Too many options and not enough happy customers

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By: Wise Marketer Staff |

Posted on June 8, 2006

Customer loyalty is critical when customers have a whole world of options - thanks largely to the internet - and customers are making more and more decisions based on their experiences with retailers, according to research from AchieveGlobal, which also suggests some ways for companies to build more profitable customer relationships.

According to AchieveGlobal, companies that listen to and respond to the way their customers feel are most likely to earn long term loyalty, allowing them to weather market changes and overcome competitive pressures. Customers may forget what a company says and does, but they won't forget how the company made them feel.

As AchieveGlobal's CEO, Sharon Daniels, explained: "As commoditisation narrows the gap between competing products and services, customers are making more of their decisions based on how they feel about what they buy, and how the company treats them."

Quantifying 'at-risks'
With the risk of disappointing customers becoming increasingly serious, the company's research uncovered some worrying trends:

  • Ninety-one percent of unhappy customers said they won't buy again from a company that displeases them;
  • Dissatisfied customers said they tell 10-16 people about their negative service experiences;
  • It costs about five times as much to attract a new customer as it does to retain an existing one, according to AchieveGlobal;
  • Of those customers who had previously switched to a competitor, as many as 80% said that they were basically satisfied with the provider they left.

"Companies need to do more than satisfy customers: they need to make them feel good," warned Daniels. Indeed, it can be safely argued that customers who feel they are treated well will demonstrate their loyalty by resisting offers from competitors, by recommending the company to others (i.e. becoming advocates), and even by working with the company to resolve negative experiences.

Four loyalty tactics
Four key tactics identified by AchieveGlobal are aimed at helping companies improve their overall customer service experience, thereby earning greater customer loyalty:

  1. Loyalty is earned through a series of defining moments
    According to AchieveGlobal, a "defining moment" occurs whenever a customer forms an impression about a company. Successful companies identify and map all of these defining moments (or, at least, as many of them as practically possible) in a typical customer experience to determine how to make more of them positive and to anticipate or completely avoid negative experiences. Simple customer segmentation, without these metrics, is not sufficient to find and fix existing or potential problems.
  2. Customers judge defining moments based on specific expectations
    The company's research found that customers throughout the world value the same service qualities in their interactions with the companies they deal with: "seamless", "trustworthy", "attentive" and "resourceful". Delivering on these four expectations is therefore essential to creating positive defining moments.
  3. Defining moments are three-dimensional
    Customers experience each defining moment in three dimensions: the human aspect, the business aspect, and the hidden aspect. To help create positive defining moments, companies must meet the business needs of the customer quickly and completely, while also addressing the person's basic human need for respect, understanding and individual attention. Managers must also pay attention to the design of those processes and policies that are hidden from the customer but that affect the service interaction.
  4. Positive defining moments build a good service culture
    Even though the services that the company offers each customer segment may vary, success still depends on finding a way for each and every customer to experience the brand consistently. To be loyal to the company, customers must feel that the whole brand is on their side.

According to Daniels, customers demonstrate their loyalty in four key ways: retention, referrals, reputation and revenue. "By internalising these four key tactics companies can build deeper, more profitable customer relationships, which in turn will drive business results."

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