Does Customer Satisfaction Equal Customer Loyalty?

Stu Perlmeter

Marketers are often confused, for good reason, about the connection between these three things:

Customer Satisfaction Loyalty Retention

Customer Satisfaction is most often measured. It has been made a staple in every industry category, accelerated by the dizzying rate of adoption of the Net Promoter Score (NPS). While smart marketers can debate whether NPS accurately measures satisfaction, we can at least all agree that satisfaction is easiest of these items to measure.

Loyalty is a more complex equation; in that it reflects an underlying state that has yet to be expressed in actual behavior. In many industries, loyalty is described in a way that merely indicates repeat purchase behavior. If an individual remains a client of say, a financial advisor, dentist or yoga instructor, that is often described as loyalty. An undetected relationship fracture can lead to an abrupt and unannounced defection of that customer. And sometimes, that decision to defect happens in an instant.

What is missing is a way to measure undercurrents that could lead to fractures in a relationship, and client defection to another provider of the same services. This already murky situation becomes even more opaque in B2B situations, where the use case is complex, and the deciders about vendor selection are many.

What every marketing organization is really after is retention, and an expansion of the relationship with the customer. Satisfaction and Loyalty are simply precursors of retention. Churn, or defection, is something that companies just live with, and instead focus on cross and up selling their ongoing customers, along with creating new ones.

Fortunately, there is an answer for this vexing situation. Loyalty can be measured in ways that can predict the likelihood of what is called a loyalty event, the risk that a customer will either leave, or split their buying practices. This split-buying pattern is referred to as ‘share-of-wallet’, a meaningful concern for all companies that want to maximize their customer relationships.

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About the Author

Stu Perlmeter

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Stu brings 30 years of marketing and research experience to 1st Resource, which he founded in 1996. Stu’s primary expertise is in understanding the market insights that tie to success formulas for companies seeking to grow their business in strategic ways.