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Bad experiences drive away 65% of consumers - often forever
Author: Niki Harwood
April 27, 2006
Poor customer experiences are damaging businesses, with 65% of consumers saying they stop dealing with a business after a bad experience and 27% saying they would never return, according to a survey of British consumers, commissioned by RightNow Technologies and conducted by Harris Interactive. But the survey also found that good service has a strong impact on customer loyalty.
In terms of industry sectors, survey respondents indicated that their worst service experiences had been with telecoms providers and the public sector, while their experiences with the retail sector had been the most positive.
There has been a major shift in how American consumers behave when they go shopping in the current ‘never normal’ retail environment, with cut-backs being seen in most categories except for necessities, according to the latest ‘How America Shops’ study published by WSL Strategic Retail.
The American shopper’s mindset has shifted since 2001, reflecting what WSL describes as a "never normal" retail environment. As a result, the report says, consumers have become more anxious, cautious, and calculatingly price-conscious. Many have reduced their spending across most of the key indicator categories measured by the How America Shops bi-annual study. nharwood This article is copyright 2006 TheWiseMarketer.com).
By "never normal", retail consultants Wendy Liebmann and Candace Corlett refer to a retail decade in which shoppers seek safety and security in their day-to-day lives, as well as in their shopping life. "After 9/11, consumers found themselves in a ‘new normal’ retail landscape, as we reported in ‘How America Shops 2004′, but today they reel in a ‘never normal’ world rife with shocks that range from corporate scandals, war and tsunamis, to hurricanes, see-sawing oil prices, and more," explained Liebmann, WSL Strategic Retail’s founder and principal.
Main loyalty driver
Overall, consumer spending is down, while the frequency and variety of shopping trips has held steady. According to WSL, the retail landscape has reached a state of saturation, and service has re-emerged as a leading consumer demand and loyalty driver.
Reacting to these uncertain times, women have reduced their spending across six key expenditure categories (shopping, savings and investment, education, leisure travel, entertainment, and ‘on myself’) by a net average of -17 points.
Limited increases
And, while ’shopping’ was the only category to show a net spending increase (+6 points), these purchases were on necessities, including food, medicine and pets. In contrast, spending fell sharply for discretionary categories such as cosmetics, fragrance, and home decor.
Of the fourteen leading indicator categories surveyed, only pet supplies (+19 points), food (+18 points), and prescription medications (+18 points) showed substantial net increases in spending over the previous year’s study.
"There were dramatic declines in everything from cosmetics to computers. But this isn’t necessarily about using less or doing without," explained Corlett. "Rather, it’s about smart shoppers buying at the lowest price, travelling further to save money and trading down to lower-priced brands."
Frequency unchanged
While consumers spent less overall, they still shopped at almost the same number of outlets (3.6 in 2006) each week as in 2004 (3.4) and made the same number of weekly shopping trips (3.9) in 2006 and 2004. According to Corlett, shopping combines both necessity and entertainment, so while consumers may have to less money to spend, it doesn’t always affect their enjoyment of the shopping experience. But today’s women shoppers are the most price-conscious, and are less willing to pay a premium for convenience than in previous years.
While anxiety impacts all income groups, a growing gap has emerged and widened between locations where the affluent and lower-income consumers shop. For the first time in many years, WSL reports that the choice of shopping location is now largely determined by how much money a shopper has.
According to Liebmann, "Throughout the 1990s and the early years of the 21st century, consumers of all income levels shopped through most retail channels. In fact, Wal-Mart drove this phenomenon by letting low-income shoppers know that they were entitled to name brands at low prices. Then Target taught them they were entitled to great design at low prices everyday. At the same time, higher-income shoppers stretched their dollars by shopping at discount and club channels. But today, most shop where they can best afford things without undue temptation."
Channels stagnating
According to WSL, retailers can no longer expect to gain new shoppers in the coming years, as retail reach has been maximised. This means that retailers will soon need to focus more on building shopping frequency and transaction size.
Until 2006, many channels (including the supercentre, warehouse club, dollar store and the internet) consistently attracted a broader base of shoppers year-on-year. But when WSL asked where consumers had shopped in the past 90 days, there was little growth since 2004 in the percentage of people shopping through any of the channels.
New loyalty drivers
The firm’s studies have shown in the past that the key to building lasting customer loyalty has moved beyond the usual factors of price, product and location. Emotional factors, such as "a good place to spend time browsing" and a place that "attracts customers I feel comfortable around" now play a key role.
But what matters most to shoppers now, the survey found, is "service with respect". According to Corlett, service with respect has become the foundation on which store loyalty stands: "Women want bargains, to accomplish a lot in one trip, and to get interesting items, but if the level of service and respect is found wanting, none of that matters."
The study was based on interviews with 950 consumers (760 women and 190 men, aged 18-70).
wisemarketer.com
Reinvigorated Customer Perspective
Author: Aaron Huston
April 26, 2006
I have been the victim of some really bad customer experiences recently, to the point that I generally started to dread the thought of any new purchases I had to make - as I knew any vendor I chose would eventually let me down and leave me frustrated.
