompensated

Maz -

Unlike customer recommendation and recommendation likelihood, which can clearly be purchased, customer advocacy is based purely on an individual's personal experience and relationship with a company. While a customer might belong to a company's loyalty program as part of that relationship, we are entirely focused on uncompensated downstream behavior: http://www.customerthink.com/article/customer_advocacy_behavior_personal...

Michael

Brian Hodgson

January 23, 2012

Unexpectations and loyalty

I agree that it is not simply exceeding expectations, but also some level of differentiation. Also as you point out the differentiation may also override the expectations in that people will still by "from their tribe" when "rationally" it may not make sense based of the measurable value.

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