Why ‘customer satisfaction’ misses the mark – and what to measure instead?

a 2016 survey Executive Leadership found that 90% of CEOs believe that consumers are one of the biggest influencers on business performance and strategy. However, customer satisfaction provides an imperfect metric in driving performance, leading to blind spots and problems with long-term development. Instead, we need to focus on a more accurate metric to predict success: customer loyalty.


relationship between satisfaction and profit

Customer satisfaction has not been in the news without reason. Study demonstrates a strong link between customer satisfaction and increased profits – with companies reporting higher customer satisfaction 5.7 times more revenue compared to competitors. In addition, improving customer satisfaction has been shown to increase revenue. 84% of organizations.

Why is it like this? There are many hypotheses.


Consumer surveys show that 42% Buyers will pay more for good customer service, suggesting that, when satisfaction is high, organizations may charge more. Furthermore, Zendesk, a customer service platform, has also shown that customer satisfaction has improved Leads to better employee satisfaction, also, reducing high cost employee turnover.

All of these factors play a role in increasing profitability, but they do not tell the whole story.


Customer loyalty: the missing piece of the puzzle

While customer satisfaction may account for increased purchases at retail or SaaS companies, in healthcare, most individuals enroll in health insurance just once a year and try to avoid hospitals altogether. Yet member and patient satisfaction is still associated with increased profitability; In fact, hospitals with higher satisfaction scores have a net margin that gets doubled of hospitals with low satisfaction ratings.

What does this tell us? Increasing profitability is much more than just retention. It is about loyalty.

According to a study by Bain & Company, a 5% Increased customer loyalty leads to more than 25% increase in profits depending on the organization and industry. Consumer surveys for 2020 show that on average, 57% Loyal customers spend more than new customers. Plus, when customers are loyal, they not only keep coming back, but they also bring others with them – one report showed that loyal customers are four times A company is more likely to be referred by friends, thereby generating new sources of revenue.


Three tips to shift your focus from satisfaction to loyalty

So, how do you build a loyal customer base?

Taking advantage of the long-term benefits of customer loyalty begins with vanity dropping “customer satisfaction” metrics that assign any customer moderately satisfied — or at least not dissatisfied — as a happy customer. In addition, the following three tips can help organizations better measure and improve customer loyalty going forward.

Tip 1: Adopt more stringent standards for success with NPS.

The Net Promoter Score, or NPS, provides a more rigorous measure of customer loyalty than traditional satisfaction surveys — a measure of a consumer’s willingness to actively recommend a service or company. The NPS asks customers to rate their experience on a scale of one to 10, counting only those who rate the service as nine or 10 as “promoters”.


This scoring method, although rigorous, has been helpful in identifying companies and services with higher than normal “satisfaction” and providing a more meaningful measure of true customer loyalty. Monitoring this score regularly – during and after the customer experience or program – adds additional clarity to the consumer experience, and what can be done organizationally to ensure smooth processes throughout the customer journey.

Tip 2: Get a buy-in by engaging your customers.

In the healthcare industry, customer satisfaction and NPS scores have historically been low, with 48% Health plan members citing dissatisfaction with their services, according to the 2020 J.D. Power US Commercial Member Health Plan Study. This dissent provides an interesting insight into what members – and many customers – are really looking for in an organization: buy-in.

According to the survey, health plans that were willing to engage with members to coordinate care and navigate the costs of care had the highest satisfaction scores. Why? By engaging with members, health plans were able to collaboratively develop win-win strategies to provide effective care while maintaining low out-of-pocket costs. As consumers were consulted in the process, their purchases increased both in prescribed care recommendations and the health plans themselves.

This focus on buy-in can provide a significant boost to the brand and customer loyalty to other organizations. A report found that 77% Numbers of clients prefer organizations that actively seek feedback and confirm trends seen in healthcare.

Tip 3: Lead with empathy to establish trust.

“Authenticity” has become a buzzword in the world of websites and social media, with consumers expecting more authenticity from corporate leadership. But what does this really mean? (Hint: It’s not as simple as blunt honesty or a “take it or leave it, it’s who we are” policy.)

The call for greater authenticity in business speaks to the desire of corporations – large and small – to focus on statistics rather than focus on the people who work there and the people who shop there. Is. This is a desire to be seen and treated as a person, not a “consumer” and requires empathy.

according to a Study Published by the Harvard Business Review, organizations that rank high in corporate empathy outperform organizations that rank low in empathy financially.

Ways to demonstrate empathy will vary by organization – from designated “empathy” funds to allow companies to send sympathy gifts to reduce hidden fees to create a member or customer support team, and ongoing personal follow-up and to provide support. However, the overall message remains the same: empathy is a statistically significant, positive effect on increasing customer loyalty.

fix your response

The first few board meetings after switching from customer satisfaction metrics to hard-to-obtain customer loyalty metrics will be uncomfortable, but ultimately worth it.

As you learn to ask which measures really predict the happiness of our customers, you are in a better position to predict not only satisfaction but retention, loyalty and long-term business growth.