WHY SATISFIED CUSTOMERS DEFECT

by Thomas O. Jones, W. Earl Sasser, Jr

Customer Satisfaction Customer Satisfaction ExampleExample

Survey by a light manufacturing, wholesale, distribution and consumer service company ( 8 divisions).

82% of customers scored as “Satisfied” or “Completely Satisfied”

48% - Completely Satisfied (5) 34% - Satisfied (4)

“The battle plan is to find out what is making our least satisfied customers mad and fix it!”

Customer Satisfaction Customer Satisfaction ExampleExample

False Managerial Assumptions

If a customer responds with “satisfied” or above, the company-customer relationship is strong

The investment required to change customers from satisfied to completely satisfied will not result in enough financial return

Addressing those who are least

satisfied is the best use of resources

CustomersCustomers Complete customer satisfaction is key to securing

customer loyalty generating superior long-term financial performance.

Completely satisfied customers are much more loyal than satisfied customers.

Any drop in total satisfaction results in a major drop in loyalty, especially in highly competitive industries.

In less competitive markets, providing outstanding value is the only reliable way to achieve outstanding customer satisfaction and loyalty.

Measures of LoyaltyMeasures of Loyalty Intent to repurchase

Primary behavior( recency, frequency, amount, retention, & longevity)

Secondary behavior( customers referring other customers)

LoyaltyLoyalty True long-term loyalty vs. false loyalty

False loyalty can be generated by government regulations, high switching cost, proprietary technology, and strong loyalty promotion programs (e.g., frequent flyer).

Define a target customer, and deliver a product or service which completely meets their needs, in order to secure long term loyalty

Often company attract wrong customers and lack adequate process for turning around the customers. Different satisfaction levels require different actions

Satisfaction-Loyalty Link

Xerox finding: Totally satisfied customers were six times more likely to repurchase Xerox products than its satisfied customers.

Findings of 5 markets: automobiles, personal business computers, hospitals, airlines, and local telephone services. (most competitive to least competitive).

In most competitive industries, only highly satisfied customers are loyal.

In least competitive industry, most customers are loyal regardless of satisfaction level; however, once barrier is eliminated, the loyalty shifts in remarkable speed.

Customer TypesCustomer Types Loyalist/Apostle

Completely satisfied customer who keeps coming back (company’s bedrock)

Defector/Terrorist

Defector- merely/dissatisfied, neutral (can be turned into loyalist)

Terrorsist- very dissatisfied customers who tell others of their bad experience

Mercenary

Those who may be completely satisfied but not loyal (chase low price, buy on impulse, pursue new trends, seek change for change sake, etc.

Hostage (monopolistic environment)

Customer Satisfaction, Loyalty, Customer Satisfaction, Loyalty, and Behaviorand Behavior

Satisfaction Loyalty Behavior

Loyalist-

Apostle

HIGH HIGH Stay and Support

Defector-

Terrorist

LOW-MEDIUM

LOW-MEDIUM

Leave and Unhappy

Mercenary HIGH LOW-MEDIUM

Coming and going

Hostage LOW-MEDIUM

HIGH Trapped

Elements of Customer Elements of Customer SatisfactionSatisfaction

Basic elements of the product or service (all competitors expected to provide these)

Basic support services (make the product or service effective, and easy to use)

Recovery process (for countering bad experiences)

Extraordinary services (make the product or service seem customized )

How to Listen to How to Listen to CustomersCustomers

Customer satisfaction indices

Feedback (comments and complaints)

Market research

Frontline personnel

Strategic activities (e.g., Intuit bring in customers to participate in product development, MTV have employees with similar demographics of its viewers – 18 to 24 year olds)

Lessons LearnedLessons Learned Complete customer satisfaction is key to securing customer

loyalty generating superior long-term financial performance.

Completely satisfied customers are much more loyal than satisfied customers. In most competitive industries, only highly satisfied customers are loyal. In least competitive industry, most customers are loyal regardless of satisfaction level; however, once barrier is eliminated, the loyalty shifts in remarkable speed.

Define a target customer, and deliver a product or service which completely meets their needs, in order to secure long term loyalty

Using a variety of measurement methods including surveys, unsolicited or casual customer feedback, and market research, frontline personnel, and strategic activities.