Customer loyalty is on a “knife edge” with 55% of consumers switching brands in the past 12 months and as many as 66% researching companies at any one time, according to a study seen exclusively by Marketing Week.
The reason why 21% of those surveyed by Accenture have changed the retailers they shop with, 17% have signed up with alternative utility companies and 14% have joined a new bank is because of poor customer service and the influence of friends, family and the internet.
Previously, consumer inertia was key to reducing churn as the inconvenience of changing telephone numbers, direct debits, standing orders and giving several weeks’ notice to close accounts all put people off switching. However, a new focus on what the consumer wants has led to companies enticing customers by offering to undertake all the tedious switching admin for them.
“The number of UK consumers using multichannel ways to shop and research continues to become a more important metric. Their activity here is so much more measurable and it really validates our image of the changing consumer in the UK today,” states Les Bayne, senior executive in Accenture’s UK and Ireland customer relationship management practice.
Bayne suggests that while consumers are looking online for company information, they may not be setting out with the initial intention to switch. “It’s more about finding the best deal and looking for opportunities,” he says. “The concept in the past was that companies could get away with not providing the best value but consumers are more sophisticated, powerful and less tolerant. Customer loyalty is on a knife edge.”
Bayne claims this is the beginning of an era where the consumer is effectively more powerful than the brand. He adds that this will be a hard lesson for companies to learn because they are “hard-wired to be in control”.
Consumers are also seeking input from peers online and that word of mouth is having a significant impact on their switching decision with 45% saying it is “important” or “very important” to get advice from family and friends.
However, the idea that consumers are switching brands just to get a better deal is not borne out by the research, which reveals that 45% of those surveyed would not accept a lower price in exchange for lower levels of service. However, only 11% said they would quit doing business with a service provider immediately if they received negative customer service.
Rising levels of expectation – demonstrated by Accenture’s finding that 34% of UK consumers have higher or much higher expectations regarding customer service than they had 12 months ago – has led both More Than and First Direct to put customer service at the heart of what they do, having specific advisers assigned to each customer who phones up (see The Frontline, page 23).
Other brands would be wise to follow suit because 83% of those surveyed say they would be happy to tell others around them about a bad customer experience. On the plus side, 50% of those surveyed agree or somewhat agree that the introduction of new technologies has improved the customer service experience as a whole.
This is possibly because those new technologies improve the flow of customer data. Loyalty programmes also provide important data for marketers, but the research shows such schemes fail to completely engender loyalty. For the 70% of consumers who subscribe to a retailer loyalty programme, only 52% cite it as a reason to stay loyal to the brand.
There is a question mark over how effectively brands use the data produced by their loyalty schemes, with more than three-quarters of those surveyed saying they get very frustrated when their information is not used well.
Accenture’s Bayne concludes: “From a marketing perspective, companies need to properly embrace big and small data. For the past 20 years, it’s all been about customer experience. In the next 10 years, the brands that will dominate will be the ones that can really embrace data and predict customer behaviour.”
60% of people in the UK are shopping around for a deal at any one time
83% of consumers have told people about poor customer experiences
34% of consumers say their expectations of service are higher or much higher than they were a year ago
Head of marketing
Nobody likes paying too much for gas, electricity or insurance. By making the comparison process very quick and simple and allowing them to buy online, convenience is the key to successful switching.
Despite what this research shows, we are still aware that a significant minority of consumers don’t like their current product, but still haven’t been persuaded to switch. There is still customer inertia.
Price is key, but brands have to work with us to ensure the relationship is maintained. Customers may be happy to save money on a motor insurance premium but will feel resentment towards the insurer if the policy does not to cover the elements they deem essential, such as complimentary hire car or windscreen replacement. We’re only as good as our partners and if they don’t offer the right features and service then our proposition fails.
It’s also crucial that the transition from our comparison site to the brand owner’s transactional site is as seamless as possible. The relationship between the customer and the insurer brand is established at the point of payment. If they are benchmarking their customer experience against the relative ease of use of GoCompare and don’t have a similar experience at the checkout, it is possible to tarnish that relationship from the beginning. If we can make it easy for the customer, our partner brands need to too.
Chief marketing officer
RSA Insurance Group
Price promotions and discounts are the hook to get people to join you, but if you rely on constant discounting, you destroy your brand equity.
It would be silly to say that price isn’t a factor in our market, but the value offering that strengthens your brand has to mean something to the customer. We’ve been innovating in how we deliver customer service in areas that keep the relationship going, which includes making sure each customer has a personal customer manager. They have the agent’s direct phone number and speak to the same person all the time.
Managing the customer relationship is crucial in the claims network. Having a dedicated group of agents who manage the account at a time when the customer is usually distressed is key. Simplicity is vital to the process to ensure that, from a negative event, the customer has a positive experience.
We also pass on our business benefits to the consumer. We are the number one purchaser of electronic gadgets in the UK, as we have to provide replacement equipment. We created the website More For Me which is a customer-only part of the More Than site, and this means we can pass the benefits of our bulk-buying discount on to our customers. In this way, we can reward them for their custom in a very simple manner.
Much of our service has been designed to develop a point of difference in the sector. Even when we come up on price comparison sites that rely on the ability to “rack and stack” the offerings across the hundreds of companies that will provide a quote, More Than may be fifth on the list so our brand equity must be high for us to stand out.
Head of brand and communications
Almost half of First Direct’s customers come to us through recommendation, so it is clear that word of mouth, whether online or in person, is a critical element in the way we attract business.
People are always looking online for the ultimate Tripadvisor-type recommendation for any service, and banks are no different. The second and third most important reasons that consumers switch to us is service reputation and the customer’s experience with other banks.
We still feel it’s important to offer that extra incentive, which is why we offer £100 when customers move to us. But we also couch this in our satisfaction guarantee and support it with the offer of another £100 should they feel the need to leave. We don’t want people to leave but we don’t want to make it hard. It’s all part of the same service proposition.
Encouraging multiproduct take-up is a central element of our customer retention strategy. It’s a virtuous circle. The customer is happy with the core current account and so takes out some more products. These products work together to deliver benefits to the customer and they become happier still. By virtue of arranging so much of their financial life through First Direct, the customer is still happier to stay.
Backing this with personal customer service – where a real person answers phone calls in a minimum of 20 seconds – matters a lot. Continuing the dialogue with the same person instead of being passed around the organisation also counts for a lot in the customer’s mind.
The essence of retention is starting out with respect for the customer that translates automatically into great service.
The Accenture research correctly represents the market at the moment. As online becomes more prevalent in people’s lives, particularly through the use of channels such as tablet and mobile, there is a lot more searching and comparison going on.
Voucher code and cashback companies are also encouraging consumers to go online and search for the best deal, often at the expense of service. We believe across our markets that we offer the best service, but we are premium-priced because of that. Obviously in this environment we face a challenge when people come to renew.
Our response is to invest in the service and to make sure the customer understands that it stands out from the competition. For example, we ensure that we have more patrols on the road than any other service.
You can’t get away from having to make that investment so that people will choose you. From a marketing perspective, the next challenge is how to get over to the consumer the service that you provide. The reality is that most people will shop on price. But we are also offering loyalty benefits – gold and silver memberships with added services for customers who have been with us for several years. If you are a premium brand, to maintain that equity you have to leave your prices at the top of the range and be committed to it long term.