Why businesses say they don't deserve loyalty

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By: Wise Marketer Staff |

Posted on March 10, 2004

Nearly half of executives polled say their companies don't deserve their customers' loyalty, according to a year-long global poll of corporate bosses by New Jersey-based customer relationship consultancy, Strativity Group Inc.

"Even as companies spend millions on customer initiatives and customer relationship management software and declare the importance of listening to customers, many executives acknowledge their customers are becoming strangers," warned Lior Arussy, CEO for Strativity Group.

The unknown customer
Some 45% of executives surveyed in the US, Europe, Asia, and Africa agreed that their companies do not deserve their customers' loyalty, while 55% percent agreed that their companies do not conduct "true dialogue" with customers. At the same time, 53.8% of executives said that they do not meet frequently with customers.

Alarmingly, only 37% of executives said they have the tools and authority to solve customer problems. While companies are focusing on ways to generate more revenue from customers, the 'core value proposition' is often diluted and undifferentiated. According to Arussy, not being able to deliver the required service is at the heart of the problem. More than half of the executives (59.6%) agreed that the role of the customer is not well-defined within the company.

"Lacking a clear definition of expectations from customer relationships causes a great deal of waste and confusion," Arussy noted. "Companies are selling to customers without knowing what they would regard as a successful relationship, or what kind of relationship they should stay away from."

No incentive
One worrying finding, given that so many executives thought their customers' loyalty was currently undeserved, is that only 32% of executives said their compensation is tied to quality of service provided to customers (often cited as an important indication of customer-centricity).

"Customers make judgments based on company actions, not company slogans," advises Arussy. "Companies must link compensation to quality of customer experience, and they must give executives real authority to address customer concerns."

Arussy added: "What use is a customer loyalty programme - or telling a customer he's a platinum member - when his frustration and alienation are building, and the only loyalty in sight is the company's own loyalty to its financial results?"

Other findings
Other findings of the Strativity Group study included:

  • 42% of executives said they will happily take any customer that pays, as opposed to selecting customers with a view to successful relationships in the long-term.
  • Only 36% agreed that their company invests more in people than in technology.
  • Europe may be worse off: Only 36% of European respondents agreed their company deserves the customer's loyalty, compared to 54% of US respondents.
  • The majority (82%) of those who strongly agreed that their compensation emphasises quality of service also strongly agreed that their company deserves their loyalty as an employee.

The survey of 165 corporate executives was conducted during 2003, and its findings are available from Strativity in an eight-page summary.

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