Retention

Stop and Think = How often does someone patronize your small business just because of your over-the-top service? You might think of a few examples, but you probably can’t come up with many.

Loyalty has a lot more to do with how well companies deliver on their basic, even Vanilla promises than on how dazzling the service experience might be.

Now ask yourself: How often do consumers “Fire You” because of terrible service? All the time. They exact revenge on restaurants that provide poor service, cable providers whose technicians keep you waiting, cellphone companies who put you on permanent hold, the list goes on = You’ve been there.

Why You Need to Pay Attention

Sometimes you know your first impulse is to punish bad service at least more readily than to reward Good Customer Service interactions. Loyalty has a lot more to do with how well companies deliver on their basic, even Vanilla promises than on how dazzling the service experience might be. Yet most companies have failed to realize this and pay dearly in terms of wasted time and resources and lost customers.

Most customers encounter loyalty-eroding problems when they engage with customer service. How Many Times have you Experienced this Before:

56% of Customers report having to re-explain an issue several times as they get passed around the “Black Hole of Customer Service”.

To examine the links between customer service and loyalty, the Customer Contact Council, a division of the Corporate Executive Board, conducted a study of more than 75,000 people who had interacted over the phone with contact-center representatives or through self-service channels such as the web, voice prompts, chat, and e-mail. We also held hundreds of structured interviews with customer service leaders and their functional counterparts in large companies throughout the world. (For more detail, see the sidebar “About the Research.”) Our research addressed three questions:

• How important is customer service to loyalty?
• Which customer service activities increase loyalty, and which don’t?
• Can companies increase loyalty without raising their customer service operating costs?

Trying Too Hard

Two findings emerged that should affect every company’s customer service strategy:

First, delighting customers doesn’t build loyalty; reducing their effort the work they must do to get their problem solved does.

Second, acting deliberately on this insight can help improve customer service, reduce customer service costs, and decrease customer churn.

According to conventional wisdom, customers are more loyal to firms that go above and beyond. But our research shows that exceeding their expectations during service interactions (for example, by offering a refund, a free product, or a free service such as expedited shipping) makes customers only marginally more loyal than simply meeting their needs.

One reason for the focus on exceeding expectations is that fully 80% of customer service organizations use customer satisfaction (CSAT) scores as the primary metric for gauging the customer’s experience. And managers often assume that the more satisfied customers are, the more loyal they will be. But, like others before us (most notably Fred Reichheld), we find little relationship between satisfaction and loyalty. Twenty percent of the “satisfied” customers in our study said they intended to leave the company in question; 28% of the “dissatisfied” customers intended to stay.

The picture gets bleaker still. Although customer service can do little to increase loyalty, it can (and typically does) do a great deal to undermine it. Customers are four times more likely to leave a service interaction disloyal than loyal.

Another way to think about the sources of customer loyalty is to imagine two pies—one containing things that drive loyalty and the other containing things that drive disloyalty. The loyalty pie consists largely of slices such as product quality and brand; the slice for service is quite small. But service accounts for most of the disloyalty pie. We buy from a company because it delivers quality products, great value, or a compelling brand. We leave one, more often than not, because it fails to deliver on customer service.

We buy from a company because it delivers quality products, great value, or a compelling brand. We leave one, more often than not, because it fails to deliver on customer service.

Never Fear, we have solutions

In our next installment of this article will address another of my “Sakamoto” Mantras, “Remove All Barriers”. 2