Customer Churn Continues Unabated

The Importance of Measuring Customer Retention and Loyalty

Customer attrition rates remain unbelievably high, despite (or maybe because of) continued investments by corporations in CRM technology.

According to a study a couple of years ago of 1,000 consumers by Accenture, 18% of respondents reported they stopped conducting business with at least one retailer within the past year due to poor service. A significant proportion of consumers in this survey also stopped doing business during the previous 12 months with Internet Service Providers (15%), banks (14%), telephone companies (12%), wireless/cell phone companies (11%), and cable/satellite TV service providers (10%).

That’s a whole lot of customer churn going on.

And I have not read or seen any data or evidence that these numbers are significantly different today. In fact, they may well likely be worse.

It is little wonder that Larry Weber, founder of the Weber Shandwick public relations firm, says that “most customers are nomads.”

When viewed in the light of another piece of research, perhaps these findings are not so surprising after all. A destinationCRM.com reader poll conducted in October a couple of years ago reports that:

  1. 39% of customer contact centers do not measure either customer loyalty or customer satisfaction.
  2. 19% measure only customer satisfaction.
  3. 42% measure both customer loyalty and customer satisfaction.

This means that a full 58% of customer contact centers do not measure customer loyalty at all, at least according to this reader poll.

If you are not measuring customer loyalty, then you probably have little idea how to manage and reduce customer attrition.

Building a sustainable and profitable business requires a customer strategy that is centered on creating (and measuring) customer loyalty.

Doing so requires keen customer insight, not million dollar CRM computer systems. In most cases, the thousands and millions of dollars spent on CRM hardware would have been better spent on hiring, training, motivating, and retaining good staff who have your customers’ needs, wants, desires, and best interests in mind at all times.

In another Accenture research study reported in the article Meeting Individual Customer Expectations by Michael Breault, “delivering consistently on the brand promise plays a greater role in creating loyal customers than any other customer-facing capability does.”

In fact, according to the study, “regardless of their industry or business model (B2C, B2B, etc.), developing and delivering a branded customer experience comprises 33% of a company’s ability to achieve strong customer loyalty.”

In his article, Breault also cites a Bain & Company study that found some 80% of companies believed they are delivering a “superior experience” to their customers, while the customers of these firms rated only 8% of them as truly delivering a superior customer experience. Now that is a perception gap!

It is a perception gap that is caused by the corporate focus on using transactional data to define the relationships with customers and a lack of insight on customer attitudes, behaviors, and perceptions. It is also caused by the reliance on demographic segmentation instead of segmentation based on customer needs.

It is also caused by companies not listening to their customers. A study by customer experience research and consulting firm Strativity Group concludes that too many companies do not properly use the information garnered from customer surveys. The two biggest problems cited in this study were:

  1. although a majority of the respondents (59%) claimed to design customer surveys with strategic intentions, only a small minority (23%) managed to obtain internal buy-in for change in response to customer survey results.
  2. only 45% of the 200+ plus firms surveyed around the world could translate their customer survey results into actions.

One of the other problems identified in the Strativity Group survey is that 69% of the survey participants reported that they faced internal struggles with people arguing about the validity of the customer survey results. As the report concludes, “the study results indicate only a superficial and incremental commitment on the part of companies to their customer studies and to acting upon customer insight.”

When these various independent research studies are reviewed in aggregate, one reaches the conclusion that:

  1. Customer attrition rates of 10% to 15% per annum are likely to remain for years to come.
  2. Until companies start to measure customer loyalty, they will remain ignorant and naive about this critical bottom-line impacting issue.
  3. Too many companies are fooling themselves (or their senior management, but not their customers) by conducting customer surveys that do not result in action and customer experience enhancing changes.

One of these days, corporations are going to understand the cost of customer attrition. At least that is my hope.

Until then, of course, any company that makes customer insight and customer loyalty a focal point of their business operations will have a significant advantage in creating long-term, sustainable growth and profitability.

KEY POINT:  if you are not measuring customer loyalty, then you probably have little idea how to manage and reduce customer attrition.

TAKING ACTION:  review the results of your two most recent customer surveys and then identify what actions were taken as a result of the surveys. Was sufficient action taken? Why or why not? What actions were overlooked or not implemented? Why?

