October 2013 Featured Article
Satisfaction vs. Engagement: Which Retains Customers Better?
In a recent survey done among business owners and entrepreneurs, they were asked:
Which is more powerful in retaining clients? Customer/product satisfaction or engagement?
An overwhelming majority of business owners believed that a good product is the most important thing.
Before I tell you what the real answer is, let's walk through exactly what these terms mean…
By definition, customer satisfaction (CS) is “the number of customers or percentage of total customers, whose reported experience with a business, its products, or its services exceeds specified satisfaction goals.”
This means that the customers' needs or desires were exceeded by the product or service that was rendered – a very positive thing.
Customer engagement (CE) is a more complex statistic; it is the participation of customers with one another or with a business/brand. Either the business or the customer can initiate it, and it can be through any medium.
Now, it stands to reason that if a customer's needs or desires are completely met by your product or service, then they will remain loyal no matter what, right?
The truth may surprise you…
According to a Peoplemetrics.com report, extremely satisfied clients were only slightly more likely to stay with a company than moderately satisfied clients.
In fact, nearly the same percentage of ‘extremely satisfied' clients is likely to leave as those who are ‘less satisfied'.
Businesses' efforts to improve customer satisfaction provide a very low return on investment (ROI).
These statistics are truly shocking considering how much weight businesses have put on customer and client satisfaction in the past.
Now, let's look at customer engagement (CE)…
According to the same study, companies with high CE are “able to yield an annual average increase of 8% on ROI above their industry average.” Meanwhile, companies with low CE “experience a 23% decrease below the industry average.”
Pretty drastic, huh?
Going back to the question, why do so many people still believe that satisfaction is more important than anything else when it comes to retaining customers?
Honestly, that's a hard question to answer, but much of it has to do with fundamental beliefs we learn in business school or by following large corporations.
As an entrepreneur and an expert, the onus is on you to challenge what you believe and test to see what really works best.
As you differentiate yourself from your competition in your market, one of the best ways to make your business stand out will be how well you communicate with your clients and manage your CE.
What Do the Customers Believe?
In this study, customers of the businesses surveyed had to answer the same question.
An overwhelming majority of them said that they are more likely to stay with a brand or product if that business makes an obvious and well-intended practice of communicating, sharing valuable information, chatting with them online, etc…
Basically, they must feel wanted and valued.
Business owners think that product quality is the issue, while their own customers place more importance in engagement with the company.
Talk about a recipe for failure…
You need to be on the same page as your clients at all times. Any lack of engagement could be solved easily with improved communication.
Luxury brands have been aware of this concept from the very beginning… they spend a lot of their energy and money on learning how to best service and engage with customers.
And those customers come back again and again…
People don't have emotional experiences with a thing itself. If you appeal to clients' emotions as a human being, and they feel connected to you, you will have repeat customers regardless of what other options are out there.
The proof is in the numbers… clients will reward you for making them feel special:
- A fully engaged client recommends a brand nearly 4 times more often than does a client who feels neutral.
- 13% of fully engaged clients post to a blog or website about their positive experiences. An upset client is 4 times more likely than a neutral client to post online about their poor customer experience.
- A fully engaged client visits that company’s website on average 8 times in a six month period. They will also make an average of three purchases!
What You Can Do to Improve Today
It may be difficult to shift your way of thinking right away.
But I ask you to at least take one thing away from this newsletter: challenge foundational beliefs. Talk to your clients and test your strategies to see what works best.
The easiest way to do this would be through e-mail and social media.
Gary Vaynerchuk, the author of Crush It! (did you read our blog post?), believes that we are returning to our “mom and pop” roots in doing business.
If you recall, there used to be a time when you could walk into a store, and everyone knew who you were, what your order was, and you felt “at home.”
Well, the advent of the internet and social media is bringing that same mentality to a much larger scale.
People are sharing more personal information than ever online, regardless of privacy concerns.
Use that information to learn about your clients; address their Facebook posts, have conversations with them on Twitter, and make them feel like a friend.
Doing so will improve their loyalty to you and your brand, and also create word-of mouth advocates for your business!
You will be far ahead of your competition, putting your business on the path to great success.
And I am here to help you navigate that path, every step of the way.