The softly-softly approach

The need for customer relationship management (CRM) has become widely accepted, but it is still debatable whether businesses really understand what sort of relationship the customer wants with them. For example, how much information are consumers prepared to divulge about themselves?

KPMG Consulting recently surveyed 750 UK consumers about their relationships with utility, telecom and banking suppliers. Most respondents said they were prepared to give suppliers as much information as was necessary for efficient and personal interaction. Nearly two-thirds said they liked to speak to the same person when dealing with a supplier and nearly three-quarters agreed that they found it irritating to be asked for the same details every time they called.

Customers are resistant to unsolicited contact from companies – and those customers who are most resistant to having data collected on them are also the most likely to be infuriated by companies not retaining information about them. Of those respondents most resistant to their data being kept on file, 58 per cent agreed “very strongly” that it is annoying to have to give the same information whenever they contact a company.

This attitude is probably a reaction against unsophisticated use of customer data in the past. Customers have been scarred by intrusive and untargeted prospecting methods.

KPMG believes companies need to shift the focus away from outbound contact campaigns – such as direct mail and unsolicited phone calls – and concentrate on making the most of the approaches customers make to them. They need to assess what data they really need from customers and collect it intelligently – by motivating customers to share their information, for instance. Companies must focus on learning more about the customer from every contact – particularly those initiated by the customer.

Some sectors are currently better placed than others to collect information on customers. Supermarkets can collect huge amounts of data unobtrusively through EPOS systems. But utilities have little customer contact. Apart from usage patterns, their billing and metering systems tell them very little about their customers as individuals.

But there is one area in which customers are eager to contact their suppliers – when they want to complain. The research showed that nearly three-quarters, 74 per cent, of respondents had contacted at least one supplier during the past year to make an enquiry or complaint.

A customer complaint offers three opportunities to gain a positive form of contact. First, the company has an opportunity to retain dissatisfied customers by dealing with their complaints effectively. Second, it is being offered advice about a specific improvement it can make to its products or services. Third, the organisation gets a chance to diplomatically acquire information from the customer. A complaint represents a “moment of truth”. Handled successfully, it can create a customer for life; handled incorrectly, it can destroy the relationship.

With this in mind, it is startling to discover the number of customers who have switched their suppliers in the past year. The research shows nearly half of all the respondents, 44 per cent, changed supplier in at least one of the sectors researched.

It seems that companies are not yet able to convince their customers that they have their best interests at heart. Of those who switched, 63 per cent cited “better prices” as the reason. But price – and the second most often named issue, service – are “entry level requirements”. Without these basics in place, companies have little chance of building loyalty.

Of all the sectors in the study, utilities suffered the worst, with nearly a quarter, 24 per cent, of respondents changing company. Banks fare better: just 6 per cent of respondents had changed their current account or credit card supplier. This could be because changing a bank account is perceived as a time-consuming and risky activity, compared with the ease of switching utility supplier, especially since deregulation.

Commodity sector companies need to consider how they can build “entanglement” with their customers to gain some of the inertia benefits that banks enjoy.

This research demonstrates that businesses must devise strategies to give their customers compelling reasons to retain them as suppliers. For many companies, this will mean shifting their focus from customer acquisition to retention, and from market share to share of customer spend.

Factfile is edited by Julia Day. Louise Fletcher, head of customer management at KPMG Consulting, contributed