Satisfaction and loyalty

Attempting to satisfy customers is a necessary first step in building customer loyalty, but that is only a start. It is now generally agreed that satisfaction alone does not necessarily lead to loyalty, and that satisfaction indices are not a reliable indication of the number of customers who will return. In today’s highly competitive markets, numerous suppliers are chasing the same customers with similar offerings, and many customers are playing the field and seeking satisfaction from different suppliers on different occasions. Brand promiscuity is a problem facing many suppliers at present. So while satisfaction surveys ought to be carried out, having a high percentage of satisfied customers must not give suppliers a false sense of security. Satisfied customers can, and do, exit.

The debate about satisfaction has now moved on to whether it is a high degree of satisfaction, complete satisfaction or delight, as opposed to mere satisfaction that leads to customer loyalty. A survey by British Airways, however, found that 13 per cent of its ‘completely satisfied’ customers did not intend to fly British Airways again.

There are, nevertheless, many situations in which dissatisfied customers continue to stay loyal to a supplier simply because there is no better alternative. This situation is clearly characterized by banking services in the US, and the helplessness felt by most customers caught in an oligopolistic competition. High bank charges, the reduced number of branches and the increasing difficulty of speaking to a personal banker in one’s own branch as opposed to someone unfamiliar at a call centre are some of the common problems for US bank customers. Yet the alternatives, at present, are no more attractive. So most customers remain with their banks. This could be regarded as apathetic loyalty; others have referred to this type of customer as a hostage (Jones and Sasser, 1995). It should be remembered that hostages and advocates have one thing in common: word of mouth. While advocates spread positive words about the company, hostages or apathetic loyals will often take the opportunity to complain and criticize. This increases the cost of complaints handling and damages the corporate image – and these customers will look for the first real opportunity to exit. This is obviously not wise long-term business planning.

Although satisfaction does not guarantee loyalty, in most cases where one is a willing participant in a relationship one will experience a high degree of satisfaction. Consequently, suppliers must ensure that they research satisfaction levels amongst their customers and adjust their total offerings to maximize customer satisfaction. High satisfaction is an important component in the loyalty formula. This is particularly so where intense competition exists in the marketplace and customers have easily obtainable alternatives. It is necessary to remember that what satisfies customers today may not, will not, satisfy them in the future. The competitive environment of the markets, at present, requires continuous innovation and improvements to be made to a producer’s augmented offering. It is also necessary to remember that satisfaction alone will not create loyalty.

Satisfaction – Trust – Commitment – Loyalty