Why satisfied customers defect

By-Thomas O Jones. and W. EarlSasser

Presented by
Ipsita Ojha
Kapil Rustagi
Neha Yadav
Prinku Jain
 3 Beliefs
It is sufficient merely to satisfy a customer, as long as
the customer responds with at least a satisfied
rating.

Investment required for changing customers from

satisfied to completely satisfied is not a wise use of
resource.

Each division with a relatively high career rating(3.5

to 4.5) should focus on customers on its lower
satisfaction categories.
 Research Findings
Except in a few rare instances , complete customer satisfaction is the key to
securing customer loyalty and generating superior long term financial
performance.

Even in markets with relatively little competition, providing customers with

outstanding value may be the only reliable way to achieve sustained customer
satisfaction and loyalty.

Very poor service or products are not the only cause-and not even be the main
cause-of high dissatisfaction.

Different satisfaction levels reflect different issues and, therefore require

different actions.

Even though the results of the customer satisfaction surveys are an important
indicator of the health of a business, relying solely on them can be fatal.
Listen to your customer
Customer Satisfaction Indices : Quantify level
of customer satisfaction to compare results
from different time periods ,locations and
business units.

Feedback: Recovery strategy can only be

implemented when complaints and negative
feedback are clearly known to the company.

Market Research: Identify those attributes of the

product or company that are making customers to
leave. During survey make a last ditch attempt to
retain the customer. Customer should be
interviewed both at time of arrival and at the time
of departure.
Listen to your customer
Frontline Personnel: Train frontline
personnel to listen effectively and
try to amend when customers have
bad experience . Establish flow of this
information through the organization
by carrying customer oriented
integration .

Strategic Activities: Co-create product

and services with the customer by
involving the customer in every level
of the business.
 Xerox Corporation
A Satisfied discovered, Its
Customers— merely satisfied
a sure sign of Actually customers, were six
times less likely to
the not……. buy again from
company’s Xerox than its
totally satisfied
success? customers. 
Few Companies which lost their market share

Industries or companies
Reason for shift in customer
that experienced a rapid
loyalty.
change in customer loyalty
• Telecommunications, • Deregulations.
Airlines.
• Nokia, BSNL • Entry of New competitors.
• American Express • Reduction in brand
dominance
• IBM, Digital equipment • Advent of new technology.
Corporation
LOYALTY: Loyalty is the share of purchase
in respective category. The feeling of
loyalty gets manifested in many forms
of customer behavior.
Loyalty is a higher-order measure of customer attachment than
satisfaction.
Loyalty involves an emotional commitment to a brand.
It usually has an attitude component ("I feel better about it, so I'll
keep using it") and
A behavior component ("I'll keep buying it, regardless.").
Attitudes are important because re-purchase alone doesn't
always mean a customer is emotionally invested. For example,
you may not like your insurance agent, but you renew with him
each year because you don't have the time to look for a new one.
Then you get a great referral for a new agent and you switch.
In this case Perceived loyalty is nothing much more than
convenience.
There’s a tremendous difference in loyalty between merely and
totally satisfied customers. Whether in highly competitive
markets (e.g., cars), virtual monopolies (e.g., local phone service),
or industries with strong loyalty-promotion programs (e.g.,
airlines), customers will stray the instant they’re no longer
completely satisfied—and have a choice. 

Totally satisfying customers requires some investment and

ingenuity—but it pays for itself many times over. Here’s how to
keep your best—i.e., most profitable—customers delighted and
devoted. 
• There are five categories that show actual repurchasing
behavior.
Behavior.
• Recency, Frequency, Amount, Retention and Longevity.
• But only provide a glimpse of overall share and are most
Primary
useful as an indication of change over time.
• Ask customer about their future intentions to
repurchase a given product or services.
repurchase.
• Can also link this intention with customer satisfaction.
• Intention to repurchase is very strong indicator of future
Intent of
behavior.
Measure of Loyalty
• Customer Referrals
• Endorsement
• Spreading positive word of mouth.
Behavior
• Although these are soft measures of behavior that
link to customer
Secondary
• Repurchasing intention however they significantly
affect positive experiences of customer.
Measure of Loyalty
 The Satisfaction Loyalty Link
Research conducted by selecting 5 markets

1.Automobiles: Highly Competitive Market.

2.Personal Computers for businesses: The user is not the actual buyer,
highly competitive with considerable barriers.

