Why do companies seem to have given up on attempting to retain customers? Why do I now feel ashamed to mention my early career in marketing? Where did it all go so wrong? The answers are rooted in many short-termist, introspective and isolationist policies on the part of management. Businesses are not by and large run on a holistic basis and are frequently focused on strictly functional issues.
On average, US corporations lose half their customers every five years. Research by the US Customer Care Institute reveals that:-
- Seven out of ten customers who switch from one company to another give poor service as the reason.
- Dissatisfied customers tell twice as many of their friends and families about poor service as do satisfied ones.
- It is five times more expensive to gain a new customer on average than it is to satisfy an existing one.
Recurrent studies have found that the longer a customer stays with a company, the higher the profits generated. This is not new and my time in businesses large to small tells me we are no different here in the UK. The following are but a few of what are sadly common barriers to customer loyalty:
- Building labyrinthine complexity into pricing plans – have you tried to decide which the best value mobile phone tariff is recently? Do you believe that any phone company genuinely offers its multitude of pricing plans so that we have more choice and will be more satisfied? Is it any coincidence that we have to threaten to move supplier before being offered a better tariff? If you do think so, move along now, nothing more to read here.
- Outsourced ‘Customer Care’ departments – a trend that started 30 years ago and one that is till going strong clearly treats engagement with customers as peripheral and no more worthy of direct involvement than cleaning the office washrooms. It’s not merely cultural or language differences that are created when you move your customer interaction functions to India (or toGlasgow or anywhere outside the company), it’s the creation of a total barrier that isolates management from the true customer experience.
- Moving to part-time staff – some staff appreciate the ability to work part time but many have this practice forced upon them. The ultimate extension was that most cynical policy, the “Zero Hours Contract” where staff is guaranteed no work hours at all, merely being required to respond at short notice when required. In a well-documented and infamous variant, staff in a well-known hamburger chain was required to sit unpaid in the staff room when the restaurant became quiet. Any guesses as to how they felt about this practice? Research has shown that retail chains that stayed with full time staff experienced higher customer retention and higher profits than chains that turned to part time working. Full-time staff was also found to be more loyal to their employer, more knowledgeable and was rated more highly by customers. It is no coincidence that good staff retention goes hand-in-hand with above average customer retention.
- Creating loyalty premiums – many years ago I found to my horror that the interest rate on my hard-earned savings had been dropped to near zero by a certain northern British bank; my account, once paying a top interest rate was now classified as ‘obsolete’. Hitherto unknown, this practice quickly became commonplace amongst our banks and building societies and the public quickly learnt to check rates and shuffle their savings accordingly. How can the banks have imagined that this insidious technique would engender loyalty? Instead, having inflicted this monstrous, zero sum game of monetary musical chairs upon us, we, their customers are now referred to as ‘rate tarts’! Having rapidly moved my money, I watched the fortunes of this bank soar and then noted with grim satisfaction when they became the first to be exposed as insolvent in 2008.
- Inflexibility of some industries – if I want to buy a car, I can choose from a vast range of standard product offerings (all capable of easy price and performance comparison). If I wish to wait longer and customise my new vehicle then I can choose from a vast range of options to turn it into something that as closely meets my needs as it is possible to get. In comparison I remember an almost surreal conversation with my local bank manager some years back. No, I didn’t want free breakdown service, travel insurance or yearly meetings with a financial adviser. All I wanted was a stable interest rate for my savings (e.g. linked to the base rate) and the phone number of the branch manager to ensure I got problems resolved easily. At the time I had business banking for three separate companies in addition to my personal accounts, so I wasn’t quite at the bottom of the pile. After an hour of wrangling (I was bored that day) I managed to get the phone number (after I ultimately promised only to use it in the direst of emergencies). No rate guarantees though. Nothing else. And the phone number was a pyrrhic victory; a few months later the manager moved and the phone was diverted to the call centre.
- Drip Pricing’ – I have blogged before on this subject (‘Don’t be a marketing drip’) but I am still amazed at how more and more companies are using this technique to pad out the price of a purchase. It is common to find that on a like for like basis the ‘low cost’ airline is more expensive than the ‘full cost’ one.
- The small print – entering into any form of business with a bank, insurance company or many of the largest companies really requires the service of a commercial lawyer to unravel the terms. It is quite beyond the capabilities of the average consumer to understand this legalise jargon. The banks and some insurance companies are also now following the lead of our politicians and issuing ‘amending terms’ which require you to sit for hours comparing documents and deciding what effect the simple change of one word has on a clause. Pure obfuscation.
- Complete dishonesty – No other way to put it – some companies simply lie or knowingly promise more than they can deliver. Some examples: a mail order company advertises a product knowing full well that if they don’t get x number of orders they won’t either place an order for the goods from their supplier. The airline tells passengers that the flight will depart in 30 minutes when in reality they simply don’t have any idea when the necessary parts to fix it will arrive. The travel company offers flights toNew York “from £329” knowing they have no flights available at anywhere near this price.
Some companies have improved to the extent that they are shining examples. After a recent visit to a Jaguar dealer I found a slight scratch on my car (it simply polished out, no harm done) when the customer feedback email arrived I mentioned the scratch. Firstly, I got the service manager on the phone for half an hour, genuinely concerned, very interested in both my car and me. I was quite satisfied with his apology but accepted the offer of a no-charge valet when next passing. A few days later I received another call from ‘Jaguar’ extremely concerned and courteous, wanting to know if I was satisfied. The matter of the scratch resolved, he passed on to seeking my opinions on the car and again we chatted for half an hour. Being suspicious, I quizzed him as to where he really worked. Not only did he convince me he actually worked for Jaguar’s design department but insisted I took his full name and phone number in case I ever needed assistance in future.
Eating my lunchtime sandwich one day, I took to reading the small print on the receipt I had received with a delivery from Lands’End (I really do get bored easily). I discovered that they offered to repair any item of their clothing that might have become damaged – whatever the reason or age of the garment. I sent back an old favourite casual shirt that had a torn seam and, sure enough, a week or so later, it came back completely repaired with a compliment slip. A perfect generator of customer loyalty.
Do you recognise any of the above practices? Do they happen in your company? Or do you have any shining examples of companies that really set out to build customer loyalty?