isfaction level as very satisfied, their loyalty is very high. The relationship highlights a ‘zone of affection’ where customers become ‘apostles’ of the product or service provided by a company. However it also illustrates that even when customers rate their satisfaction at ‘4’ or ‘satisfied’, there is a high degree of indifference or even defection.

What conclusions can we draw from this information? The key point here is that achieving a satisfaction level

Many of us have heard of the current trend for businesses to become ‘customer-centric’, that is, to put the customer at the centre of our business in terms of our strategies, actions and processes. For most of us, old truths still hold good, such as it’s easier and more profitable to sell to existing customers than to find new ones. In practice, organisations are increasingly setting themselves strategies to measure and ensure customer retention, and charging their staff to be more customer-focused and service-oriented. Many organisations now approach the ‘lifetime value’ of customers (calculated as the typical number of purchases per year multiplied by the average purchase value multiplied by the expected number of years of the customer relationship) and seek to increase it.

In the modern era building customer satisfaction and loyalty is a key we say to profitable business – but do many of us really know why? And what we should really be doing to achieve this goal?

A good method to establish whether our customers are satisfied with us has been to ask them. Customer feedback mechanisms such as surveys, focus groups, and even feedback forms in hotels and restaurants have become increasingly common over the last decade. Hopefully they’ve provided food for thought and even perhaps prompts for action or change. Too many of us though have underestimated the power of such feedback and the true reasons why customers defect. In such feedback, if customers ‘score’ us at 75-80% we’d be fairly pleased. Falsely so!

In the mid-nineties the Xerox Organisation undertook a large study of customer satisfaction (“Putting the Science - Profit Chain to Work”, Harvard Business Review, 1994) and found that there is a relationship between customer satisfaction and customer retention. That relationship can be summarised that when customers rate their satisfaction level as very satisfied, their loyalty is very high. The relationship highlights a ‘zone of affection’ where customers become ‘apostles’ of the product or service provided by a company. However it also illustrates that even when customers rate their satisfaction at ‘4’ or ‘satisfied’, there is a high degree of indifference or even defection.

What conclusions can we draw from this information? The key point here is that achieving a satisfaction level o

staff to be more customer-focused and service-oriented. Many organisations now approach the ‘lifetime value’ of customers (calculated as the typical number of purchases per year multiplied by the average purchase value multiplied by the expected number of years of the customer relationship) and seek to increase it.

In the modern era building customer satisfaction and loyalty is a key we say to profitable business – but do many of us really know why? And what we should really be doing to achieve this goal?

A good method to establish whether our customers are satisfied with us has been to ask them. Customer feedback mechanisms such as surveys, focus groups, and even feedback forms in hotels and restaurants have become increasingly common over the last decade. Hopefully they’ve provided food for thought and even perhaps prompts for action or change. Too many of us though have underestimated the power of such feedback and the true reasons why customers defect. In such feedback, if customers ‘score’ us at 75-80% we’d be fairly pleased. Falsely so!

In the mid-nineties the Xerox Organisation undertook a large study of customer satisfaction (“Putting the Science - Profit Chain to Work”, Harvard Business Review, 1994) and found that there is a relationship between customer satisfaction and customer retention. That relationship can be summarised that when customers rate their satisfaction level as very satisfied, their loyalty is very high. The relationship highlights a ‘zone of affection’ where customers become ‘apostles’ of the product or service provided by a company. However it also illustrates that even when customers rate their satisfaction at ‘4’ or ‘satisfied’, there is a high degree of indifference or even defection.

What conclusions can we draw from this information? The key point here is that achieving a satisfaction level

e should really be doing to achieve this goal?

A good method to establish whether our customers are satisfied with us has been to ask them. Customer feedback mechanisms such as surveys, focus groups, and even feedback forms in hotels and restaurants have become increasingly common over the last decade. Hopefully they’ve provided food for thought and even perhaps prompts for action or change. Too many of us though have underestimated the power of such feedback and the true reasons why customers defect. In such feedback, if customers ‘score’ us at 75-80% we’d be fairly pleased. Falsely so!

In the mid-nineties the Xerox Organisation undertook a large study of customer satisfaction (“Putting the Science - Profit Chain to Work”, Harvard Business Review, 1994) and found that there is a relationship between customer satisfaction and customer retention. That relationship can be summarised that when customers rate their satisfaction level as very satisfied, their loyalty is very high. The relationship highlights a ‘zone of affection’ where customers become ‘apostles’ of the product or service provided by a company. However it also illustrates that even when customers rate their satisfaction at ‘4’ or ‘satisfied’, there is a high degree of indifference or even defection.

What conclusions can we draw from this information? The key point here is that achieving a satisfaction level

and the true reasons why customers defect. In such feedback, if customers ‘score’ us at 75-80% we’d be fairly pleased. Falsely so!

In the mid-nineties the Xerox Organisation undertook a large study of customer satisfaction (“Putting the Science - Profit Chain to Work”, Harvard Business Review, 1994) and found that there is a relationship between customer satisfaction and customer retention. That relationship can be summarised that when customers rate their satisfaction level as very satisfied, their loyalty is very high. The relationship highlights a ‘zone of affection’ where customers become ‘apostles’ of the product or service provided by a company. However it also illustrates that even when customers rate their satisfaction at ‘4’ or ‘satisfied’, there is a high degree of indifference or even defection.

What conclusions can we draw from this information? The key point here is that achieving a satisfaction level

isfaction level as very satisfied, their loyalty is very high. The relationship highlights a ‘zone of affection’ where customers become ‘apostles’ of the product or service provided by a company. However it also illustrates that even when customers rate their satisfaction at ‘4’ or ‘satisfied’, there is a high degree of indifference or even defection.

What conclusions can we draw from this information? The key point here is that achieving a satisfaction level of ‘4’ (80%) with customers is not enough – even when customers report that they are satisfied, they are indifferent and are likely to defect if provided with a reasonable alternative.

It is an old adage that a very satisfied customer will tell perhaps one or two others, whilst a dissatisfied customer will tell many others. We are only too aware that we cannot allow customers to be very dissatisfied and become a ‘terrorist’ to our business. But how many of us are aware that in the economics of customer retention, some increases in profit are generated from reduced operating expenses and increased purchases by customers - most real gains in profit, however, are realised when customers provide referrals.

We know that referrals only come from customers who are ‘apostles’. However price premiums and referrals can only come when customers report very high levels of satisfaction - when they are in the ‘affection’ zone. The study showed that a 5% increase in ‘apostles’ can increase profits by as much as 85%. Conversely, a 5% defection in customers can reduce profits for some businesses by as much as 85%. Thus it is vital to the profitability of our businesses that we achieve very high ratings of customer satisfaction – ‘satisfied’ is not enough!

What differentiates between customers who defect and those who become apostles? Xerox showed that the overwhelming reason for defection was not price or product problems, it was how the customer felt they had been treated. Similarly, if we reverse the argument, then how we treat customers – not our products, services and pricing - can be a powerful catalyst to a customer becoming highly satisfied, an ‘apostle’, and leading us to the increase in profit we are seeking. What steps do we need to take to achieve this aim?

Firstly having a definable and measurable customer retention strategy shou