Customer Satisfaction Versus Customer Loyalty

If your business sells goods or services online, then you know that nothing beats having a new customer visit your website and then make a purchase. But, the sale is just the beginning of the journey with your new customer. Once the customer makes a purchase, you must ensure that he/she is satisfied with it.

Many people confuse satisfied customers with loyal customers, and while they do share similar traits there are a few differences. It is true that satisfied customers do often become loyal customers, and that’s the kind you want because they are, by far, the best kind. Still, understanding the differences between the two will help you obtain more of both types of customers.

You Mean They’re Different?

It’s probably safe to assume that most businesses get that customer satisfaction is important, and the term is relatively simple to understand. In a nutshell, customer satisfaction refers to the level of which the products or services your company provides meet or exceed customer expectations. Customer satisfaction is essential to a successful business, especially online where shoppers can quickly and easily express their experiences.

Being a satisfied customer is a prerequisite to being a loyal customer. Sound confusing? Well, it’s not really. Building loyalty in your customers should be your ultimate goal every time you make a sale or connect with a potential buyer. Why? Because once a satisfied customer becomes a loyal customer, he/she will make sales for you.

Loyal customers are advocates or evangelists for your company who eagerly and willingly sing praises about your company to others. Loyal customers are more than happy, satisfied customers; they are the ones who will form your best form of advertising – positive word of mouth. Loyal customers are also the ones who will return to your website time and time again to make purchases.

They Really Are Different

Like I mentioned above, one of the characteristics of a loyal customer is that he/she buys from your company repeatedly or multiple times. Still, it’s important that you understand just because a customer continues to buy does not necessarily mean he/she is really a loyal customer.

If you operate in a niche market where you are the only player (or there are very few) and a customer makes a few repeat purchases from your website, the customer may simply be a customer with not a lot of choices. This type of customer may indeed be loyal, but there is not easy way to determine whether he is loyal or not unless you ask directly. In this scenario, the customer is satisfied but not necessarily loyal.

On the other hand, if your business is in a competitive market, and a customer buys from you many times (and refers others to do the same), then chances are good that he/she is indeed a loyal customer. So, as you can see, loyal customers are infinitely more valuable to your business than those that are merely satisfied with your products and service.

Measuring Loyalty and Satisfaction

As mentioned above, customer satisfaction is measured against a customer’s own expectations and the perceived value of your products and/or services. The only real way to gauge a customer’s satisfaction is to ask him/her directly (something that you can do with live chat or a follow-up email).

In the book “Researching Customer Satisfaction and Loyalty“, author Paul Szwarc explains that loyalty is often measured with diligent market research surveys and observations. While performing in-depth market research can be time consuming and costly, using a few simple observation methods to determine your loyal customers is a little bit easier.

When new customers contact you about making a purchase, make it a habit to ask who referred them to your site. You can do this via your live chat application or you can add a “Referrer” field to your shopping cart page. Not all customers will tell you who referred them. Still, many will tell you who sent them, so make sure you have some sort of way of tracking this data. You’ll find that knowing who your loyal customers are will help your business a lot in the long run.

Converting Satisfied Customers to Loyal Advocates

Offering discounts to repeat customers is a good way to make sure they return to your website and make additional purchases. However, when it comes to building a loyal customer base, other factors are much more important than low prices – and discounts impact your bottom line in a negative way. I’m not saying discounts are bad (sometimes they are definitely necessary), but you should use them sparingly.

According to Inc. magazine, loyal customers spend on average 67% more than new customers. Pair that with the fact that it cost most business 5 – 10 times more to make a sale to a new customer than an existing one, and you can see that loyal customers are much more profitable.

Contact your customers frequently and inquire about their past purchases. Send out follow-up emails and ask your customers about their experiences with your products and services. If they reply with issues or problems, be sure to address and resolve them as quickly as possible.

Most customers realize that mistakes happen or sometimes products don’t work as expected. However, if you work to resolve issues quickly and professionally, customers almost always respond in a friendly and positive manner. Moreover, they will remember your service more than the price they paid when they need to make future purchases. If a customer has a problem that’s slow or difficult to solve, offer them an incentive or discount.

Above all, when trying to build a loyal customer base, it is extremely important to emphasize gaining customers for life over making bigger profits on individual transactions. In the end, your loyal customers will buy more and (perhaps even more important) will be the best possible advertising for your business.