3.Hospitals: Shifting from a market dominated by semi-monopolies to one

characterized by Intense Competition with significant barriers.

4.Airlines: Varying level of competition on routes and strong loyalty Programs

affect purchasing decisions.(Route is virtual monopoly).

5.Local Telephone Services: Actual or virtual monopoly, in which satisfaction

seems to have a little impact on loyalty.
How the Competitive Environment Affects the Satisfaction
Loyalty Relationships
 Research Findings
1.Local Telephone Services
Monopoly- Customers remained Loyal no matter how dissatisfied they
were.

What in case the source of a monopoly’s hold on customers suddenly

disappears??

2. Loyalty increases with satisfaction, but the relationship is neither

linear nor simple.

3.Automobiles
Competitive market – Steep Curve
Even a slight drop from complete satisfaction created an enormous
drop in loyalty
 Continued
4. Personal Computers for businesses
Midrange market- End user satisfaction may impact
customer loyalty.

5. Hospital Industry
Midrange market- Curve becomes steeper as competition
intensifies.

6.Airlines Industry
Mixed Market- Relationship between satisfaction and
loyalty resembles competitive markets on several routes
 Conclusion of the research
• Customers are reasonable, but they need to be
completely satisfied else when provided with other
choices they will be lured easily.

• It is necessary to understand that what percent of

seeming loyalty is true and what part is artificial.

• Managers should concerned if the majority of

customers fall into the satisfied category.
USING CUSTOMER SATISFACTION INFORMATION
The key is to understand what the Customer is saying when he provides a certain
response:

STEP 1:
• Measure customer satisfaction systematically by ensuring
that the process: 
• is unbiased, i.e., not distorted by interest groups within
your company, 
• lets you compare products, locations, and business units, 
• lets you capture and store information on individual
customers, so you can tailor improvements to their needs. 
 Continued:
Step 2:
• Deriving focused conclusions by:
• Creating a curve by plotting the individual customer responses.
• Comparisons between the company’s performance and the
industry standards and the factors that are taken into
consideration
• False Loyalty Mechanism or True Loyalty. (e.g., airline frequent-
flier plans) or high costs of switching to a rival (e.g., hospitals
when a patient is in the midst of treatment; computer
companies with proprietary technologies) can create “false
loyalty.”
 Continued:
Step 3:
• Determine the most appropriate strategies to raise Customer
Satisfaction:
• The Basic Product and the evolutionary trends and attempts to be
made to continually map the trends.
• A well designed Support Service System can ensure the usage of the
basic product more convenient.
• An extremely responsive Recovery System, to ensure a speedy
recovery.
• Example: Lexus dealers provide the basics—and much more.
• A satisfied customer is much more than just cash inflows.
 A COMPANY’S BEST
• To understand the customer as an individual is as
important as understanding them as individual. FRIENDS AND
• This is dependant on the following factors: WORST ENEMIES
• Unique behavioral attributes
• Intensity of satisfaction or dissatisfaction
• Ability to act on their satisfaction and
dissatisfaction.
APOSTLES AND TERRORISTS
• Within the Loyalists camps, those who are so satisfied,
they share their strong feelings with others. They
The Apostle
vouch for the company.
• Eg: Intuit, maker of Quicken
• He is completely satisfied with company and returns
back.
The Loyalist
• He is the company’s bedrock.
• Service offering are extremely suitable for him.
Customers Behave In The Following Four Ways
• They spread bad word of mouth about the company. The Terrorist
• They are more committed than apostles to do so.
• They became so because once they had the problem they were not to
attended to or listened to.
• The customers are more than dissatisfied, quite satisfied and neutral.
• The “merely satisfied” defect too. The Defector
• The company should make attempts to not let them defect for the
company has many a resources at its disposal.
• But “fire” the ones who make unreasonable demands
Continued…
• They experience the worst the company has offered
and they accept it.
The Hostage
• Monopolistic environment.
• They should be taken care of for various reason.
The
• They defy the satisfaction-loyalty rule. Mercenary
• Expensive to acquire and quick to depart.
Continued
 A WORD OF CAUTION

FIRST: Different actions are required to raise the satisfaction of

customers of a family of products or services whose level of
satisfaction differs.

SECOND: It is absolutely critical to accomplish the 3 Stages in

order.

THIRD: For a Quantum leap concentrate on the Support Services

and redesigning them.

FOURTH: Constantly strive to understand the relationship between

satisfaction and loyalty for the customers of each of it business
unit.
THANK
YOU