In a world of abundance, too much of everything, what we also sometimes describe as hyper-competition, understanding the difference between satisfaction and loyalty is also the key to profits and growth.
There are many different ways of defining loyalty out there but this is my favourite one (not one invented but I can’t for the life of me remember where I found it): A loyal customer is someone who is willing to pay a bit more for your service than they would have to pay somewhere else for a similar experience.
Think about that for a moment…
If they are paying the same price to you as they would pay anywhere else, they are not loyal. It is just convenient for them to do business with you. And if they are paying less, you have just bribed them to stay with you.
So there you have it, satisfaction is manly about avoiding dissatisfaction: Delivering on the primary results in a consistent and reliable way, what Tom Peters so famously called Ho-Hum.
There is no loyalty in satisfaction. It is just Ho-Hum.
Loyalty is about a connection. Loyalty is emotional, not rational. Loyalty is Wow! You have this ‘feeling’ about a place, a product.
Just think about all the stuff that you own. Of all the things in your possession, which ones are in your eyes brands and what are just products?
It’s quite simple: A product or service becomes a brand when you have a feeling for it.
And then we are back full circle to the Service Profit Chain because things do not create emotions, people do. When I think of a certain hotel or café that I am very fond of, it’s the people. They have some people who have made an effort and established a connection with me, and yes I will gladly pay a premium for that emotional connection. It makes my day.
This blog post is part of a series of answers to frequent questions that I get around the concept of the Service Profit Chain. In future post, we will continue to explore other key points. If you would like the full concept served up in one go, you will find Mike’s book “Best! No need to be cheap if…” HERE.