Customer Satisfaction and Loyalty Simplified… Who Likes To Moan?

One term which regularly arises in the marketing journals I read is customer satisfaction. It’s always suggested that customer satisfaction is key to a successful business. Seems obvious right? Would you return to your local Subway if they spat in the sandwich right in front of you? Of course not. Well you certainly wouldn’t want to but if there was no alternative you may be forced to. There is actually a lot to learn about customer satisfaction and so I have written this blog to give you an insightful overview.

First of all why is customer satisfaction so important? Customer satisfaction is proven to lead to customer loyalty. Customer loyalty leads to increased shareholder value and asset efficiency. So you keep your customers happy and your business will grow along with the income.

For a customer to increase your earnings they need to be loyal. Loyalty isn’t just a person who repeatedly buys from you, it’s where they consciously evaluate and buy and brand regularly over others.

Example: I regularly buy my shopping from Tesco when I am at work. This is not because I like Tesco because the truth is I can’t stand it, but it is convenient. If Asda opened up nearby I would prefer to go there, EVEN if it was a bit further out that the local Tesco. This is because I am loyal to Asda.

If a customer buys from you once it is considered a transaction-specific experience and is unlikely to get a customer to switch to you unless you exceeded their expectations greatly. Even dissatisfaction with a single transaction is unlikely to lead to a customer switching unless it is extreme.

Example: You are a loyal customer of Pizza Hut. You visit regularly but one time you walk past Pizza Express and decide to give it a go. Psychology shows that you want to like the experience but not as much as Pizza Hut as you want to confirm your ideas and beliefs that Pizza Hut are the better choice. This makes it harder for Pizza Express to gain your loyalty. However you find that the taste, the quality, and the people create far more of an experience. The price is great and they went above and beyond your expectation to deliver the best pizza experience you have had. You allow yourself to rate them higher than Pizza Hut and can in an extreme case become loyal.

In most cases the experiences customers have will either slightly exceed their expectation or just fail to meet it. This results in the customer feeling unmoved and there will be no change. When customers fall into this area it is called the “zone of indifference”. There is a bowl shaped diagram below which better explain this. If a customer’s feelings fall into the gentle slopes of the bowl they are indifferent. If your business greatly exceeds or grossly fails to meet their expectations then you will have a loyal or very unhappy customer.

How is Customer Satisfaction Determined?

Satisfaction should be judged (with loyalty) over a number of experiences. There is a formula to determine customer satisfaction which is:

PERCEIVED QUALITY – CUSTOMER EXPECTATIONS = CUSTOMER SATISFACTION

As customer satisfaction is a result of cognitive and affective evaluation a business must meet their informational needs and their expected feelings.

The customer will judge a business typically on three areas; Product, Process and After-sale service. This means that businesses will have look at each and every stage they interact with the customer and aim to maintain high levels of service and information to keep their customer happy.

Product performance is evaluated by the cost, the technical sophistications, the durability and the ease of use.

Process performance is evaluated by the interpersonal interaction with the business and ease to purchase.

After-sale service is evaluated by the customer’s judgement of quality of the service and evaluation of the interaction experience with the service provider.

Apply the customer satisfaction formula to each of these areas and you will be able to judge where the company fails to meet the customer’s expectations.

Is it that simple? Unfortunately not. What I’ve written so far explains what the business should be aware of from their end to make improvements. The strength of the relationship between customer satisfaction and loyalty is STRONGLY influenced by characteristics of the customer such as gender; age; income; involvement and variety seeking. If you want to better understand how these characteristics affect purchasing behaviour and loyalty please read Customer Traits affect Customer Satisfaction.

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