The murky link between customer satisfaction and loyalty

Intuitively, it is easy to accept the claim that customer satisfaction leads to repeat purchases. After all, if you have a choice, why would you abandon a brand that has surpassed your expectations¹; and why would you keep buying from a brand that has disappointed you?

 

Happy customers buy again. Unhappy customers, move on. Right?

As intuitive as this relationship may be, empirical measurements of the effect of customer satisfaction on purchase have failed to show a clear relationship between the two. Here is one example.

 

What could be happening here?

 

It turns out that the answer to the question of whether there is a link between customer satisfaction and purchase behaviour depends on how we measure customer satisfaction, in the first place! A study² examining the relationship between these two variables for 188 brands in 11 industry sectors found that:

• When satisfaction is measured at the brand level, there is a weak link between this variable and purchase behaviour;
• When satisfaction is measured at the level of the consumer in absolute terms³, again, there is a weak link between this variable and purchase behaviour; but
• When satisfaction is measured at the level of the consumer in relative terms⁴, again, there is a significant link between this variable and purchase behaviour.

 

In other words, how you measure satisfaction alters the results.

 

Why these results

The authors propose that measuring satisfaction at the level of the brand is misleading because firms tend to have heterogeneous customer bases. Some customers are satisfied, and others aren’t. So, the aggregate measurement of satisfaction, like all average measurements, masks the differences between the various groups of customers, and gives an inconclusive result. This is particularly relevant for a large brand.

 

In turn, measuring satisfaction in absolute terms is misleading because satisfaction is a relative concept. Whether I am happy with brand A or not depends not only on what the brand is offering me, but on how that offering compares with the alternatives available.

 

 

What these results mean

The implications of this study are twofold.

 

First, for those of us studying customer satisfaction, it is important that we measure it at the right level. Namely, we need to focus on individual customers (not aggregate levels), and we need to measure satisfaction in relative terms. For instance, instead of asking ‘on a scale of x to y, how satisfied are you with the brand?’, we should ask something along the lines of ‘How would you rank the following brands in terms of how satisfied you are with them?’

 

Second, for marketing managers, don’t focus on maximising customer satisfaction levels. Focus, instead, of optimising customer satisfaction levels vis a vis the relevant competitors.

 

Notes

1. Satisfaction is subjective, as discussed in this blog post. Satisfaction arises when the product that we received, or the service that we experienced, surpasses our expectations. If it meets our expectations, we feel neutral about it. If it falls below our expectations, we are disappointed. This is called the disconfirmation theory of satisfaction.
2. The reference for this study is: Buoye, A., Komarova Loureiro, Y., Kabadayi, S., Nejad, M. G., Keiningham, T. L., Aksoy, L. & Allsopp, J. (2016) Is share of wallet exclusively about making customers happy or having more customers? Exploring the relationship between satisfaction and double jeopardy, Journal of Service Management, 27(4), 434-459, doi: http://dx.doi.org/10.1108/JOSM-05-2015-0157
3. E.g., On a scale of 1 to 10, how satisfied are you with brand X?
4. I.e., ranking different brands in the industry