WHY SATISFIED CUSTOMERS DEFECT
by Thomas O. Jones, W. Earl Sasser, Jr
Customer Satisfaction Example

Survey by a light manufacturing, wholesale,
distribution and consumer service company ( 8
divisions).

82% of customers scored as “Satisfied” or
“Completely Satisfied”
 48% - Completely Satisfied (5)
 34% - Satisfied (4)

“The battle plan is to find out what is making
our least satisfied customers mad and fix it!”
Customer Satisfaction Example

False Managerial Assumptions

If a customer responds with “satisfied” or
above, the company-customer relationship is
strong

The investment required to change customers
from satisfied to completely satisfied will not
result in enough financial return

Addressing those who are least satisfied is the
best use of resources
Customers

Complete customer satisfaction is key to securing customer
loyalty generating superior long-term financial
performance.

Completely satisfied customers are much more loyal than
satisfied customers.

Any drop in total satisfaction results in a major drop in
loyalty, especially in highly competitive industries.

In less competitive markets, providing outstanding value is
the only reliable way to achieve outstanding customer
satisfaction and loyalty.
Measures of Loyalty

Intent to repurchase

Primary behavior( recency, frequency, amount, retention,
& longevity)

Secondary behavior( customers referring other customers)
Loyalty

True long-term loyalty vs. false loyalty

False loyalty can be generated by government regulations,
high switching cost, proprietary technology, and strong
loyalty promotion programs (e.g., frequent flyer).

Define a target customer, and deliver a product or service
which completely meets their needs, in order to secure
long term loyalty

Often company attract wrong customers and lack adequate
process for turning around the customers. Different
satisfaction levels require different actions
Satisfaction-Loyalty Link

Xerox finding: Totally satisfied customers were six times more likely to
repurchase Xerox products than its satisfied customers.

Findings of 5 markets: automobiles, personal business computers,
hospitals, airlines, and local telephone services. (most competitive to
least competitive).
In most competitive industries, only highly satisfied customers are
loyal.
In least competitive industry, most customers are loyal regardless of
satisfaction level; however, once barrier is eliminated, the loyalty shifts
in remarkable speed.
Customer Types

Loyalist/Apostle
Completely satisfied customer who keeps coming back (company’s bedrock)

Defector/Terrorist
Defector- merely/dissatisfied, neutral (can be turned into loyalist)
Terrorsist- very dissatisfied customers who tell others of their bad experience

Mercenary
Those who may be completely satisfied but not loyal (chase low price, buy
on impulse, pursue new trends, seek change for change sake, etc.

Hostage (monopolistic environment)
Customer Satisfaction, Loyalty, and
Behavior
Satisfaction
Loyalty
Behavior
LoyalistApostle
HIGH
HIGH
Stay and
Support
DefectorTerrorist
LOWMEDIUM
LOWMEDIUM
Leave and
Unhappy
Mercenary
HIGH
LOWMEDIUM
Coming and
going
Hostage
LOWMEDIUM
HIGH
Trapped
Elements of Customer Satisfaction

Basic elements of the product or service (all competitors
expected to provide these)

Basic support services (make the product or service
effective, and easy to use)

Recovery process (for countering bad experiences)

Extraordinary services (make the product or service
seem customized )
How to Listen to Customers

Customer satisfaction indices

Feedback (comments and complaints)

Market research

Frontline personnel

Strategic activities (e.g., Intuit bring in customers to
participate in product development, MTV have
employees with similar demographics of its viewers –
18 to 24 year olds)
Lessons Learned

Complete customer satisfaction is key to securing customer loyalty
generating superior long-term financial performance.

Completely satisfied customers are much more loyal than satisfied
customers. In most competitive industries, only highly satisfied customers
are loyal. In least competitive industry, most customers are loyal regardless
of satisfaction level; however, once barrier is eliminated, the loyalty shifts in
remarkable speed.

Define a target customer, and deliver a product or service which completely
meets their needs, in order to secure long term loyalty

Using a variety of measurement methods including surveys, unsolicited or
casual customer feedback, and market research, frontline personnel, and
strategic activities.