Whats Better? Satisfied Customers or Loyal Customers?

If you are running a business, what would you rather have, satisfied, happy customers or loyal customers? I suspect many might say that the idea of a satisfied customer seems like the right visual in their minds eye. Some one who is pleased with the experience they have just been through, leaving the store with a smile on their face and contentment with their purchase. Trouble with that is that your in business to make money. I know, I know, the standard mantra is that satisfied customers will come back again and again. That may be true, or maybe its not.

Loyalty and satisfaction differ in one significant respect: action. Satisfaction is defined as a feeling about a past interaction or set of interactions. Satisfaction is fleeting and does not translate to actions on the part of the customer. This is where loyalty differs. Loyalty is focused on the buying behavior of the customer. Research by the Corporate Executive Board (an industry benchmarking research company, www.executiveboard.com) discovered that loyal customers were more likely to behave differently in three ways:




Loyal Customers

1. Recommend the supplier to others more often

2. Increase purchases

3. Partner with the supplier on new opportunities



To contrast, Satisfied Customers


 
1. Purchase based on price

2. Purchases remain steady or decline

3. Will readily jump to competitor based on price, availability, or negative experience

4. No partnership on new development

So which of those sounds like the customers you want? I don't know about you but give me loyal customers any day.

So whats the difference? Is there a difference? Turns out there is a difference. A satisfied customer is merely a spectator in the operation of your business. What I mean by this is that their involvement is more superficial, more circumstantial, and more subject to change at a moments notice than the loyal customer.

Ever had a conversation with a die hard car brand enthusiast? There is no swaying them from their brand, and if you press hard enough strong emotions and maybe some fists will fly. That's loyalty. They know all of the gory little details that make their brand the best. They are in it up to their eyeballs. Satsified customers really do not know much about the brand they have purchased, and as such, do not have a strong attraction to it.

I'll relate a personal experience. My wife owns a General Motors car. The now defunct brand has been problematic from the beginning. I have owned various General Motors brand vehicles over the years. Some have been pretty good, but none have been great, none have wowed me in the areas that matter most to me. I have been a satisfied customer, but not a loyal customer. Now back to my wife's car. Like I said, problematic from the first, but thats not the end of the story. We have owned problematic cars before from other brands (not GM) and I would consider owning one again if I did my homework and found their quality and engineering to be good. I will never allow another GM product into my garage again though. To say that I am a dissatified customer of GM is a vast understatement on par with saying that World War 2 was a minor disagreement between friends. Never, I say, NEVER will I own another GM. Why such strong emotions on this brand? It was not the problems alone that caused it, it was the problems and the fact that they could not be solved in 6 (count them 6!) tows to the dealer, it was the problems and the tows and the lack of fixes, and the moronic engineering that makes it so I can not change a burnt out headlamp, and the poor structure that required suspension work normally reserved for cars older than decade.

In short, my several ownership experiences with this car have led me to conclude that as a company GM is not competent at what it does...build and sell cars. The entire experience has been awful, thoroughly and completely awful. Interestingly enough though, I may never have arrived at this conclusion were I not a die hard car brand enthusiast for another brand. About 8 years ago, I bought my first Japanese car, a Subaru. Now let me say that I didnt get the whole "Subaru Love" thing for the first couple of years, but after we bought my wife's car, I started to notice all of the things that I did NOT have to do to my car. In 8 years, nothing but regularly scheduled preventive maintenance. If the headlamp goes out (which it has) I can replace it myself in about 10 minutes for about $20. No ball joints needing replacement after 60,000 miles, no intermittent electrical outages. No problems at all. In my entire car buying adult life, I have never owned a car this well put together, this well thought out. In short, I am a very loyal Subaru customer.

So this little story brings us to the essential element of loyalty versus satsifaction. I'll give you one guess which brand my next car will be, and one guess which brands it will not be. Subaru will be rewarded with my money in short because I see that they are competent at what they do and I am loyal to them for it.

So, which kind of customers do you want?

Kano Model for Customer WOW!

The Kano model is a useful tool to help the design team or even an improvement team develop ideas that will WOW the customer by addressing needs that the customer does not even know they have. It is a simple model for customer satisfaction that posits three satisfaction regions; Dissatisfaction, Satisfaction, and Delight. The model was developed by Japanese TQM consultant Noriaki Kano*. The Kano model is useful for process improvement teams as well as design teams to help the team think outside the box for innovative solutions that are focused on meeting and hopefully exceeding customer needs. Heres a visual of the model: (Click to enlarge)

The model works this way. A product or service that does not meet the customers' unspoken or basic needs will result in dissatisfaction of the customer. A product or service that does not meet the expressed needs will also result in dissatisfaction. Think of it like this. You purchase a car that claims to get 100 miles to a gallon of gas. If that car does not actually get 100 miles or more to a gallon of gas, you will be dissatisfied. If that car also has no steering wheel, you will be really dissatisfied even though you didn't expressly ask for a steering wheel to be included. That's the difference between a spoken and an unspoken need. Unspoken (Basic) needs are assumed to be present, until they are not. The interesting thing about basic needs is that by meeting them, satisfaction does not improve, but the absence of them will cause satisfaction to decrease. Having a steering wheel in your car does not make you a satified customer, you assume it will be there. The other interesting thing about basic needs is that customer expectations advance over time and things that were satisfiers in the past, become expected today and in the future. In our visual example above, the customer is dissatisfied because the machine that they purchased from us does not complete a manufacturing cycle without causing a process reset activity. A basic need in this example might be that the machine controls actually function properly.

In order to move from the basic needs into a leadership position, the customers' expressed needs must be met. In our example, to move from dissatisfaction to satisfaction, the team must solve reliability issues with the machine such that the customer can complete a cycle without having to reset the process. If the team is able to redesign the system to perform reliably, customer satisfaction will improve. This will be particularly true if performance of the new system exceeds competitors performance.

Moving from dissatisfaction to customer delight is where the real power of this tool lies. This is where innovation and out-of-box thinking comes into play. The Kano model challenges us to think about what would delight the customer in regards to the problem we are working on. Delight results from the delivery of a product or service to the market that the market didn't ask for but once its is experienced, the customer can not do without it. Using our car example from earlier, if our car achieved 100 miles per gallon of gas AND had an autopilot function for long trips, that might delight some customers who would prefer to nap or read than drive on a long trip. The iPhone is another example of a delighter. Flash memory sticks were a delighter to those of us that remember floppy disks. Those were not things that customer's demanded but they were recognized as extremely valuable once the idea was introduced. In our visual example, the customers that did not experience the problem but experienced the upgrade to prevent the problem from occuring were delighted by the service provided.

I recently talked about a couple of myths about six sigma. One of those myths was that six sigma stiffles innovation. Use of the Kano Model as a tool in the six sigma process is one way to make sure that innovation is not stiffled, but encouraged in the problem solving process as well as in the development process.

*From Quality Function Deployment: How to Make QFD Work for You by Lou Cohen. Copyright 1995 by Addison Wesley Longman, Inc.