Understanding Customer Requirements

Few corporate initiatives are as intermittent and ad hoc as the process of gathering feedback from key stakeholders. Among the most often overlooked, interestingly enough, is gathering, reviewing and acting upon input from customers.

Ask organizational leaders for a read on the level of customer satisfaction they enjoy and you’ll probably get a variety of responses. I’ve actually had some tell me that as long as customers remain with them, that’s a sure sign that they are happy with the level of service, quality and value they are receiving. But is it?

In the Harvard Business Review classic article “Why Satisfied Customers Defect” the authors point out the many dangers of making this understandable but flawed assumption. There are any number of reasons why customers stay with their current providers and many of them have little to do with factors that contribute to long-term loyalty.

One way to consider the current state of your customers (at least with your key accounts) is to view them in one of four quadrants: Loyal and satisfied, loyal and not satisfied, satisfied but not loyal and neither satisfied nor loyal. Let’s take a closer look.

The two extremes of these quadrants are the easiest to understand. Customers who are both satisfied and loyal fall into quadrant one and can be described as loyalists/apostles. These are the kind of relationships businesses strive for. They are very happy with what the organization is providing; so much so that they will gladly and without prompting tell others. Not surprisingly, they tend to be the most profitable relationships as well.

Those customers who fall into quadrant two; not satisfied/not loyal are known as defectors. They will leave your organization and they too will not hesitate to share their experiences with others. On the way out, they can create messes, constantly complaining and tying up your sales and service staff with demands and issues. For this and other reasons, they can be a drain on resources and on profitability.

Quadrant three customers are those who are not satisfied but loyal. Why do they stay? Lack of alternatives and the pain of switching are among them. Oh, and loyalty points! These can be labeled hostages.

Finally satisfied but not loyal, quadrant four are referred to as mercenaries. They are perfectly happy; that is until they get a better offer. The challenge here is that mercenaries will give high scores on satisfaction surveys because they are, well, satisfied.  But they are not loyal which is why satisfaction surveys can be misleading. Satisfaction alone is not a predictor of loyalty. Relative satisfaction, that , how much better you are than your customers’ perceived alternatives, is the far more effective measure.

Knowing where we stand with customers, especially key accounts is an essential element in predicting long term engagement and success.

For more information on ways to gather accurate feedback from your customers, contact me as joe@ajstrategy.com