Customer satisfaction surveys are often fatally flawed in their ability to predict the true strength of customer relationships and their future value to your company. In fact, many “satisfied” or “very satisfied” customers are often quick to abandon your company for a competitor if just one thing goes wrong.

In 2008, 87% of customers said they’d stop doing business with a company after a single negative experience – up from 68% just two years prior. This result is borne out across industries; in recent banking research, between 60 and 80 percent of “lost” customers describe themselves as satisfied in surveys conducted by their banks just prior to defecting.

So just how useful are customer satisfaction surveys? If your objective is to publish results for internal morale boosting or to tell prospective customers that your company has high satisfaction, then they can be very useful indeed. But if your goal is driving revenue growth and desired customer behaviors, then satisfaction is a less effective metric. According to Harvard Business Review, “…it is difficult to discern a strong correlation between high customer satisfaction scores and outstanding sales growth.”

In a fast-changing environment where your customers have their fingers in a search engine on a daily basis – and your competitors are just a mouse click away – a focus on understanding, measuring and improving customer experience is the fastest, most reliable way of making and keeping more, and more profitable customers.

Getting Beyond Satisfaction to Loyalty and Advocacy

Many executives believe that customer experience is the next competitive battleground. The long-term value of a loyal customer is huge. Simply put, a single business transaction has a finite value. A relationship, however, does not. The value of loyal customers can be infinite.

Most customers will pay more for a better experience, even in a down economy. Unlike customers who are merely satisfied, loyal customers stick with you over the long term, even if they’re not getting the best price. They transact and more and devote an increasingly larger “share of wallet” to your company. They tell their family, friends and associates about their experiences, which can dramatically lower customer acquisition costs, and are more likely to forgive the occasional faux pas, decreasing churn.

So how do we learn what makes these satisfied customer loyal? Getting beyond satisfaction requires a more holistic view. It’s based on understanding the experience of doing business with you, from your customer’s perspective. Does your “customer experience” create satisfied, loyal customers – or do you push them away? Understanding and improving your customer experience is a key step to creating more, and more loyal, customers.

Understanding how to improve experience is rooted in an understanding of what it’s like to do business with your company. For many organizations, the gap between company perception and customers’ reality is more like a massive chasm. Not long ago, Bain & Company conducted a research study that exposes the size of the gap; of several hundred companies surveyed, 80% described the experience they deliver to their customers as “superior.” Yet only 8% of their customers agreed. So how do we learn what makes these satisfied customer loyal?

Measuring Customer Experience and the Drivers of Loyalty

While many organizations recognize the importance of improving customer experience, not many have the tools or data to track it, much less improve it. Customer satisfaction surveys may tell you where you stand today, but at any point many of these satisfied customers are only a short step away from leaving.

So how can companies measure and improve customer experience? It starts by understanding each individual interaction or “touchpoint” that influences customer satisfaction. Whether human (such as sales staff or a call center) interactive (web sites, email) or static (including radio ads or sales collateral) each touchpoint is an opportunity to improve customer experience. At the same time, a single poor touchpoint can mean a bad experience – and drive customers away.

Customer experience research that measures customer touchpoints is key. Through this process, you’ll learn what your customers think about doing business with your company, build a foundation for stronger customer experience, and take the first step towards a corporate culture that will help you identify and close “gaps” between actual and perceived performance on an ongoing basis. Customer experience research can help boost loyalty and drive desired behaviors by helping your organization answer these questions:

1. Once we win a customer, how does the experience we deliver match up to what our customers expect from us? Where do gaps exist, and how big are they?

2. Are we under-investing in areas that are important to our customers? Or overly investing in areas that don’t matter? How can we reallocate our resources to be more effective?

3. Where can we focus customer experience efforts to boost loyalty with our most profitable customers? Which “dials” can we turn to boost loyalty with our best customers? The job of measuring and improving customer touchpoints is getting at this critical information from the “outside in.” What do your customers think? And why? As a result, companies can acquire more accurate and more actionable data, seeing where and how insights into customer opinion, experience, wants and needs can be leveraged to boost loyalty, improve overall marketing, sales and service effectiveness and strengthen brand.

Better Experiences Create More Loyal Customers

In short, satisfaction surveys give your company lots of data about your customer. But they cannot effectively capture what your customers think about you. By measuring customer experience from the customer perspective, your organization will enjoy a clear understanding of where customers actually stand in their relationship with you, where you may be in danger of losing them – and why.

Through this understanding, and a culture that encourages taking positive actions as a result, you’ll be in a position to build real value, improving retention and cross-sell while building relationships that will reward you for years to come. After all, in a world where nearly 90% of customers will walk out your door (whether virtual or physical) after a single poor experience, the cost of focusing research efforts on satisfaction alone may well be your survival.