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Customer Satisfaction is not a Point but a Continuum

A lot of buzz is going around about how you shouldn’t measure customer satisfaction and how you should instead be more interested in customer loyalty as that is the better predictor of repeat purchases. This implies customer satisfaction and customer loyalty are two unique and different things; that you mustn’t measure one and must aspire for the other. Well I disagree. As far as I am concerned, they are two points on the same continuum. Should you aim for one rather than the other? That depends on your business model.

For example: a bank in America aspired to having loyal customers and went all out to create them. When they did more research they discovered their customers didn’t want or add much value to the razzmatazz that went into creating customer loyalty in a banking environment. They simply wanted somewhere to deposit and withdraw their money safely, easily and competently. As long as the bank did that they were happy, the extra bells and whistles were a complete waste of time and more importantly a waste of money. The cost/benefit ratio was way out of kilter.

At the other end of the spectrum a restaurant in New England went out of its way to increase customer loyalty. They printed menus with the diner’s name on it, chauffeured them from home to the restaurant and back after they had eaten there a certain number of times, remembered diners choices from the previous visits and pointed out similar items, and many other little gestures. They were very successful at creating loyal customers, soon word of mouth made it virtually impossible to get a table and profits soared.

From these two examples you can see there is no ideal state to aim for. What you must aim for depends on the product you offer. Before you go after creating loyal customers consider the following:

Think of the emotion in the purchase – is yours a simple transaction or does more ride on it being done correctly?

  • Is there a lot of competition in your industry so you have to differentiate yourself?
  • Is your value offering a necessity or a luxury?
  • What is your profit margin? Is it tight or quite large?

All of these will have an impact on whether you should be aiming at customer satisfaction or customer loyalty. But how do you put that all into one measurement?

For me the Zone of Tolerance by Parasuraman, Zeithaml and Berry works best. They say that for every service encounter you have an expectation of the outcome ranging from low to high. For example you have a low expectation from a one star hotel but a very high expectation from a five star hotel. This continuum has two points being the Desired service level and the Adequate service level.

The Desired service level is your ultimate in service excellence; that level of service you would love to receive every time. If you receive above that service level you become fanatically loyal, what we call an “Evangelist”. You give good word of mouth advertising, cut out the competition, tell everyone about them, and promote them at any opportunity.

The opposite end of the spectrum is the Adequate service level. This is the lowest level of service you are willing to put up with. Anything below that you actively look for an alternate supplier. If you are stuck in a contract with a below adequate supplier, you become a “Terrorist”. You strongly resent dealing with them. You will do anything in your power to undermine them, even though you could be shooting yourself in the foot.

Unfortunately this Zone of Tolerance (between Desired and Adequate service levels) is not static, it fluctuates. If there is an alternate supplier, an emergency, or a service failure your Zone of Tolerance will move up and in some instances the Adequate could be higher than the Desired service level was half an hour prior to the service failure or emergency. Think back to when you needed something urgently from a supplier and your lack of tolerance for the usual service level – the Zone of Tolerance had moved up.

The ideal place to be on this continuum is in the Zone of Tolerance, between the Desired and Adequate service levels. You obviously do not want to be below the Adequate as you will lose customers. Likewise you may not want to be above the Desired unless it is part of a strategy as you are leaving money on the table (either over-servicing or under-charging your customer).

Now where does customer satisfaction and customer loyalty come in as part of the same continuum?

If you give a service level about the Adequate level you have satisfied customers. They may not be loyal and could switch if a better offer comes along, but until then they are happy and will continue using you.

If you want a loyal customer then give them above their Desired service level. Anyone above the Desired is fanatically loyal and will become your evangelists spreading the good word about how fantastic you are – your own free marketing department.

The higher up you go from Adequate towards the Desired service level, the more likely that person is going to become a loyal customer. At the same time the more expensive the service experience is going to be to get them to become loyal.

In summary it is up to you to do the maths and work out whether your service offering, industry and larger environment necessitate loyal customers or whether you only need to aim for a satisfied customer with the risk of them easily switching. You now have a tool to measure the costs and benefits of offering a service to customers, whether they are simply satisfied or fanatically loyal.

We believe the Zone of Tolerance is such a good all encompassing robust model that it is at the heart of Customer Relationship Auditing’s methodology.

Any questions or comments? Please feel free to express your opinion. We will not be censuring comments but no rude or offensive language please. A hint: only write what you would say in front of your very wealthy grandmother who has not yet finalised her will!

Douglas MacGregor

Customer Relationship Auditing

“Building superior business relationships through client intelligence”

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