A satisfied customer is eight times more likely to switch to a competitor than a delighted customer, according to research published by US-based brand awareness consultancy Delia Associates.
In today's market - and particularly in service industries - when customers say they are "satisfied" they are still at risk of defection to a competitor that offers a better value proposition or promises better service.
The true costs of churn
In a recent conference presentation, Bob Harris, president of Attrition Busters, warned that replacing lost recurring revenue is an expensive business. The cost to replace US$1 of recurring revenue in the average service business is approximately US$33. In the insurance/finance services business, that cost is estimated to be US$57. And in the telecommunications business, it's approximately US$84.
And according to Ed Delia, president of Delia Associates, most unhappy customers will never come forward and say they are less than satisfied. In fact, Harris warned, approximately 96% will never say a word about it, instead choosing to simply disappear and move on to another service provider.
Hidden problems exposed
And when one customer from the small (but often vocal) 4% comes forward with a complaint, an average of 26 more silent customers have the same complaint. Many businesses - and their customer service agents - may be in danger of trivialising complaints that seem insignificant or even isolated in their nature, not realising that the problem is probably 26 times bigger than it appears to be.
So customers who complain are actually our best friends, and are to be thanked with the greatest sincerity for taking the time and trouble to give us the greatest gift of all: honest feedback on what's going wrong. According to Harris, speaking at the recent Attrition Busters conference: "The customers we lose hold the information we need to succeed."
The approach suggested by Delia Associates is simple: When a complaint comes in, "jump all over it". Ask lots of questions and really listen. Show the customer with decisive action that you heard and understood their message. "This is how you delight a customer and turn your worst complainer into your most loyal advocate," said Delia. "And this is why being relentlessly brand-conscious is so important."
Branding tactics also help to remind customers why they are doing business with you in the first place. Without that reinforcement, they will eventually find excuses and external motivations to drift away to competitors. Delia explained: "This is why I believe branding is more valuable in retaining the customers you already have, than in attracting new ones. Just like the customer acquisition vs. retention argument, brand loyalty is easier to maintain than it is to create."
Deselection must be intelligent
But Delia also has some concerns about the increasingly-used technique of 'customer deselection': it must be intelligent deselection, not indiscriminate (or even worse, based on 'gut feeling'). In general, only when a customer is found to be a definite drain on the company and there is no hope of altering their behaviour should they be deselected (often referred to as "firing the customer").
So deselecting customers because of their long record of complaints is the wrong approach, as long as most of their complaints are valid and help the company to correct its processes, products and services. These are the very people who can help turn a brand into one that delights customers, rather than merely satisfying them.
So how can a brand really delight customers? First, Delia suggests, we have to remember that the brand is not just a name. It's the company's personality. It's the company's core identity that determines the way the company is perceived by customers. It's the company's emotional "soul" (see 21 Apr. 2006).
According to Delia, the way to delight customers (in addition to the basic factors of reliability, trustworthiness, and efficiency) is to use and promote the brand's unique identity at every point of contact, and to make it stand for something that the target customer segment truly values, always using it to reinforce all the reasons they chose the brand in the first place.