Many companies have admitted that they don't empower employees to solve customer problems, provide customers with a reason for loyalty, or analyse customer relationships by financial criteria, according to the '2006 CEM Study' by Strativity Group.
Although the executives surveyed said that customer strategies are more important than they were three years ago, the majority acknowledged that their employees "do not have the tools or authority to resolve customer issues".
No loyalty motive
Respondents admitted that they are selling commodities and that their core value proposition does not merit customer loyalty. According to company founder Lior Arussy, "Such an admission should serve as a wake up call to every executive to re-examine their core value proposition and ability to deliver differentiated customer experiences."
Poor state of affairs
The survey's results were worrying. Among the most significant findings:
- 60% of senior executives claimed they do not deserve their customers' loyalty;
- 51% of respondents claimed that their company does not deliver unique and beneficial products or services;
- 56% felt that their products or services are worth the price they charge;
- 34% said that they have the tools and authority to serve their customers;
- 75% do not know the cost of acquiring a new customer.
The study also found that 70% of companies believe that customer strategies are more important than they were years ago. However, basic execution parameters such as frequently visiting customers (34%), providing the necessary tools and authority to employees (34%), and strongly linking compensation with service quality (29%) are still sadly lacking.
Overall, the study suggests wide-spread ignorance regarding the economics of customer relationships. Although 75% of respondents did not know the cost of a new customer, a more worrying 81% did not know the cost of a customer complaint. Half (50%) did not know their organisation's annual retention rate.
Financial metrics needed
The failure to manage customer relationships on the basis of clear financial metrics may help to explain why some companies' strategic intentions fail to translate into sustainable customer-centricity: They simply do not invest the necessary resources and funds to establish long-term relationships because they are unable to justify them financially.
Empower the employee
The general trend observed by Strativity is one of diminishing corporate investment in employees, ultimately leading to the curtailment of the employee's ability to execute effectively the customer strategy. For example:
- Only 29% of respondents indicated that their compensation plan emphasizes quality of service and not just productivity;
- Only 34% of respondents claimed that their employees have the tools and authority to solve customer problems;
- Only 30% of respondents agreed that their company invests in people more than in technology.
One major problem, the survey found, is that companies continue to declare their commitment to customers while not fully comprehending what that commitment really entails. As such, customer experiences are commoditised, employee readiness is limited, and strategy execution is insufficient.
This failure to deliver a differentiated customer experience leads, inevitably, to the failure to command premium pricing, influence consumers' preferences about companies and products, gain a greater proportion of each customer's budget (share of wallet), and ensure the permanence of customer relationships and loyalty.