At this point, having left Company A, the customer begins anew with Company B, and it is not long before the customer has fully switched allegiance. Company A’s loyal customer has become Company B’s loyal customer. And in the nature of a speeded up, constant shopping, rapid gratification world, the customer’s loyalty to Customer B may also be ephemeral.

What really hurts Company A is the net market damage caused by a seriously alienated departing customer once he/she has fully switched her allegiance to new Company B. He/She no longer repurchases from, refers others to, or recommends with positive word of mouth the products and services of Company A. He/She becomes, first, a customer terrorist, telling innumerable others about her bad experience with Company A; and second, and soon, an apostle for Company B, guiding both his/her own business and that of others to its products and services.

Satisfied customers are more likely to be loyal customers, but loyal customers aren’t always satisfied. Loyalty may even be defined as the likelihood of repurchase, recommending, and positive word of mouth even in the face of dissatisfying experiences. Loyalty typically stems from a long relationship with a company spanning multiple purchases and particularly embedded as a result of multiple positive servicing encounters with company representatives. Occasional service glitches which the company responds to quickly and effectively (from the customer’s perspective) might leave the loyal customer somewhat disappointed, less satisfied, even somewhat disaffected, but he/she is still likely to repurchase, recommend, and generally provide positive buzz.

Particularly important are critical incidents (those unfortunate but seemingly unavoidable things that happen at touch points or “moments of truth” when a customer’s dissatisfaction collides with front-line employees representing “the company’s side” in a dispute) the customer regards as very serious. Critical incidents not resolved to the customer’s satisfaction change loyal customers to disloyal switchers. Critical incidents resolved quickly and effectively in favor of the customer, or in a way the customer regards as fair, reinforce customer loyalty, even when the whole episode leaves a residual taste of disappointment, dissatisfaction or disaffection in the loyal customer’s mouth.

So how does one achieve the goal of maximizing customer satisfaction, promoting long-term customer retention, creating unusual and bulletproof customer loyalty, minimizing critical incidents and making sure that these efforts drive higher profitability? Learning to measure the right stuff is a big step in the right direction.

Some of the things you should measure are:

Economic Loyalty. This tells us actual behavior and behavioral intent to purchase, repurchase, recommend, refer, and/or provide positive word of mouth.

Psychological Loyalty. This tells us about a customer’s engagement and commitment to a company based on variables such as trust, delivery on promises, and problem and dispute resolution.

Susceptibility. This tells us about a customer’s service experience history and consideration of switching given equal availability and costs.

Zone of Tolerance. This tells us how much breathing room a company has on service missteps before a satisfied or loyal customer actually departs/switches.

CDCI has found that companies with high scores on both economic and psychological loyalty measures tend to have low susceptibility scores and higher zones of intolerance for their best customers. Also we found that the susceptibility scores are an excellent leading indicator, showing signs of eroding psychological loyalty well before there is movement on specific commitment indicators. And psychological loyalty scores in turn are leading indicators to economic loyalty scores. Monitoring these measures on a consistent basis is critical to ensuring that happy customers remain loyal.