How many times have you heard that customer satisfaction is the key to a long lasting, successful business? Or that, if you want to succeed in today's ultra-competitive environment, your company needs to be obsessively focused on customer satisfaction.

Let me venture to guess that you've heard it so many times that it's almost become a cliché.

While this idea contains a profound truth, it also contains a profound error.

I'm not saying that customer satisfaction is not important -- it's very important.

I mean, if a customer leaves a store having purchased an overpriced product with a subpar customer experience, yeah they're a customer, but they're not happy about it and they're likely not to return and convince others to do the same.

Knowing what made them dissatisfied is very useful information in those situations.

But even with the happiest customer experience, one in which the price was reasonable and the service was stellar, satisfaction is still backward looking. It only measures whether someone was happy with your product, service, or interaction. It tells you nothing about their future intent.

The most important information for the success of your business is that which is forward looking.

You need to know how customers will behave in the future. Will they buy your product or service again? Will they recommend your business to a friend or colleague? Will they rave about you to their Facebook and Twitter followers. Or, will they get your logo tattooed on their forehead?

Believe it or not, you don't need some sort of fortune teller named Zoltar to show you whether or not you'll have that loyal, tattoo-branded customer. If you listen, your customers will tell you themselves.

Customer Satisfaction vs. Customer Loyalty

One of the biggest mistakes businesses make is that they focus on customer satisfaction rather than customer loyalty. It's easy to do because most people don't even know the difference between the two. But the difference is as important as the difference between a loyal romantic partner and one who's merely satisfied. Think about that...

Customer loyalty measures something more than satisfaction -- it measures whether someone is willing to put their name on the line and recommend your product or service to others or if they are willing to stick with your product/service in spite of an occasional poor experience.

It's easy for a customer to tell you they're happy with your performance. It's a lot harder to get them to say they'd recommend you to a family member, friend, or colleague, because now his reputation is on the line. No one wants their mother-in-law to call him up at two in the morning yelling, "Why on earth did you tell me to buy this horrible mattress ... I can't sleep!?" A routine mother-in-law call is bad enough as is.

The fact is, there is no correlation between someone saying, "I'm satisfied" or not, and almost any other important metric:

  • How much more of a product or service they are going to buy (upsells / expansion revenue)
  • How long they'll remain a customer (retention / churn)
  • Her willingness to recommend or refer a business, friend or colleague (organic growth, lower CAC, higher LTV)
  • Levels of customer support engagement

As far as your knowledge of that customer's behavior is concerned, it stops at knowing his/her level of satisfaction.

In a sense, customer satisfaction is a feel-good metric. It's easy for a customer to say he's satisfied.

When you hear a company like GEICO say that 97 percent of its customers are satisfied, it's good marketing, and I'm sure it makes the GEICO team feel proud. But stats like that don't actually correlate to customer behavior. The next time a GEICO customer hears from a friend that USAA, for instance, is incredible and that he swears by it, that GEICO customer is probably going to pick up the phone and give USAA a call.

On the contrary, a loyal customer wouldn't be so quick to leave at the first sign of a better option. In fact, they would be the one that would come to your defense and likely bring their friend to your side.

To say it again but in a different way, if you want to succeed in today's ultra-competitive environment, your company needs to be obsessively focused on customer LOYALTY, not satisfaction. The difference is paramount.