Then, several days ago a colleague of mine passed along a web link to the 2005 Copernican Award Winners. This award is given out to customer-centric companies that deliver a superior customer experience. I have been a customer of a couple of the winning organizations in the past.
Browsing the 2005 award winners article and related links, I was led to the upcoming 2006 Copernican Award Candidates article. Upon reviewing this list, I realized that I have been a customer of at least one candidate from each award category at some point in the past as well.
From this, I even recalled a couple of companies that I am a current customer of that do get it, such as Vonage - who provides stellar services at low prices and leaves me expounding its virtues to my family and friends.
Ultimately, reviewing last year’s winners and the candidates for this year’s awards reminded me that there are still companies out there - even if they seem to be in the ever-shrinking minority - that do care, that do strive to provide a superior level of service, and that consistently deliver an experience that keeps your returning to them as a loyal customer - with a smile on your face.
Thinking about this, and these customer-centric companies, left a smile on my face too.
Measuring customer satisfaction
Author: Siobhan
April 25, 2006
Some insight from Jack and Suzy Welch on customer satisfaction. Truly loyal customers will not only stick around, but also encourage others to become customers as well.
Can You Trust Good Customer Service?
Author: Anne McLain
April 24, 2006
Let’s face it. SBC and AT&T don’t get high marks on the customer experience meter. But I have to admit, their new partnership may be having a positive effect. I just had a second phone line put in at home. I ordered it on a Thursday. They promised hookup by Tuesday. On Monday, they called to say they’d be out between 8am-12pm the next day. Tuesday morning at 9am, the technician called to say he might be there closer to noon (although we didn’t need to be home).
He arrived around 10:30am, came to the door to introduce himself, and shook my husband’s hand. He quickly finished the work outside and our phone line was ready. How refreshing! Later that week, the line was dead. Ah, could the great service be a fluke? I knew the phone company couldn’t be trusted! We sent an online trouble ticket. A technician called within 15 minutes and said he’d be there within 45 minutes to check things out. He was there within that time and in a few minutes, our line was restored (cause: unrelated construction work down the road).
Wow! It made me feel so differently about our phone company. But I still don’t know if this good experience makes me trust them. I am “satisfied” with the work done but the proof will be in the pudding with future encounters. Good going, SBC/AT&T. Now, keep it up! Anyone else out there have a good experience with them?
Talking about BAD customer experience
Author: Luis Serpa
April 21, 2006
A Man in Malaysia Gets $218 Trillion Bill. How does something like this get past the billing department?!?
See here the story here.
The Best Advertising?
Author: Aaron Huston
April 20, 2006
I listen to NPR on my daily commute and yesterday I heard a piece by Robert Reich, on an ad agency, working for GM, that reportedly offered him money to comment positively on a GM employee pension buy-back program.
Reich was not amused - and made the point that this was, in effect, bribery. GM commented that neither they nor their advertising suppliers/vendors conduct business in such a manner. The ad agency said this was all a misunderstanding. I don’t know the facts in all this, but I’m inclined to believe Reich’s view of the situation.
What’s this all got to do with a better customer experience? Plenty! If you even think that someone is deliberately lying to you, or circulating lies, you’re not going to trust that person, right? And trust is the very first thing you’ve got to have if you’re going to engage customers. Without trust - no engagement. Without engagement - no good experience. Without a good experience - no loyalty.
Any company that tries to influence public opinion by paying for positive messages through supposedly impartial third parties has got to expect a horrendous public opinion backlash. On the other hand, maybe GM doesn’t have much to loose. Their loyalty rates for repeat buyers are abysmally low.
There is a glimpse of good news on the horizon though. DuPont has officially endorsed the Word of Mouth Marketing Association (WOMMA) Code of Ethics, making it applicable to all sales and marketing employees and vendors. With a Fortune 100 company coming on board, that’s a big boost for transparency in advertising practices.
Customer Experience, ready for takeoff!
Author: Anne McLain
April 19, 2006
UAL (United and Ted Airlines’ parent company) just created a new post, VP of Customer Experience. It’s about time! Besides safety, the customer should be every airline’s primary focus. Finally, we may soon rank higher than a bag of peanuts.
Shopping and Politics
Author: Jack Borland
April 17, 2006
I noticed an interesting Business Week article, Companies in the Crossfire, through a RetailWire synopsis/thread discussion this week. There are a number of good thoughts in both the article and the posts on how consumer activism is affecting companies. These break down into 3 major issues:
1 - Is shopping becoming more politicized?
Given that vocal minorities are finding more and better ways to get their message out I’d say yes. However, the take-away for the manufacturer/retailer/service provider seems to be that good ethical business practices will keep you out of the majority of controversy.
