By Lior Arussy, Strativity Group
Imagine that you are about to open a savings account with the promise of a new microwave as a reward for your decision to do business with the bank. While the offer might sound great, the "suspicious" customer in you will likely ask if there is any "catch". When the bank representative explains that acceptance of the microwave will lead to a lower interest rate on your account, you will then have to decide whether or not you want to take the deal.
These catches are not limited to the banking industry. Virtually every deal presented to us by myriad of companies with whom we do, or might do business comes with a catch. The same holds true with corporate efforts to reduce costs. Whenever companies offer seemingly incredible deals with amazing savings, we rarely stop and ask companies if there is a catch. All too often, we only discover the catch when it's too late. When time permits, ask Delta Airlines why they decided to move their lower cost offshore call centers back to the more costly United States during the economically challenging year of 2009.
Is customer loyalty dead?
We recently conducted a study among 1,994 consumers in the US and Canada. The purpose of the study was to discover if customer loyalty is dead due to the challenging economic conditions that most consumers currently face. The report revealed that customers are paying careful attention to the experiences they receive from companies with whom they conduct business, and are rewarding or penalizing those companies accordingly. Some pertinent findings include the following:
- Share of wallet: More than 70% of consumers surveyed indicate that they are willing to spend 10% or more with businesses if those businesses exceed their expectations.
- Customer retention: Loyal customers are almost three times as likely to expect to continue doing business with companies for another decade or more than dissatisfied customers. Dissatisfied customers are 10 times more likely to expect to attrite during the next 12 months than their loyal counterparts.
- Premium pricing: 40% of loyal customers said they are willing to pay 10% or more to continue purchasing from companies delivering great experiences, in contrast with 9% of dissatisfied customers. Meanwhile, 52% of dissatisfied customers expect discounts of 5% or more to continue doing business with a company. Loyal customers do not expect discounts.
Although challenging economic conditions and a reduction in purchasing power have increased price sensitivities among consumers, many continue to demonstrate loyalty to those vendors that continue to provide exceptional customer experiences. In the survey, customers were asked to rank their most important aspects of the experience. We then correlated these responses with their likelihood to purchase additional products and services from vendors. The aspects and touch points of the customer experience that are most likely to generate additional sales of products and services from consumers include the following:
- Quick and effective issue resolution
- Common sense and discretion
- Employees who exceed expectations
- Retail stores
- Call centers
Interestingly, the factor that did not make the aforementioned list is the self-service channel. While customers are willing to demonstrate loyalty to those companies that treat them well, they do not perceive the self-service channel as being a prominent factor in the overall customer experience.
Self-service
Now, before I'm bombarded by claims from self-service technology providers that their solutions do indeed influence customer loyalty, give me a minute and hear me out. There are two inherent challenges with self-service solutions. The first challenge is that, for many consumers, self-service is perceived as a commodity and not a competitive or experiential differentiator. While a poor self-service solution can negatively affect customer loyalty, rarely will it substantially increase it
The second and more critical challenge is that with self-service solutions, customers serve themselves. They do internalize that they are receiving any value from their vendor. Since customers are primarily loyal to those that serve them, when customers use self-service solutions they are simply loyal to themselves!
This brings me to the savings account offer that I cited at the beginning of the article. Many executives willingly rush to implement self-service solutions because of their self-serving agenda to reduce operating costs. All the while, they neglect to examine the positive or negative impact of such solutions on customer loyalty. They often erroneously assume that they can reduce headcount, have customers do more of their work and loyalty will at best increase or, at worst, remain relatively unchanged. Therefore, they are unwilling to invest in the innovation of the self-service channel so that they may provide customers with real self-service value.
Instead, they are content with automating processes so that customers will act as their own customer service agents. This is the stage where companies lose customer loyalty. The challenge that companies face is in creating innovative self-service solutions that add true value to customers. Innovative self-service solutions that surprise delight and engage customers will easily exceed their already low expectations for self-service mediums.
Ultimately, customers are loyal to those companies who serve them well and add value to their lives. If you ask your customers to do your work, do not be surprised when customers attrite or seek discounts and other give-aways in return. If you are ready to innovate your experience with proactive services and customized options that will make the self-service channel a unique experience then you will be rewarded with greater customer loyalty.
It's time to stop speaking the language of cost reduction when thinking of self-service and start speaking the language of innovative experience!
About the Author
Lior Arussy, founder of Strativity Group, is an author, visionary, consultant and creative catalyst in the areas of creating delightful customer experiences and executing profitable customer strategies. For his thought leadership and contribution to the industry, Mr. Arussy received CRM Magazine's "2003 Influential Leaders" award and served as a juror on Fast Company's Customer First Awards 2005.
He is the author of four books including: Excellence Every Day; Make the Daily Choice and Passionate & Profitable: Why Customer Strategies Fail and 10 Steps to Do Them Right! In addition, he has published over 50 articles in publications around the world including at the Harvard Business Review. His accomplishments have been recognized by leading press and analysts such as ABC, The Wall Street Journal, Financial Times, The Times of London and Gartner.