Just as companies think they are edging ahead in the race for customer loyalty, many are discovering they are being overtaken by changes in consumer attitudes and expectations.
Most brand managers and company directors list customer service and building consumer loyalty as top priorities. Yet, in a competitive world driven by new technology and the Internet, what was an acceptable level of service five or ten years ago may no longer be good enough today.
The results of a new survey reveal that even organisations with the best reputation for service fail to get it right all of the time. Many businesses do not fully understand how their customers view their relationship with the company, while others fail to react adequately when that relationship deteriorates.
The report, Twenty-first Century Customers: Hopes and Fears, was conducted by loyalty marketing company Evans Hunt Scott (EHS) for ICL, an IT services and customer relationship management business.
EHS, which has created and managed loyalty programmes such as Tesco Clubcard and Thomson Founders Club, finds that in most instances consumers will remain loyal to organisations they feel they can trust and which provide basic levels of customer service. These include having helpful and knowledgeable employees and enough staff to cope with demand, ease of access such as flexible trading hours, no quibble refund policies and an appropriate recovery strategy when things go wrong.
In fact, consumers will put up with an occasional bad experience if they know that more often than not the service they get is good. If a mistake is handled well, this can cement a relationship more than error-free service from a company that shows lack of interest in its customers.
The survey also found that even the most traditional of consumers can handle the drive towards automated services – fuelled by the growth in call centres and Internet shopping – as long as the technology is simple to use and the service benefits are obvious.
EHS planning director Debbie Ramsay says that earning customers’ trust is the foundation of any strategy to build long-term loyalty. “There are crossovers between the trust and respect people expect in their personal lives and how they expect to be treated by companies,” she says.
A notable finding of the EHS survey was that none of the respondents considered any company or sector to offer the best or worst service, although some sectors have acquired specific reputations and several companies were consistently regarded highly, with Waitrose and B&Q both singled out for praise. One in seven respondents felt unable to nominate any company that provided excellent service, although 52 per cent felt that none of the companies they dealt with fell into the “very poor” category.
Financial services companies, the multiple grocers and larger department stores, such as M&S, are thought of as leading the way in service, while the opposite is true of train operators and local and central government. Surprisingly perhaps, privatised utilities came fourth in the positive list, while the telecoms sector was only saved from being lumped with the poorest performers by the positive view that many consumers have of BT.
The mobile phone companies (including BT Cellnet) were criticised for their complicated tariff systems, and were perceived as being concerned about themselves at the expense of their customers, a feeling that is probably fuelling consumer promiscuity in this sector.
BT is a good example of how it is almost impossible for large organisations to please everyone all of the time, as it topped the “heroes” poll for having the best reputation for good service, but was also placed number one on the “villains” list.
Tesco, M&S, Sainsbury, Asda and British Gas hold the other leading positions in the perceived best service chart but, like BT, these companies also feature in the worst top ten – which may be a reflection of the negative publicity they have been receiving in recent months.
Ramsay says: “Some companies’ appearance in both tables demonstrates that they find it difficult to offer a consistently satisfactory level of service or are unable to target their service to reflect the needs and desires of individual customers. It also shows that attempts by organisations to boost loyalty by openly trying to show they care about their customers are seen as dynamic by some, but intrusive by others. An example is BT calling people at home to tell them they could save money by switching products or services.”
Ramsay points out that organisations may be failing to offer good service to all their customers because of the lack of staff training. She says that after privatisation, companies such as British Airways and BT – and after deregulation, the high street banks – initially invested in customer service programmes, but these tended to be scrapped or reduced when cutbacks and economy drives were implemented.
Organisations were also criticised for not treating customers as individuals, and failing to recognise that younger and older consumers have different expectations. Young people want to be acknowledged as responsible adults, while older consumers prefer a more personal service.
Brands must also have systems in place to avoid irritating their consumers who have evolved from one stage in their life to another. A mother, whose youngest child was seven, was still being sent promotions for Pampers nappies, while other respondents said they were turned off brands by poorly targeted direct mail.
The survey points out that retailers can avoid this by ensuring the technology behind customer loyalty schemes has the facility to match offers and vouchers to the buying habits of individual shoppers. Consumers appreciate the need to gather information if they can see obvious benefits, explains the study.
Yvette Asscher, marketing manager of ICL, which builds CRM technology systems for the retail, financial services and telecoms industries, says the survey’s findings will demonstrate to clients how technology can be used as a tool to build profitable relationships with customers.
Asscher says: “Consumers want organisations to simplify their lives. We were surprised by how much people knew about CRM and how aware they were of how technology was being used to gather information about them. People are annoyed when that data is used incorrectly.”
Mark Albert, business development director at Alto, the interactive marketing division of list brokers and management company Swetenhams, says: “A customer’s first purchase should be regarded as the initial step in an intens ive and extensive relationship; the opportunity to develop that relationship must be seized immediately.
“The company needs to implement a customer loyalty strategy which all employees can buy into – from the managing director to the sales and marketing teams to IT support.”
Whatever systems are put in place to encourage customer loyalty, there are a number of external factors that have to be taken into account. Research International Group (RIG) has carried out detailed studies into how much aggravation consumers are prepared to put up with – known as the “hassle” factor – before they will end their relationship with an organisation.
For example, motorists, says RIG research and development director Rory Morgan, may tolerate poor service from a petrol station, but if it is conveniently situated at the end of their road it could take many bad experiences for them to take their business elsewhere.
Morgan says: “Studies also tell us that acceptable levels of service have changed over the past few years and organisations must work hard just to stand still. But loyalty is often about weighing up the probability that someone will switch brands. There is a lot of inertia in many sectors, such as banking, where people will not move their bank account because of the ‘hassle’ involved.”
The Internet is a threat to companies which fail to address customer service issues, as new online rivals to traditional businesses are tempting consumers to switch brands with lower prices or greater convenience.
The Internet is likely to make consumers even more fickle, but, says managing director of marketing services agency Manifesto, Keith Johnson, online shoppers have the same demands when it comes to good service.
“Every brand has a product proposition but does it have a service proposition?” he asks. “While customers focus on products and deals, service is ultimately just as important, and Internet users demand speed and convenience, which means in their time, 24 hours a day, seven days a week.”
The EHS research has shown that organisations could strengthen the relationships they have with their consumers simply by analysing whether their basic customer service levels are as good as they could be. If they are not, they will only have themselves to blame if their customers go elsewhere.