Factors that affect retail customer retention

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By: Wise Marketer Staff |

Posted on December 20, 2007

According to an Ipsos MORI study into the moments, both good and bad, that affect consumer relationships with companies, 'the human touch' has a key role to play when things go wrong.

The 'Moments of Truth' study found that bad experiences are commonplace, with 36% of the British public having experienced a problem with a company in the preceding two weeks.

Small complaints rule
Small "niggles" were found to be more prevalent than major problems. Almost one-quarter of those surveyed (23%) reported experiencing one or more minor problems with a company during the past two weeks, while only one in six (16%) had a major complaint or problem not dealt with to their satisfaction during that time.

The worst offenders were telecoms companies (cited by 16% of those who have experienced a problem), banks (11%), and utilities (11%). The top three customer service issues cited by survey respondents included:

  1. Not getting the basic service right (60%);
  2. Problems with payments (21%);
  3. Concern that they were being deceived or "ripped off" (8%).

Impact on defections
According to Alex Bollen, director of Ipsos MORI's loyalty division, "With a third of customers recalling some form of bad experience over the past two weeks, this adds up to a lot of dissatisfied customers. And 72% of customers who have experienced a problem say they will either defect right away, defect at some point in the future, or use the company less as a result."

Among those consumers who had mainly good experiences with companies, 60% said they would still leave or use the company less when problems arose, but this figure rose to 90% for those who have mainly bad experiences.

Compensation isn't the answer
So how can companies repair relationships with customers who are feeling or acting more negatively toward them as a result of a problem they have experienced? Surprisingly, compensation is not the answer, the survey found.

When asked what one thing, other than fixing the original problem, would have made them feel or act more positively toward the company, customers supplied a range of options, regardless of whether the problem was major or minor:

  • If they treated me as a more valued customer (46%);
  • If they apologised (19%);
  • Nothing would make any difference (12%);
  • If they offered a free product or service (12%);
  • If they offered a discount (12%).

The impact on customer loyalty
This research has some significant implications for those companies that are trying to build customer loyalty. To reduce customer churn and build stronger customer relationships, companies need to know how well (or how badly) their processes work. Where things are going consistently wrong, the process needs to be fixed, Bollen warned.

But if the problems experienced by the customer aren't attributable to company processes, there is a need to evaluate whether or not time and money should be spent trying to retain customers who are already lost, suggests Bollen. In any case, it seems that offering a free product or a discount by way of compensation is often not the best thing to do when a problem arises. Instead, as any loyalty marketer should know, the customer will only stay if they are made to feel valued by the company.

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