But do loyal customers generate more profits than the merely satisfied? There is every indication that they do, though measuring the revenue impact of satisfaction is far harder than measuring the impact of loyalty. What can be said for certain is that when a company acts on what it learns from loyalty analysis — marketing to selected customers instead of the entire customer population, targeting customers who are candidates for incremental purchases, protecting revenue by spotting potential defectors before they defect — both margins and return on dollars invested in marketing improve significantly. Tenfold returns on investments in loyalty analysis are not unusual.
Loyalty and satisfaction are decidedly different indicators of business vitality, but as management tools they complement each other. Good satisfaction measurement can help identify what’s broken in your business today (although fixing it is up to you). Good loyalty measurement is an easily applied forward-looking tool that sales and marketing can use to devise strategies to hold on to customers they want to keep — and also to earn more from every relationship.
The myth that a satisfied customer will become a loyal customer is just that — a myth.
Mark Klein, email@example.com
Mark Klein founded three software companies that made tools for communications and business intelligence. Most recently, he was general manager of enterprise integration at the Lotus Development Corporation, which purchased his third company, an infrastructure supplier. Mr. Klein is CEO of Loyalty Builders.
Arthur Einstein, firstname.lastname@example.org
Arthur Einstein was a cofounder of and principal at the advertising agencies Lord Geller Federico Einstein and Lord Einstein O'Neill. For the past decade, Mr. Einstein has been a marketing communications and agency review consultant, working with technology and financial-services companies, including IBM, Compaq, The New York Stock Exchange, and Oppenheimer Funds.