The CEO looked worried. The share price is down another few cents. Where will it finish up? The revenue figures didn’t look too flash either. A report she received from Sales told her that they had lost 142 customers in the previous month and they gained only 98 new customers – a net loss of 44 customers. A net loss of 126 customers in the last quarter and almost 500 over the last twelve months! Yet, the latest customer satisfaction survey showed that in excess of 90 percent of the surveyed customers were either satisfied or very satisfied with their service. This tracked favourably with previous quarters. “How can this be?,” she thought. She wasn’t looking forward to the meeting scheduled for later that day - the Chairman had requested it after the board papers were circulated to directors.
What bothered the CEO most was that apparently happy customers were taking their business elsewhere. Why?
This real-life case study in the business services sector is not an isolated example. It happens all the time and in all sectors of the economy – happy customers ditching one brand for another one.
There are two issues here. First of all the question of customer satisfaction research – how relevant is it in its present form? Second, how useful is it to have satisfied customers if most of them replace your brand with someone else’s at some stage in the future? I will briefly address both issues.
Customer Satisfaction Research
So why are satisfied customers still going to the competition? It is simple; the competitor has lured them away with a better offer, be it price, service or any other incentive that made the new deal more attractive. Being satisfied is a rational state of mind and obviously not enough to stay loyal to a certain brand. I reflected on this a little while ago when I was planning a trip to Australia. We often fly Air New Zealand, but on this occasion, as we sometimes do, we choose to travel with another airline. Why was this? We have always been happy with Air New Zealand and in our view “there’s nothing wrong with Air New Zealand”. The simple reason is that the other airline offered a better price and the timetable was also slightly more favourable. We were obviously prepared to forego Air New Zealand Airpoints dollars for other incentives on offer by the competition. A rational decision on our part.
It is obvious from this experience that there is no emotional bond between us and the Air New Zealand brand. Perhaps we don’t fly often enough, but we don’t find it difficult to 'chop’n’change’ airlines – we go where we get the best deal, as long as we are sufficiently convinced that the airline of choice has a good safety record. This means that we always fly the major airlines of the world.
Traditional customer satisfaction research aims to measure the level of customer satisfaction with a product, service or supplier. Being satisfied about something is a rational consideration based on one or more experiences. If those experiences have been good, one has reason to be satisfied. Negative experiences cause people to be dissatisfied.
Thinking of Air New Zealand, their customer satisfaction research revolves around the customer’s experience with aspects of their most recent air travel. They measure customer satisfaction with the process of booking one’s air fares, the checking-in process, boarding the plane, satisfaction with the crew, meals, in-flight entertainment, comfort and atmosphere, and baggage handling. They also obtain a measure of overall customer experience, value for money and likelihood to recommend Air New Zealand to friends and family. In addition, customers are asked questions about their experience of flying with other airlines. In other words, very conventional customer satisfaction research.
When completing this survey after my last trip with Air New Zealand, I found myself scoring 8s and 9s and possibly even the occasional 10, the overall result being that I was very satisfied with all these aspects of my flight experience. Yet, this counted for nothing when it came to choosing an airline for my next trip.
How many other people are there like me? Is this symptomatic of the airline industry? Not so. This happens all the time in every sector of the economy – satisfied customers going to the competition for a better deal. What worries me as a market researcher and a marketer, but also as a consumer, is that companies and organisations make strategic decisions based on incomplete customer satisfaction research. We have all seen companies’ annual reports that boast customer satisfaction statistics scoring in the high 80s and 90s percent. In the meantime customers keep running off to the competition.
I say incomplete customer satisfaction research, because the critical questions have not been asked. Measuring customer satisfaction on its own is not enough without trying to find out how loyal customers are to your brand. A truly loyal customer would have disregarded a small price difference and would have put up with a slightly inconvenient time table.
Why? Because there is an emotional connection with the brand. Cheesy as it may sound, but if I had Air New Zealand in my heart I would have put up with minor inconveniences and avoided going to the competition.
Complete customer satisfaction research includes questions around trust, feelings, pride, aspirations and relationships. Yes, as a marketer you want to know whether your brand has a place in the customer’s heart; whether there is an emotional connection with the brand – that’s what loyalty is about. A loyal customer is a satisfied customer, but a satisfied customer is not necessarily a loyal customer.
Customer engagement – from head to heart
A loyal customer is positively engaged with the brand and feels an emotional connection with the brand; yes, there is a degree of passion. This passionate bond is not “love at first sight”. It has evolved over an extended period of time as a result of many positive experiences with the brand’s touch points. While customer satisfaction is a vital ingredient in building customer loyalty, satisfaction and loyalty should not be thought of as one and the same thing – they are two very different concepts.
Positive experiences on their own are not enough in creating customer loyalty. It is the human element in these positive experiences that have the potential of building loyalty. Having respect for the customer and introducing or re-introducing some old-fashioned courtesy and care. No marketer has a divine right to customers. Customers have to be “earned”, courted, nurtured and looked after. Failing to do so is at the marketer’s peril. We’d better understand the true meaning of Customer is King and stop paying lip service to this most valuable concept. Every single touch point has to be a positive and warm customer experience and marketers better start thinking about how this can be achieved.
From a research perspective, it is vital to measure the “warmth”, to regularly take the temperature, because that will tell you the level of loyalty amongst your customers.
As the CEO was pondering the issues before her, she seemed puzzled. Something is not right here. “We have all these satisfied customers running off to the competition. How can this be”, she murmured to herself. There must be more to it. There must be something that we are not doing right or not doing well enough. “Where’s the pride?”, she wondered.
Here’s a question for you. Are your customers proud to be a customer of your company or brand? Have you earned their respect and loyalty? Is the relationship purely transactional, deal to deal, or is there something stronger that bonds customers to your brand? Big questions that you may or may not have answers to, but should.
Effective customer satisfaction research should obviously have questions about the level of satisfaction with product, service or people. In addition to that you need to know whether customers will continue to support your brand in the future and whether they are prepared to recommend your brand to others. You are now on your way to getting some idea about customer loyalty. If customers say that they are willing to buy again in the future and rave about your brand to others, stirrings of loyalty start to appear.
Don’t be afraid to also include questions about pride, trust, reliability and respect – they measure the “warmth” customers have for your brand. Without “warmth” there is no loyalty, without loyalty there is no future.
- Theo Muller is the managing director and founder of marketing and community research company MMResearch. He has previosuly worked in marketing for Lever Rexona and the New Zealand Dairy Board (Fonterra).