What is your customer attrition rate? If you do not know, how can you start monitoring this immediately? Your customer attrition rate should be a critical component of your Marketing Dashboard. Is it?

How can you start to measure customer loyalty? Make measuring customer loyalty one of your top goals for the coming year.

 

This article is excerpted from our book The Best of the Monday Morning Marketing Memo, available at Amazon in Kindle and paperback formats.

 

The Customer Experience Is More Important Than Price

Consistently Good Customer Experience Drives Repeat Business

From a customer’s perspective, every interaction with your organization is a customer experience. And each of these interactions has a cost to the customer ─ in terms of money, time, or both.

If these experiences are consistently good, customers are more likely to repeat business with you; giving you the kind of customer loyalty your organization truly desires.

A research study from Amdocs, a leading provider of software and services that enable integrated customer management, supports the importance of the customer experience on customer retention.

Called the Customer Experience Survey, the survey reveals that consumers and businesses around the world say that they are more likely to stick with a telecom provider based on the quality of the customer experience than on the cost of its service. For an industry that seems driven by constant cost pressures and incessant price cutting, this survey may be quite an eye opener.

For those of you who hate being put on hold when calling a customer contact center, you will not be surprised to learn that 57% of the respondents to this survey said they would pay extra not to be put on hold, or have to talk with multiple service representatives, when dealing with a call center.

This survey queried over 1,000 consumers and 400 businesses in the United States and the United Kingdom about their interactions with telecom providers. While the results are industry specific, I believe similar findings would occur in most other industries and markets across the globe.

After all, the frustrations that customers feel about the service they receive, particularly when trying to reach a frontline support person, are universal.

“The Amdocs Customer Experience Survey proves that keeping customers happy is not just about reducing prices,” says Mr. Michael Matthews, Chief Marketing Officer of Amdocs. “By adopting an integrated customer management strategy, providers can get a full picture of their customer interactions. From there, they can identify customer needs and provide a differentiated and intentional customer experience. That is the right strategy regardless of whether the customers are consumers or large corporations.”

Customers buy experiences.

Customers pay for the experiences they receive from your organization ─ either in money, time, or both.

For many customers, perhaps even a majority, time is a more valuable currency than money.

As a result, many customers are willing to pay for convenience. In the Amdocs survey, a majority of respondents claimed they were willing to pay an extra US$5 a month if it meant that they would not be put on hold and not have to talk to multiple service representatives when contacting a telecom call center.

In a world of product parity and commoditization of both products and services, it may seem like price is the most important determining factor in the customer buying decision-making process.

But as the Amdocs survey results show, this may not always be the case. Even in the highly competitive telecoms industry, where product parity and service commoditization are the status quo, there are market segments eagerly willing to make purchase decisions on factors other than price.

In a world of customer experiences, sustainable growth will come to those who monitor and improve the experiences of customers at each and every point of interaction.

After all, good customers place a higher value on their experiences in dealing with organizations over the prices paid for products and services.

And since customer retention is all about the art of keeping good customers,™  focusing your efforts on improving convenience to customers and reducing their time costs when dealing with your organization is one of the best ways to improve the overall experiences of your customers.

 

KEY POINT:  customers pay for the experiences they receive from your organization ─ either in money, time, or both.

TAKING ACTION:  survey the top 20% of your customers and ask them specifically what steps you could take to improve your convenience to them. Also be sure to ask them if they would be willing to pay a fee to receive improved and more convenient service.

Monitor your call abandon rates, as well as the length of time customers spend on hold, at all your telephone service centers. Survey your customers about their experiences with your phone and call centers. Where is improvement needed?

Benchmark your customer experiences with those of your competitors. How can you make the customer experience a point of differentiation so that you do not need to compete as much on price?

7 Laws of Customer Retention Marketing

Change Your Definition of CRM to mean Customer Retention Marketing

I have long struggled with the concept of Customer Relationship Management (CRM), mostly for the simple reason that I fully understand that customers do not want their relationships with an organization “managed.”

This is why the whole notion and philosophy of CRM as customer relationship management is wrong.

In my keynote speech a few years ago at the Services Marketing Conference in Kuala Lumpur, one of my key messages was that marketers and senior management really need to think of CRM as Customer Retention Marketing.

