Does a high level of customer satisfaction guarantee customer loyalty or not? Convincing arguments have been made for both possible answers. Which is to be believed? It depends, reveals new research from Miller-Williams.
The research shows that it depends on the industry you are looking at, and that there is no one answer or single strategy that covers all industries. The report's authors analysed data gleaned from 33 market-leading companies in the software, PC, e-commerce, telecommunication, media and automotive industries between November 2001 and October 2002.
They found that in some industries - for example, media - the correlation between satisfaction and loyalty was extremely high, yet in others it was much lower.
In the software industry there was actually a negative correlation, where consumers were becoming less satisfied but more loyal at the same time. Why? According to Miller-Williams, the high money and time investments that companies make in enterprise software makes them less likely to want to change to a different vendor's products - and less able to do so. As time passes, their dissatisfaction increases in proportion to their dependency on the software.
The strongest correlation between satisfaction and loyalty was found in the media industry, with the ratio being so close that the two values are almost inseparable. This is explained by the fact that it is extremely easy for, say, a television viewer or radio listener to defect. As soon as the television show or radio programme bores or offends, loyalty is lost with a click of a button or a turn of the dial.
Each industry has its own value drivers: a set of attributes that the customer expects the company to deliver. The report identifies these value drivers for each of the six industries investigated. Not surprisingly, they are completely different. Consequently companies within each industry need to develop a different set of competencies in order to build loyalty.
The report also identifies those companies in each industry who really understand customer value and are thought of by their customers as leaders in satisfaction and loyalty.
About the research
The research analysed a subset of data from the M-W Value Scoreboard, for which 12,277 consumers were questioned. Respondents were asked to rate the importance of thirty company attributes when making a purchasing decision, covering a range of topics such as financial stability, customer satisfaction, industry alliances and senior management credibility.
The correlation analysis measures how accurately one attribute movement can predict the movement of another. A correlation of 1.0 means the attributes move together perfectly, while a correlation of -1.0 means that one attribute increases as the other decreases.
Respondents then described how closely each company met their ideal, revealing that the more successful companies had the smallest gap between the customer ideal and their company's performance in that industry.
A seven-page research brief, which contains details of the research, including charts illustrating the satisfaction and loyalty relationship for each industry, and examples explaining why the leaders are successful, can be obtained free of charge by joining Miller-Williams' business member community online.