This post is about a phenomenon that sounds incorrect at first, but affects many businesses. We’ll refer to it as “the customer satisfaction paradox”.
Here’s a definition of the “customer satisfaction paradox”: The more loyal your customers become, the more likely they’ll hit customer experience issues.
It’s slightly more likely to apply to online companies, though it can still occur to offline businesses. It’s more likely to apply if you have some level of customer loyalty, than if your business only serves one-off customers. But, where it exists, it means the customers you most want to keep happy are the ones you are most likely to fail.
Why are you more likely to fail your best customers?
At first it does not sound right: “why would we fail our most loyal customers by treating everyone equally?”
The answer is due to the way most service errors and problems occur:
- In general: Most businesses treat each order with equal importance, no matter whether they’ve come from a first time buyer, a high spending occasional purchaser, or an extremely regular loyal customer.
- From a customer experience point of view, most problems occur semi-randomly, with each order having a roughly equal chance of hitting an experience issue.
Considering both of those facts together, it becomes evident: If you treat every order from every customer equally, the people you are most likely to fail are your most loyal customers.
Your most loyal customers buy many more times than one-off buyers. If each order is as likely to experience a problem as the next, a customer ordering from you every week is far more likely to hit an error than a customer ordering from you just once per year.
Your Error Rate – An Example:
Let’s say you have a 10% error rate on orders. (in other words, on 10% of orders an incorrect product goes into the box, or a size is wrong, or the product is damaged, or the delivery is late, it’s sent to the wrong address, etc). Hopefully your error rate is lower than that (perhaps you don’t know), but let’s use the percentage for our illustration.
Your ‘error rate’ is usually unrelated to who has placed the order. The likelihood that any given order will include an error is equally likely, whether it’s for your best customer or a low spending one-off discount customer.
Order Frequency:
- All things being equal – a customer who orders from you once per year, therefore has a 10% chance of their order going wrong.
- A customer who orders from you 10 times per year however has a 10% chance of something going wrong on every order.
What does that mean for the likelihood of the customer hitting an error overall? The maths on that is roughly as follows:
- Each time the customer places an order, the probability of everything going right is 90% (remember there is a 10% error rate). So that’s a 9/10 likelihood of everything going ok, or a ‘0.9’ chance.
- The probability of everything going right on all 10 orders is therefore 0.9 * 0.9 * 0.9 * 0.9 * 0.9 * 0.9 * 0.9 * 0.9 * 0.9 *0.9. Or roughly 35%.
- In other words, as a one-off customer there’s a 90% chance everything will go right with my order; as a loyal customer buying 10 times, there’s just a 35% chance everything will go right with all 10 orders.
- By the time the customer reaches 100 orders, following the same maths, there’s a 99.99% chance they will have hit an error on at least one order.
As the customer’s loyalty increases, the probability of experiencing an error or failure approaches 100%.
Responding to the Customer Satisfaction Paradox
Once you recognise it, you realise this is a simple concept, but one that very few businesses take into account, and one that many do little to address.
There are many ways to address the Customer Satisfaction Paradox. From removing ‘pattern errors’ in your website user journeys, or your delivery processes, to prioritising orders for your most loyal customers, to simply recognising that your most loyal customers are more likely to hit errors and therefore giving them extra attention at the point they do reach your customer service team.
Often, the biggest step is simply to realise the ‘Customer Satisfaction Paradox’ effect exists, allowing you to start counteracting its negative effects on your best customers.
