December 2012 - The Service Council

What's the Difference Between Customer Satisfaction and Customer Retention/Loyalty?

By John Carroll | Perspective | No Comments

From The Service Council’s most recent survey on “The Role of Service Culture in Driving Service Revenues”, roughly two-thirds of respondents (65%) say they currently measure customer satisfaction, but only one-third (33%) claim to measure customer retention. The main reason for this two-to-one split is that there are many tools available for measuring customer satisfaction; but for customer retention (or loyalty), The Daily Show’s Jon Stewart would probably say “Not so much.”

For those organizations that want to attain 100% customer satisfaction, the only way to do it is to “fire” your dissatisfied customers – tell them to go to another services provider! Overnight, you’ll a 100% customer satisfaction rating! However, that would neither grow the business nor improve customer retention.

A much more practical way to go about it is to (depending on the breadth of your services portfolio, its level of commoditization, and overall pricing, etc.) define exactly what customer loyalty or retention means to the business, and measure it accordingly.

For some services segments, customer loyalty may be defined as the hospital continues to buy your MRI instrumentation – Why? Because your products and services are believed to be the best – even though they will use other vendors for peripherals and consumables, etc. In other segments, they’ll buy top-of-the-line, high-ticket systems from you, but will buy various add-ons from other vendors.

The situation is different for every product/service line, and every vendor that supports them. In war, it’s all about “divide and conquer” – however, for customer retention and loyalty, it’s more about “define, measure and conquer!”

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