When Customer Satisfaction Harms Customer Loyalty

Satisfied customers are loyal.

Says who? Not hoteliers. According to a new study, satisfaction across the hospitality industry is rising, but sales aren’t. That’s because customer loyalty is sliding.

How can satisfaction be up and loyalty down? Because the pickings are too good. Hotels have been promoting low-price deals. Instead of choosing their favorite hotel, consumers know they can always search for something cheaper. So yes, they’re satisfied. At those prices, who can complain? The study’s author calls this “Price-induced satisfaction.”

Hoteliers have found a way to increase satisfaction while deep-sixing loyalty. Nice work, guys.

What’s really going on? Well, customers are getting more value these days. But you can increase value two ways: offer more for the same money, or charge less for the same product.

Charging less for equivalent products creates tangible, monetary value. But creating delightful experiences defines intangible value – and that’s where loyalty lies. The intangibles – a hotel’s reliability, friendliness, efficiency, the extra effort they put in to know you personally – these are what spur loyalty. They give customers a sense of belonging. When people feel they belong to something, you can deepen the relationship. When people feel they’ve made a great bargain, that’s all they get.

In sum: manipulating your tangible value can undermine your intangible value. You’re commoditizing your customer relationship – essentially, you’re buying customers.

Creating intangible value is harder than creating tangible value. You need to understand in what areas your strengths lie, and excel in those. It can be a long, hard road.

But it has rewards. People are not only loyal to products with intangible value; they pay a premium for them.