1. Why Satisfied
Customers Defect
The gulf between satisfied
and complete satisfied
customers can swallow a
business
Chiao-Chin Lin

2. Discussion about Satisfaction
1. Satisfy a customer at rating 4/5.
2. An attractive financial return is needed to
change satisfied to completely satisfied.
3. Relatively high average rating should focus
on lowest-satisfaction.
⇨Importance of satisfaction depends on the
degree of competitive markets.

3. Loyalty
True LT loyalty vs. False Loyalty
Factors: government regulation(limit
competition), high switching costs(change
hospital in the middle of treatments),
proprietary technology(alternatives limited)
Strong loyalty-promotion program:
frequent-flyer plans

4. Loyalty: choice availability
Market with intensive competition:
complete satisfied: rock-solid loyalty
Loyal customers defect(exhaust frequent-flyer
miles)(complete a course of
treatment)(regulated market is
deregulated)(alternative technologies are
offered)

5. Q & A
Donald has an automobile, a Volvo V70
manufactured in 2004 and he notice its
headlight issue. He just replaced the headlight
bulb for $100 but it still doesn’t work. The
whole new headlight part that will cost over
$1,000. What would be Donald’s possible
consideration to purchase an automobile next
time?

6. Q & A
Once Donald gets the chance to switch, he will
choose other models of car absolutely. The
defect of headlight would become his
consideration and possibly move his loyalty
and satisfaction from Volvo.

7. Satisfaction-Loyalty Relationship
1. Automobiles: slight drop satisfaction create DROP
loyalty
2. PC: considerable barriers prevent switch
3. Hospitals: semi-monopoly to intense competition,
little effective competition (physician, HMO, insurer
decide where to go)
4. Airlines: strong loyalty-promotion affect purchasing
5. Local Telephone Services: Deregulation, global
competition, tech change(alternative tech)

8. Satisfaction Analysis
Complete satisfied customers were 42% more
to be loyal than merely satisfied customers.
Satisfaction has bigger impact on loyalty.

9. Ways to listen customers
Customer-satisfaction indices(quantitative)
Feedback(complaints, comments)
Market research(@departure & arrival)
frontline personnel(deep interaction)
Strategic Activities(SW airline invite frequent
flyer to its first round of interview, product
development sessions)

10. SW airline Strategic Activities
Maintenance crews trained on only one type of plane
(Boeing 737s)
Midsize Market. Quick turnaround of flights make
acceptable return on assets (ROA). Baggage service is
simpler as bags are taken off the plane and immediately

11. Measures of Loyalty
Intent to repurchase(valuable for long
repurchase cycle)
Primary Behavior(recency, frequency)
Secondary Behavior(referral, endorsement)

12. Q & A
John is a frequent flyer of Just-Ok Airline with
15,000 miles, and once he earns 30,000 miles
Just-Ok will redeem it into a free
international flight ticket…
What is the possible plan John once he earn a
free ticket?

13. Q & A
If the only incentive is a free flight ticket,
assuming John has suffered mediocre airline
service and may choose other routes with
other companies and end up leaving Just-Ok
Airline.
Abruptly lower his loyalty and satisfaction.

14. Apostles & Terrorists
Loyalist / Apostle: HS HL, staying & supportive
Defector / Terrorist: LMS LML, leaving & unhappy
Mercenary: HS LML, coming & going, low commitment
Hostage: LMS HL, unable to switch, trapped
S: satisfaction L:loyalty
H:high LM: low to medium

15. Actions to take
Dissatisfied(2-3): Deliver services elements as
expected
Neutral(3-4): Provide appropriate range of
supporting services
Satisfied(4-5): understand and achieve results
in customers’ term

16. Ideas to bring up
Loyal customers may defect
(superior value>artificial)
Distinguish the true loyalty (choice availability
Competitive Environment affects
Satisfaction-loyalty relationship
(telephone, airline...Hospital...PC,
automobile)