Customer satisfaction and loyalty are not the same.

According to author Shaun Smith:

"True loyalty happens when there is an emotional engagement with the organization or product.

This engagement comes from experiencing the brand or organization in unique way that creates true value for the customer."

Continues Smith:

How is loyalty different from satisfaction?
We have seen time and time again in the research that smith+co has conducted in a variety of sectors that 90% of customers who award top scores for satisfaction indicate their intention to be loyal to that organization. That figure drops to around 20% percent for customers who are still satisfied but rate one box lower. The reason is that over the past 10 years, organisations have become increasingly aware of the need for customer focus and customer satisfaction - so much so, that it is now the norm and the entry price for any organization wishing to be successful.

As a result, differentiation on the basis of basic customer service has declined, price sensitivity has increased and it now takes a unique customer experience which goes beyond satisfaction and creates a real bond with the customer in order to regain the competitive edge.

So, loyalty is not one and the same as satisfaction, neither is it the same thing as repeat purchase. Until First Direct came along in the UK and made it attractive and easy to switch banks, few customers would entertain the inconvenience of closing their account and applying for one elsewhere, yet the retail financial segment has generally low levels of satisfaction among consumers. What kept customers coming back was not loyalty, but 'stickiness' due to the hassle factor in changing accounts. Not any longer.
Loyalty is a misused term. Most organizations think that it is about customers being loyal to them when it should be the other way round - the brand should be loyal to its best customers by offering value that is not generally available to the mass market.

True loyalty happens when there is an emotional engagement with the organisation or product. This engagement comes from experiencing the brand or organization in unique way that creates true value for the customer. And this emotional engagement matters.

As the leading global advertaising agency Ogilvy found in its annual BrandZ survey: "Companies that were successful in creating both functional and emotional bonding had higher retention ratios (84% vs 30%) and cross/up sell ratios (82% vs 16%) compared with those that did not".

And of course when you get very high levels of emotional engagement with a brand than something rather wonderful begins to happen.

Beyond loyalty -> Advocacy
For those organizations wishing to increase margins by driving down sales costs while driving up revenues, advocacy is the answer. This requires you to know who your most profitable customers are and to consistently deliver a customer experience and thus create a high degree of trust in your brand. Then these loyal and highly profitable customers are prepared to recommend your organization to others.

It's therefore no accident that First Direct in the UK claims to win a new customer every eight seconds and is the UK's most trusted bank, according to Research International, or that 36% of its new customers join as a result of a personal referral. First Direct's customers have become the bank's biggest advocates, reducing its costs of sale and increasing its share of these customers' spend.

This is the way to win in a recession.