Walmart’s shifting some product like Brokeback Mountain DVDs from front-of-store POPs to the general shelves, and dropping product from some stores based on community response shows a good model for how a general merchandiser handles these issues. Walmart doesn’t have a stand on the morality issues of the film, and they’re not caving in to the "Moral Majority" - they’re just addressing the interest or lack thereof in local communities for the product.
2 - Should companies invest shareholder dollars in political contributions?
To my mind Jim Senegal of Costco has it exactly right. If management compensation is properly structured, then they’ll put their personal money behind political issues that are meaningful for the health of the company.
Company funds used for issues seem to break out into a couple of buckets: a) the large bucket of corporate Political Action Committee (PAC) donations which are political / regulatory relief issues; and b) advertising/branding/corporate philosophy stands on topical issues such as pro-/anti-gay rights or pro-/anti-gun control.
In the PAC case, I’d suggest that senior management benefits more strongly than investors. These individuals get access to politicians, and career and networking benefits through that access - while the trickle-down to the average investor is very limited. Wendy’s Denny Lynch says it all with his comment that Wendy’s PAC is party-neutral, they just fund whoever is in power.
Also, many times when I’ve noticed a company taking a stand on a topical issue my general impression is that this is an effort to spend dollars marketing to a niche segment rather than a well-thought out extension of the company brand.
3 - Is there a benefit to shareholders to their company taking a political or issue stand?
I’d answer this with a qualified yes. Companies should research their [loyal + profitable] customer base to find additional ways to retain their loyalty and attract like-minded prospective customers. If one of the key findings is a propensity for one side of an issue, then there’s a big up-side to weighing in on the issue. Stated in this fashion, the argument sounds somewhat cynical - but when executed correctly it really isn’t. Think of Avon’s support for breast cancer research.
The corollary here is that if you are not attempting to segment your market and then address the needs of a both loyal and profitable segment, then there’s really no benefit to taking a stand on an issue.
Think about the American auto makers, with their dealership on every corner and abysmal loyalty rates. GM or Ford wouldn’t benefit from supporting specific causes because even if they do know who they’re selling to, they’re not keeping them loyal after the sale.
Lexus takes a diametrically opposite approach to segmenting and selling in the automotive market. Lexus could benefit from overt political support for an issue if a) they found their rock-solid customer base was strongly behind it; and b) their prospective customers were also strongly supportive.
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If you do take a strong stand on a controversial issue, be sure you know why you’re doing it, and how it fits in with your overall brand strategy. To do it right research your loyal and profitable customers!
Why Should A Bank Be Like An Auto Dealership?
Author: Jack Borland
April 13, 2006
J. D. Power and Associates is known best for their auto industry customer satisfaction awards. They recently conducted a study of the banking industry and identified two key issues:
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Loyal customers are more profitable; and,
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Not all customers have a propensity to be loyal.
Is this a big surprise to anyone? Well actually it may be – most of the smaller community banks I speak with do focus on providing high-personal touch services for both their consumer and commercial clients. In fact, the community bank market prides itself on providing superior customer service. But time and again, what I hear from them is that they aren’t taking a hard look at identifying and communicating with their most loyal customers.
How can you figure out how to deliver products and services to keep your premiere customers if you don’t talk with them about what they want and what they need? Understand, I don’t mean you should deliver poor service to your lower value customers. Instead, fine-tune your offerings and your communications so that your highest value customers, your customers with the most propensity to be loyal, have the strongest possible experience.
Think about the auto market for a minute. In the late ’80s Lexus and Acura both were new luxury brands with high-touch, high-service strategies. A key distinction was how they defined their target customer bases. Lexus went after customers with a higher propensity to be loyal - Cadillac customers. Acura more opportunistically targeted younger professionals who’d been buying BMWs and Mercedes. While Lexus had a harder time acquiring their customers, those they got were much more loyal, resulting in higher revenues and profitability for Lexus.
Banks should be thinking about the same issues - how do we identify those customers with a propensity to be loyal? Look first at your most profitable existing accounts, speak to them, and understand what keeps them loyal and what would make them switch.
A customer-centric country
Author: Bill Cusick
April 11, 2006
I recently spent a week with my family driving around - very poorly, I might add - the lovely country of Ireland. It’s my native land, from a few generations back, and we wanted to smell the air of my ancestors. There were thatched huts, and rocky coasts, and sheep, and winding roads with no signs, and weathered grave stones, and hand-drawn guiness, and drizzle, and rope bridges, and tin whistles, and ancient forts and castles, and tasty and tasteless food. It was wonderful.
But more than anything, there were people who made us smile. People wearing twead coats and sensible shoes and grins. Whether in backwater village or the middle of Dublin, people were unfailingly pleasant, eager to chat, and eager to offer directions (convoluted though they might be) or recommendations on where to find the best live music, or pizza, or petrol.
Would I go back? In a hearbeat. The countryside was lovely, the pubs were welcome havens, but more than anything, the people seemed to want us to be there. There’s no science to it. They were just pleasant and sincere. And when you think about your experiences with companies, isn’t that really the primary reason you want to stay?