This is what true CRM is all about – retaining customers, or as I like to call it the art of keeping good customers.™

To implement this definition of CRM in your organization, you will need to inculcate the following 7 Laws of Customer Retention Marketing into your culture, processes, and thinking:

  1. The conversion of a prospect to a purchaser is the casting of a potential long-term relationship with a possible customer. A purchaser who buys from you the first time is merely a trial user. A customer is not a true customer until the second time they buy from you. Forget the notions that “the relationship starts with a purchase,” or “you are not closing a sale, you are starting a relationship.” As we have pointed out previously, the relationship starts way back in the information seeking stage of the buying cycle, at least from the customer’s perspective.

The art of keeping good customers means that your entire organization should be geared to ensure that every experience received by a customer (including a first-time purchaser) should result in that customer repeating their future purchases from you whenever you have a product or solution that meets their needs or solves a problem for them.

  1. You do not work for your employer ─ you work for your customers. Sure, someone in the company signs your proverbial paycheck (or authorizes the direct deposit into your account). But those checks and deposits would bounce if it were not for the customers who buy from your organization. When someone asks you “who do you work for?” your reply should be “our customers” or “the customers of (name of organization).”
  2. You do not sell products or services ─you sell solutions that meet the needs, wants, and desires of your customers. As pithy as this sounds, it is something that way too many organizations and workers these days just do not seem to understand.
  3. Customers want relationships with people and organizations they trust, that are committed to them, and with whom they have shared goals. All of us can buy products and services from a vast number of suppliers and outlets. But we choose to have continual relationships, and to repeat our business, with those we trust and with those whom we have shared outcomes.
  4. Employees should be liberated ─ and allowed to be customer champions. Almost all staff want to serve customers well, if only their organizations would let them! Unfortunately many organizations have rules, processes, procedures, and policies that tie the hands of their employees and prevent them from truly serving customers and satisfying their wants, needs, and desires.
  5. Do not have a commitment to customer service ─ have a commitment to customers (and to customer care). We are definitely in the age of the customer. Customers have many choices and options available to them. But they also all share a deficit of sufficient time. Caring about customers means committing to the things customers place high value on ─ flexibility, sufficient knowledge and information, convenience, ability to choose functions relevant to them, customization, and environmental concerns.

And, of course, good service, which in today’s world is now a prerequisite for repeat business as customers will simply not put up with bad service, inconvenience, inflexible policies and procedures, and a lack of options for customization and personalization.

  1. Customer Service staff should be fired ─ and replaced with Customer Satisfaction staff. This is not a matter of semantics. Customer service tends to be either reactive (to a situation) or a follow-up activity (to a complaint).

Customer service, which is problem resolution focused, is usually initiated by the customer, when he or she has a problem. On the other hand, customer satisfaction is proactive and is customer focused.

Customer satisfaction is usually initiated by the organization to improve the quality of the relationship with the customer. The corollary of this rule is that customer service scorecards, measurements, and matrixes should be replaced with indices that measure and monitor customer satisfaction.

In the typical CRM thinking found today, the organization is the center of focus, thinking, and planning. And the measurement tools used are indicators that support managerial bonuses.

In my Customer Retention Marketing model, the customer is the focus and occupies the central platform for all thinking, planning, and strategic focus. The result becomes the optimization of customer-first processes and the continued improvement in the quality of customer interactions.

Your organization will accomplish a great deal more, and be more highly successful, by changing your definition of CRM to Customer Retention Marketing.

 

KEY POINT: change your definition of CRM to mean Customer Retention Marketing.

TAKING ACTION: survey your employees and ask them this open ended question: “what do we sell to customers?” If they give you a long list of products and services it is time to educate them that you are selling solutions, not products and services.

Review the tools and measurements you use to track and monitor customer service. How could these be turned into tools and measurements to track and monitor customer satisfaction?

Prepare an entire issue of your next employee newsletter (or staff memo) on the subject of customer retention marketing, and what the implications are for the organization in terms of customer care, customer satisfaction measurements, liberating of customer contact personnel, changes in policies and procedures, and how you will reward the organization for making the change to customer retention marketing.

 

This article is excerpted from our book The Best of the Monday Morning Marketing Memo, available at Amazon in Kindle and paperback formats.

For more thoughts on customer retention marketing, read our Keeping Good Customers Blog on Tuesdays and Thursdays.