Nearly 40% of the United Kingdom's mobile network subscribers are at risk of defecting to competing networks during the next 12 months, with only 12% saying they're truly loyal to their current provider, according to a study of loyalty among UK mobile subscribers by WDS.
The 'WDS 2013 Mobile Loyalty Audit', which included survey data from research firm TNS, has worrying implications for mobile operators, having found that 38% of UK subscribers are considering leaving their mobile operator, and that the loyal 12% (only 1 in 8 customers) are the only ones who are likely to forgive service disruptions and resist competitive offers.
The audit used 'stress tests' to show the impact of real-world disruptions on a customer's propensity to churn, providing a realistic view of the level of loyalty that actually exists among mobile customers. When tested, customers' positive sentiment toward not switching was found to be easily reversed by several scenarios.
For example, when asked what would happen if their current mobile operator increased prices by 10%, two thirds (67%) of customers who were previously unlikely to switch said they would consider leaving, while 14% would switch immediately without further consideration, and even 57% of previously 'highly satisfied' customers would also consider switching (and another 13% of that group said they would leave without hesitation).
Competitive offers are also a key motivator for churn. When asked what they would do if another mobile operator could reduce their monthly bill by 10%, only one third (34%) of customers who were previously unlikely to switch could guarantee that they wouldn't leave for that kind of saving.
But the worst offender causing churn is neither competitive or pricing-based. When asked what would happen if their current mobile provider experienced a data/privacy breach, 85% of those that said they were unlikely to switch would consider leaving, while 42% of all customers said they would switch immediately without further consideration, and 39% of currently 'highly satisfied' customers would also switch immediately.
The study suggested that the number of customers at risk of churning may be significantly underestimated by mobile network operators, and that the use of existing measures of loyalty - such as customer satisfaction surveys or Net Promoter Scores (NPS) - may be too simplistic and potentially misleading. For example, the audit found that 17% of customers who were considered a 'switch risk' were actually highly satisfied with their mobile operator, and 15% of switch risks were classified as NPS Promoters.
Two of the key reasons that churn is not already much greater in the industry are the twin problems of apathy and momentum. The audit found that one fifth (20%) of all customers who planned to stay with their current operator for another year were doing so not through any sense of loyalty but because they feel that "all mobile operators are the same" and that there is no benefit to switching.
"We've been measuring loyalty in a vacuum, assigning retention budgets based on customer sentiment and an out-of-date notion of what loyalty actually is," said Tim Deluca-Smith, vice president of marketing for WDS. "A customer might say that he is satisfied or that he has no intention of switching, but how does that sentiment change when there's a network outage or his monthly tariff increases? Loyalty means more than just a customer's intent to repurchase - this is only as good as the next handset subsidy or price discount. True loyalty creates customers that are forgiving when things go wrong and resistant to competitive offers."
The research also debunked some of the common myths around customer churn. In particular, the idea that customers switch providers primarily because of price, availability of devices, or network coverage. Across each of these, the majority of at-risk customers were actually satisfied with their current operator's performance. Only 25% thought they got poor value for money, while 21% thought that network coverage was poor, and 13% thought that the availability of new devices was inadequate.
Instead, it seems that operators are failing to create feelings of "value" and "reward" among many of their customers. More than 40% of those at risk of switching felt that they weren't valued or rewarded by their provider. In fact, the data showed that if a customer doesn't feel valued they are more than twice as likely to become a switch risk.
Finally, the study examined how some service elements are more influential in building - or damaging - customer loyalty than others. While a single interaction with customer support is relatively benign in its loyalty influence, customers that have to contact customer support more than once in a six month period are twice as likely to be a switch risk. And getting any kind of care interaction right is critical: a customer who rates the performance of customer care as 'excellent' is nearly four times more likely to be secured beyond 12 months than someone who rates the experience as 'poor'. Basic network hygiene factors are still vital, too, with 73% who rated network coverage as 'excellent' being unlikely to switch providers.
Retention budget can therefore be better deployed, and many mobile rewards programmes are clearly not producing the kind of long term loyalty expected, as 82% of customers felt they weren't adequately rewarded through existing programmes.
"Building trust, developing a sense of value and sustaining strong customer service are fundamental to securing long-term loyalty, especially given the level of parity that exists between operators' pricing strategies and network performance," concluded Deluca-Smith. "Satisfaction alone is no longer enough - in fact it's become little more than a cost of doing business. With only 12% of UK customers having the level of loyalty necessary to insulate them from competitive offers and service failures, understanding who these customers are can help operators understand their churn risk factors and deploy retention programmes that build a more resilient and emotional tie between the customer and the brand."