For years, organisations have been trying their best to please customers. Back in the 1990’s, customer satisfaction scores were buzzwords people thought really mattered.
Businesses spent millions trying to better understand their customers or find ways to make them happy.
A common misconception, was that a happier customer implied a loyal customer. But as research shows, up to 40% percent of customers claiming to be ‘satisfied’, switched suppliers without hesitation, according to Forum Corporation Reports .
Customer satisfaction scores are useful indicators in better understanding how your customers are reacting to your product over time. But there is no significant positive correlation between a customer’s satisfaction score and their purchase behaviours.
Let’s take insurance and financial services as an example.
It would be hard to believe that we’re ‘loyal’ to an insurance or financial provider, on the basis that we're ‘satisfied’ during the loan or cover period.
Come renewal time, customers naturally shop around, searching for the best value or at least perceived value.
Customer loyalty, in these industries, is really a reflection of whether the company displays professional competence, dependable performance and a greater perceived value. That’s because all companies have characters and personalities. Great companies recognise the impact of maintaining that character and personality. Especially in industries where safety and trust, play an important role in that perception - the airline industry, for example.
A better indication of customer loyalty:
Advocacy, trust, retention, market share and purchase behaviour are better indicators of a ‘loyal’ customer. Businesses that use measures such as Net Promoter Scoring and user trust ratings, are more likely to gain a better understand of how ‘loyal’ its customer base is.
Measuring factors such as customer retention rates and market share, gives a deeper insight into how customers perceive you.
Combining all factors gives business a better indication of customer loyalty levels when compared to customer satisfaction ratings.
Why is customer loyalty so hard to measure?
With any survey feedback, data collection is at that given point in time. Measurements taken immediately after purchase are much more likely to yield a better response.
Other factors that impact the measurement of customer loyalty relate to quest
ion formation and the mood of your respondent.
Questions posed in positive terms or the overall mood of your respondent have can sway respondent’s answers.