Jun 7 Posted 2 years ago
I agree with much of what you say, but I disagree about favoring a behavioral based metric of loyalty over a metric like CSAT. The challenge is that depending on which type of loyalty you have, you still may be driving towards catastrophe and not even know it If you are relying solely on behavioral data. Consider this:
Convenience based loyalty - this is where one is loyal because it's convenient. The problem is if something comes along tomorrow that is more convenient, or equally as convenient but providing a better experience, these customers will move on to the next best thing. The best you can do here with behavioral based loyalty data is react to the problem when you see it in your rear view mirror.
Purchased loyalty - this is offering incentives so customers stay with you instead of going to your competitors. Just as it sounds, you are paying customers to remain loyal. Here, the challenge is that customers can be lured away by a competitor with a better loyalty programm. This type of loyalty has proven to work for airlines and hotels for their frequent travelers.
Restricted Loyalty - If your utility company is the only game in town, you have restricted loyalty. If you charge a penalty to let customers out of their contract, you have restricted loyalty. They are loyal as long as circumstances prevent them from pursuing a better option. But if a better option presents itself, watch out if you aren't measuring and managing CSAT.
Earned Loyalty - this is the best kind of loyalty. It comes from providing a superior customer experience. It's made up of a combination of what the customer expects, and what they actually get, which is also a simple definition for satisfaction. Regardless of the type of loyalty strategy that a company employs, satisfying the customer should be at the heart of all efforts in order to ensure true long term success.
While it may be easy to dismiss CSAT because of a belief that customers won't tell you the truth (I completely disagree with this by the way), when measured correctly, CSAT has been proven in published academic research to be predictive of loyalty, retention, shareholder value, cash flow, and cash flow volatility. It shouldn't replace all that behavioral data, but it is very complementary.
Full disclosure, I work at ForeSee.
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