Falling Flat on Its Face(book)

By Larry Freed

The annual ACSI e-business results are out today, and there are a few story lines we’d like to explore in a series of blog posts.

The main one that the media is of course picking up on is Facebook’s continued plummet. In today’s report (available for free download on our website), consumers rate Facebook a 61 on the ACSI’s 100-point scale. Just how bad is a 61? The ACSI rates more than 230 companies every year, and only four have a score of 61 or lower (two electric utilities and two cable companies).

98% of companies measured by the ACSI outperform Facebook in terms of the customer experience.

95% of federal websites outperform Facebook.

Here at ForeSee, we hang our hats on the fact that customer satisfaction predicts future financial success. Study after study shows that customer satisfaction, when measured properly, predicts sales, loyalty, recommendations… even stock prices.

So Facebook starts to become a little bit of a thorn in my side. People really hate Facebook. And yet it grows and grows and grows.

One of the other points of interest in the study is how well Google+ did in its first year of the Index. It debuted at 78; 17 points higher than Facebook! But people complain that Google+ is a ghost town. They like the functionality, they like the circles, they love the lack of traditional ads and they feel more secure about privacy, but if their friends aren’t there, they just aren’t going to use it as much.

So how do we explain this? There are four kinds of loyalty:

• Purchased Loyalty: The best example of purchased loyalty is a customer rewards program.  Other examples include memberships, coupons, and rebates.  The trick is that under purchased loyalty the customer is loyal to the system, not the company.
• Convenience Loyalty: Your corner market, corner dry cleaner, the coffee shop on your way to work… you might be loyal to these businesses simply because they are convenient and because switching costs are too high or inconvenient.  You are likely to remain loyal unless competitors come along who are equally or even more convenient.
• Restricted Loyalty: Restricted loyalty exists when there is no other game in town.  This may be true for cable companies, electric utilities, and yes, even Facebook.
• True Loyalty (or Earned Loyalty): True loyalty is undying allegiance to a brand or product based on an incredible level of satisfaction.  True loyalty is the holy grail of customer satisfaction and is every business us should aspire to create.

Facebook has a combination of what I call convenience loyalty and restricted loyalty. People hate it, but they use it because everyone else does, and they want to be able to connect with everyone else.

But here comes Google+. They have 100 million users now and estimates are that they’ll hit 400 million by the end of 2012. Google is a company that has true loyalty. They have consistently high satisfaction scores whenever we measure them.

If—and this is a big if—Google+ can get the critical mass, I believe Facebook is incredibly vulnerable. There are those who say customer satisfaction doesn’t matter for Facebook. I disagree. Customer satisfaction is their insurance policy against another social network making inroads on their market share.

Meanwhile, just how low can satisfaction with Facebook go? I guess we’ll find out.