Customer Loyalty = Satisfaction + Experience (+ well designed incentive programs)
When you think about customer retention strategies (especially as a marketer), there are a lot of phrases that come to mind: satisfaction, loyalty, experience, journey and more.
Where do you focus? How do these concepts work together? Why are they important? These are all questions we’re going to tackle below.
Understanding the definition of customer satisfaction
Customer satisfaction is the measure of how happy a customer is with a product, service or experience. Traditionally this means a B2C relationship.
'Customer’ can also be a loose term meaning anyone you’re interacting with. For example: partners, distributors, representatives, employees, customers—anyone you’re reliant upon to either drive your business forward or bring in revenue.
Brands usually conduct this measurement through a survey. The survey asks customers to share how they feel about an interaction or purchase with your company/brand. The survey could be a sliding scale (quantitative) or an open-text response (qualitative). We’ve also seen some brands use NPS scores, sentiment measurements and reviews to benchmark where their satisfaction ratings are.
Why is satisfaction important for customer engagement?
This is a pretty standard measurement for most brands—but WHY are we all measuring it? Are we benchmarking to purely have something to measure up against? Here are several reason it's key for meeting customer expectations.
It helps you control your brand image
Measuring and tracking customer satisfaction will help you identify both happy and unhappy customers.
Finding happy customers allows you to try and turn them into an advocate for your brand. Perhaps they could leave you a positive review, refer a friend or share their experience with your brand later on.
Finding unhappy customers is also good for business. You can reach out and make it right. Oftentimes these customers can turn into your biggest advocates.
Everyone loves a good turnaround story. I’ll regale you with an example:
A friend of mine a few years ago decided to purchase a new face wash. She started using it and was just having terrible issues with her eyes! They were scratchy and always felt like there was something in them. Turns out her new face wash was getting those little scrubby pearls into the eye area and causing irritation. So she writes a review in a tizzy that she was having this problem with their face wash and it was causing her serious discomfort—she told them she was NOT happy with their product.
You know what the company did? They wrote her a letter! Enclosed was a sincere note from their product manager and the money she spent to purchase her face wash and a p.s. encouraging her to find something that worked better for her.
Talk about wow! My friend told this story to anyone who would listen. She shared how this brand was so considerate and willing to make things right, even though she wasn’t using their product anymore. THAT is the power of finding unhappy customers through satisfaction measurement and turning a poor experience into a positive story worth sharing.
Customer satisfaction for your brand comes down to word of mouth. Both from your happy customers and unhappy customers, but you get to choose the narrative. How you respond to feedback dictates everything. You wouldn’t have any of this insight without first measuring and tracking customer satisfaction.
It helps you identify areas of improvement
You may have expected this point after reading the story above. Customer satisfaction measurements are also a great way to find product, service and experience improvements. Listening to your unhappy customers can build a better product (or service or experience).
Listen to what those people are saying. Determine if updating or solving their issues would meet the needs of many or just a few. Then prioritize those updates accordingly.
You can then respond and tell them you listened to their feedback. This creates a cycle of positive reinforcement where interacting with your brand builds customer loyalty.
Cue the slow clap… we’re now winning at the marketing game.
It can increase your revenue
This simple metric can be one of the best ways to capitalize on reviews and testimonials.
These votes of confidence come from real people. They impact the decisions other potential customers make about your product and your competitors’ products.
The numbers support this:
- 98% of shoppers say reviews are an essential resource when making purchase decisions.
- 92% of B2B buyers are more likely to purchase after reading a trusted review.
You can also charge more for premium service. In fact, 86% of customers say they are willing to pay more for a great customer experience.
Once you prove you have customer service worth paying for (through your reviews, testimonials and word of mouth) your reputation is worth its weight in gold.
Ultimately, customer satisfaction leads to good customer experience which leads to…customer loyalty!
Which brings us nicely into the next portion of our article.
What is customer loyalty and how can you build trust?
In its strictest definition, it means being faithful—or steadfast in affection and allegiance.
In our definition, customer loyalty means a preference and willingness to buy from a specific brand or seller. It's most commonly measured by repeat purchase, size of spend and word of mouth (advocacy). It’s important to note the slight difference in customer loyalty versus brand loyalty.
This is best shown with a personal example.
I use a very specific brand of hair products (and have for years). I also ONLY buy these products from my hair stylist. Could I buy these products online? Sure. But will I? No.
So who owns my loyalty? Is it my hairstylist or the brand of hair products?
This is a great example of customer loyalty (to my hair stylist) and by extension brand loyalty (to the brand of products).
I do have preference and affinity for the brand (I’m a repeat purchaser and my transaction size is greater than average). However this relationship is created through my trust and interactions with my hair stylist. She is representing this hair product brand and is recommending it to her clients.
