New warning: customers still taken for granted

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By: Wise Marketer Staff |

Posted on March 8, 2005

Many major companies are continuing the downward trend of taking their customers for granted, and the overall relationship between company and customer is getting worse, according to the 2004 annual survey and 'Customer Experience Management' (CEM) report from Strativity Group Inc., conducted in cooperation with CustomerSat Inc.

In the survey, more than half (59%) of senior executives claimed they do not deserve the loyalty of their customers (up from 45% in 2003), while 83% say they do not know their average annual customer value. Worryingly, 65% agreed that their executives do not meet frequently with customers (up from 54% in 2003). And, highlighting a serious disconnect between high-level executive strategies and employees' actual ability to execute them, only 31% of respondents said that they have the tools and authority to actually serve their customers.

According to the 2004 CEM survey, which questioned 212 senior executives worldwide, more than three-quarters (76%) of participants agreed that companies have put customer strategies higher on their agenda then they did 3 years ago.

"These results indicate a major vote of no confidence by executives, an inability to move from intention to execution, and an overall failure to deliver successful customer strategies," warned Lior Arussy, Strativity's founder and author of forthcoming book 'Passionate & Profitable'.

Relationship economics
When asked about the economics associated with managing customer relationships, the majority of executives did not have access to basic information: 83% did not know the average annual value of a customer, 89% did not know the cost of a customer complaint, 90% did not know the cost of total resolution, and 62% did not know their annual customer retention rate.

Despite focused attention from academia and the media directed toward the value of existing customers, and the cost of obtaining new customers, companies are still largely ignorant to the costs and revenues associated with customer relationships. In light of the cost-cutting going on at many companies, Arussy concluded that such a lack of understanding is amazing.

"Companies continue to pay a great deal of lip-service to their customers and customer strategies, yet very few of them can demonstrate long-term success in forming strong, sustainable, and profitable relationships with customers," said Arussy. "Our study demonstrates that, despite the recent pick-up in the economy, many companies have not improved their investment in customer relationships."

Employee loyalty
One-quarter of the North American executives surveyed said that their company was investing more in people than in technology (down from 38% in 2003). As a predictable result of this decline in human resources investment, executives are reporting diminished commitment on the part of their employees. The focus on technology - rather than people - and a lack of tools and authority have lowered the employee's experience in the workplace, resulting in a laissez-faire attitude.

Employees are normally being asked to do more as time goes on, and to do so with less resources (due to continuing cost-reduction). With the economy doing better in recent years, over-confident company management often see employees as being less significant than before. But, due to their own lack of knowledge regarding the economics of customer relationships, such managers apparently misunderstand the growing role employees play in the total customer experience. A common emphasis on productivity over quality (18.8% agreed that their compensation plans emphasize quality over productivity) has resulted in 42% of executives feeling that their employers do not deserve their own loyalty (up from 27% in 2003).

Superficial efforts
Despite acknowledging the importance of the customer, many companies' management remains committed in a relatively superficial way, Arussy concluded. Only 44% of the survey participants agreed that their company is truly committed to the customer (down from 58% in 2003), and in Europe that number dropped to 35%.

Other highlights of Strativity's research included that:

  • 57% agree that their company does not conduct a true dialogue with its customers (up from 55% in 2003);
  • 65% agree that their executives do not meet frequently with customers (up from 54% in 2003);
  • 54% agree that the role of the customer is not well defined (down from 60% in 2003);

A final warning
Finally, the survey found that companies have become less selective about which customers they work with, as 45% agreed that their company takes any customer that is willing to pay (up from 42% in 2003). Such a lack of customer selection (or at least the availability of selection criteria) implies acceptance of customers who may prove unprofitable or be a poor fit with the company's value proposition and price point.

If this continues, executives may find themselves dealing with discounting demands, margin erosion, negative word-of-mouth publicity, and higher-than-average service costs, Arussy warned.

The research was conducted via a structured, anonymous on-line survey, and the survey was created and hosted by CustomerSat using its ECEM (Enterprise Customer Experience Management) system. Data analysis was also performed using ECEM. The 212 survey responses were submitted by executives from the USA, Europe, Asia, and Africa, from companies representing a wide range of size.

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