Sometimes companies are misguided by the notion that customers depend on them. The truth of the matter is that we very much so depend on them. Many researchers and academia have highlighted the importance of customers in today’s market.
The level of satisfaction a customer has with a company has profound effects. Studies have found that the level of customer’s satisfaction has a positive effect on profitability:
- A totally satisfied customer contributes 2.6 times as much revenue to a company as a somewhat satisfied customer.
- A totally satisfied customer contributes 17 times as much revenue as a somewhat dissatisfied customer.
- A totally dissatisfied customer decreases revenue at a rate equal to 18 times what a totally satisfied customer contributes to a company.
Research has shown that when a person is satisfied with a company or service they are likely to share their experience with other people to the order of perhaps five or six people. However, dissatisfied customers are likely to tell another ten people of their unfortunate experience. With social media readily available for consumers to tell their story to all of those online, you can easily go to Twitter or Facebook and read about someone’s experience with a company or service.
However, merely focusing solely on customer satisfaction has its drawbacks in the marketplace as well. For those companies that focus only on customer satisfaction run a real risk a failing to differentiate their brand from others. In order to achieve long-term sustainability companies must seek to establish ties of loyalty with consumers that are strong enough to ward off the advances of competitors. Creating loyalty among customers can help the company to increase purchases of existing products, charge premium prices for appreciation of your added-value services, and create positive word-of-mouth promotion for your company, which is the core marketing objective for companies.
Customer loyalty is much harder to obtain than satisfaction. Even though customers are satisfied with the company there are several factors that could cause the customer to defect to the competition, such as finding a better value or the competitor is more convenient. With that said, having high levels of customer satisfaction does not always lead to customer loyalty. However, a company cannot achieve customer loyalty without having customer satisfaction.
Thus, though customer satisfaction does not guarantee the repurchase from a company but it does play a very important role in achieving customer loyalty. Conducting customer satisfaction research will provide your company with the necessary insight it needs to make informed decisions in order to retain and increase your customer base and improve customer relationships.