When satisfied customers defect.

There is a saying in business: “Satisfied customers tend to be loyal, but loyal customers do not have to be satisfied!”

But it is equally true that even satisfied customers defect, i.e. they exit from the relationship despite being satisfied. 

This is contrary to common theory which states that high perceived service quality is positively correlated with high customer satisfaction which is positively correlated with high customer loyalty and retention. 

Satisfied customers can defect for at least three reasons:

• With new information about a better offer some customers will try the new offer next time - as explained by regret theory
• After years of using one service, some customers want to try something new – as explained by variety seeking
• The job customers hired the firm, product or service to do for them, has changed - as explained by Job-to-be-done theory

Regret

Imaging that you are invited to lunch with a good friend or colleague at a nice restaurant. When looking at the menu, you detect your favorite – Caesar Salad. You order the salad because you do not want to regret your choice by picking something new and not that tasty.  Your friend orders something else. When the food arrives, you immediately see that your friends dish is much more tempting than your salad. You make a note about ordering the other dish next time you visit. The example is a classic case of making decisions under uncertainty: Should information about the best course of action arrive after taking a fixed decision— regret is often experienced.

Variety seeking

A rational argument why some customer may choose the same destination, supplier, product or service again and again, is to avoid risk by sticking to a habitual decision heuristic. The basic premise of branding is for customers to know in advance what they get. For risk averse customers, corporate-, product-, or service brands function as a guarantee for quality. Why change something that works! Other customers may want to try something new, something different. Despite being happy with what they got, both take on some risk. While some variety seekers will conclude that the old choice was better and return to the old (Told you so!), some will experience the new choice as a blessing (Should have done it sooner!).

Job to be done

When a customer changes patronage or stop using a product or service, it might be that the job she wanted to get done, has changed. One example can be change of context, e.g. she moved to a new location thereby eliminating the need to hire the bus to get to work. Another reason could be that the job she wants to get done is seasonal. For example, customers hire eggs before Easter for several jobs to be done – one being decorating Easter eggs together with the children. Of course, people will buy eggs after Easter, but they will hire them for a different job, e.g. making a cake or for cooking. Because jobs change, sellers need to know why customers hire their product or services and do that job better than anybody else.

Pandora offers variety

The music streaming service Pandora lets users define one or two key bands or artists reflecting when you play music for example time of day (e.g. morning and Edward Grieg), situation (e.g. training and heavy metal), or moods (e.g. tired, sad, upbeat) from which Pandora’s algorithm generate or suggest new bands and artists which matches the original choice. If users dislike or like the new suggestion, they skip or play the track plus give a thumb down or up. In this way the system learns more about the user’s preferences while delivering variety while all the time doing the different jobs users hired Pandora music service to do for them.

One take away

Choice and variance is always good, but customers are risk averse. From this we can draw that firms have to offer something new by innovating in order to stay attractive in the market place and thus maintain high level of customer loyalty, i.e. low defection.