My loyalty is to our relationship—because let’s be honest, if she recommended an incredible new product to me at our next appointment, I’d try it.
This is one of the dilemmas brands face regularly when they sell through a channel. They are trusting their reputation and brand in the hands of their partners.
This doesn’t just play out in the salon; think insurance, grocery stores, gas stations, franchises, dealerships—I challenge you to find a brand you prefer where part of your loyalty if you really think about it is to the person or store selling it.
Now, there are plenty of brands selling directly to consumers (all hail the internet age!) They have it a little easier because they can essentially combine customer loyalty and brand loyalty because they are both to the customer.
It can sometimes look a little like this:
Notice that the same brand can have different loyalty outcomes in the channel because of the purchase experience. Customers may leave unsatisfied which can taint their view of your brand.
This extra layer of interaction causes a complication in measuring and maintaining consistent experiences and satisfaction levels in customer loyalty.
Selling through a channel raises customer loyalty questions like:
- Who is truly earning the loyalty?
- How do you impact loyalty when your brand is in the hands of someone you do or don’t employ (for better or worse?)
- How do you ensure customer satisfaction?
Enter: The Loyalty Program
The impact of customer loyalty programs
Some aspects of customer loyalty are out of your control. However, the good news is that well placed incentive and loyalty programs create valuable impact in both customer satisfaction and loyalty.
In my experience (and backed by the DECADES of knowledge at ITA Group working with Fortune 1000+ companies,) these well-placed programs are best done at three levels. At least to get the biggest impact. We’ve certainly seen things work that aren’t operating in all three levels—but this is a best practice.
At the highest level, create a program with your partners/channel/reseller/distributor owners. In the middle level, create a program for customer-facing members: the reps, people, and of course hair stylists. And at the bottom level, directly with your end-user/customer.
The program built between you and the partner owners and their employees is what we like to call the push/pull method. In order to reach the people who are working directly with your desired end-customer, you first have to get buy-in from the partner owners who are paying their wages.
I won’t get too deeply into this (this method deserves its own article). You essentially need to create an incentive program that creates value and reward for the owners in exchange for them giving you access to the mindshare and time of their people.
Once you have access to the people in front of your customer, create an incentive program that motivates them to support and advocate for your product. Otherwise known as driving loyalty! Provide them with the tools to build faith and affection for your brand.
The last level of the three is the loyalty program I think most people are familiar with—the one created for the consumer.
These include the behaviors you want them to take and the rewards you’re offering to them in return. To me, these programs are called loyalty programs, but this is really a misnomer. These are truly an incentive program. They offer you a chance to create more interactions with your customer. This gives you more opportunities to create satisfaction, positive experiences and influence customer loyalty. The programs alone don’t drive loyalty.
There is no question that loyalty programs have value and drive revenue (lots of it when they’re designed correctly), but they’re a tool to be leveraged.
They help you influence loyalty and create opportunities to provide a positive experience and measure satisfaction. Which brings us to one more piece of the puzzle we need to cover.
The other word threading its way throughout this entire article: EXPERIENCE.
Maximize the customer experience to improve customer loyalty plans
The customer experience is tightly woven into the outcome of customer satisfaction and ultimately loyalty. We can't discuss this topic without mentioning it.
Customer experience is simple. It's every interaction a customer has with your brand or company. It’s everything—even the things you can’t control.
Customer satisfaction measures only one or a few of these interactions at a time (usually). Customer experience is harder to measure. This is almost an intangible that spans across all departments in an organization and sprawls out into the world. Their world. The customers’ world.
There are some interesting perspectives out there that argue the customer experience is out of a brand’s control, completely up to how others are defining it through reviews, testimonials and word of mouth. I think this is partially right. To me, experience has three pillars:
- The Customer’s Perspective. This is the ultimate source of truth. This is what the customer brings to the table. What they value. What they have experienced previously. Their risk tolerance (willingness to pay, switch, try something new). The combination of these things creates a foundation for which they will make all decisions.
- The External Voice. These are the spheres of influence, anonymous review leavers, the testimonials, the recommendation requests, the people and partners who are representing your brand/company.
- The Brand/Company Actions. The interactions you can influence, the messages you share and the value proposition you put out to the world. But don’t forget that actions speak louder than words. Your actions are the things people will remember, talk about and come to expect out of your brand. Don’t disappoint your customers.
These three pillars create the foundation for a customers’ experience. It is what they will measure you against and make decisions based upon. Control what you can, embrace what you can’t and take action where you might be able to influence the narrative.
Learn more about the impact, measurement and where to go from here with customer experience by reading this article, “Who Owns Customer Experience.”