The Link between satisfaction and customer retention

Today I was revisiting some academic readings about customer satisfaction and the effect it has on loyalty. While it is from an academic perspective, it highlights how customers need to be delighted (as opposed to "only" satisfied) to be extremely loyal. The study found that a truly delighted customer will become an evangelist of the business.

This model comes from another book (titled Service Profit Chain: How Leading Companies Link Profit and Growth to Loyalty, Satisfaction and Value), however I've taken it from Lovelock, Patterson and Walker's "Services Marketing: An Asia-Pacific and Australia Perspective" (2007).Just to explain my thinking on this model, I'll use the airline industry as an example.

A little while ago we had to fly with one airline in Australia who fell well short of what we expected of an airline. My wife and I have always taken a car seat for our daughter and son to sit on while we're travelling by air, and despite having taken her on around 20 flights, with about 7 airlines in total, one airline refused to permit us to take a car seat on board (even though we'd paid adult fares to be able to reserve seats for both children (our son was six months old at the time, our daughter 2 years). Anyway this airline I wouldn't even rate a 1 out of 5 in terms of their service. The model predicts I would then be a terrorist - in real life I very much discourage anyone from flying with this airline, and even with all the travel that we undertake, we will also never fly this airline again.

We've also flown some other airlines, who while they weren't providing over the top service we at least hospitable, and got us from A to B. These airlines I wouldn't actively promote, but am happy to fly with them were their schedules or pricing works well for us.

Then there are two other airlines that have gone over the top with providing great service. These airlines will always be our preference for flying (Singapore Airlines for international travel, SouthWest for US domestic), and we will always recommend to our friends and family (and now, blog followers!). I would definitely rate both these airlines as a 4.5 or 5 out of 5 in any customer surveys.

While a 4 out of 5 may seem like a good rating for a customer to give (in action, I prefer using a 10 point scale to give customers the option of giving a 9 to allow for "room for improvement" as some customers like to), the reality confirmed by this model is that those customers are just satisfied with the service received (not delighted) and are less loyal and less likely to promote your business.