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In the wake of corporate failures, spending cuts and job losses, consumer confidence is low. Some customers will certainly defer purchases, particularly discretionary items, putting severe pressure on companies to contain costs and optimize spending. Inevitably, these pressures will impact customer relationships, by eroding trust at a time when the bonds of customer loyalty have already been seriously weakened.
Heightened competition—increasingly, occurring across national and industry borders—has given customers more choices and therefore more power. Access to a wider range of product options and service experiences has raised their expectations, making consumers globally far less forgiving of missteps and more inclined to switch. In many industries, increased ease of switching makes it easy for them to do so. And for many customers, switching is becoming standard behavior: in our most recent customer satisfaction survey, fifty percent of those who switched switched providers in more than one industry.
Combined, these factors have made profitable relationships harder to develop and keep, with providers frequently seeing new customers leave before these relationships generate enough value to offset the cost of acquiring them.
Consumer studies suggest that customers are most at risk when they believe their specific expectations are not met—as underscored by the most recent Accenture Customer Satisfaction survey, which polled 4,189 consumers in Australia, Brazil, Canada, China, France, Germany, India, the United Kingdom and the United States. Two-thirds (67 percent) reported moving their business as a result of poor service in a variety of sectors, up from 59 percent the year prior. Moreover, we also found that respondents who believed their expectations were not frequently met were the most likely to leave.
As customers grow more price-sensitive in response to current economic conditions, and aggressive rivals gear up to lure them away, companies must ensure that they tailor the entire customer experience from the point of brand awareness and acquisition though purchase, use and renewal. To create a lasting perception among their customer base and target market it is essential that not only price (or price cuts) differentiates their products from the competition.
3 Customer Acquisition and Retention
•Begin at the Beginning. The factors that create and influence customer loyalty begin to take effect even before a customer becomes a customer. The relationship a customer develops with the brand during the acquisition stage strongly influences customer value and retention.
•Recognize Every Kind of Loyalty. Loyalty is not necessarily an emotional connection to the brand. True brand evangelists—or even potential evangelists—are at best rare and possibly non-existent. Companies need to r, develop and manage more than one kind of customer loyalty: conditional, emotional and passive—using more than one kind of strategy.
•Know What to Look For. Most companies know a lot about their customers, and comparatively little about the factors influencing acquisition and retention. Achieving high performance in customer retention means aligning activities throughout the relationship lifecycle—including acquisition—and using econometric and return-on-investment analytics to study and maximize conversion rates and other customer behaviors across channels and throughout the lifecycle.
•Know What to Measure. Companies often measure the wrong things when trying to measure customer profitability and loyalty—loyalty indicators are far more involved than customer satisfaction scores. Establishing and managing cross-functional key performance indicators throughout the customer lifecycle helps prevent the loss of current and potential customer value.
•View the Entire Value Chain. Third-party channels and routes to market also affect customer loyalty—and can destroy unless they are managed effectively. Analysis and decisions concerning such factors as offers, sales incentives, pricing, service delivery—all dimensions of the customer experience—should include all the trading partners who contribute to the customer experience.
•Manage Complexity. Products, service bundles, channels—these and many other factors have grown exponentially more complex in recent years, making customer loyalty more complex to manage as well. Providers must retain the ability to react quickly to changing customer needs and market conditions.
Creating Customer Loyalty: A Customer-Centric Approach 4
Customer retention has always been essential to achieving profitable organic growth; for many organizations it will prove essential to surviving current economic conditions as well. However, many of these organizations suffer from a performance gap that will make it more difficult for them to master the retention challenges that today’s more challenging economic environment may trigger.
Accenture’s High Performance Marketing and Customer Management research has shown that one of the defining characteristics of high-performance businesses is their ability to deliver a differentiated customer experience: tailored to specific customer values, needs and intentions, and consistent with the brand promise. Mastering this ability drives customer loyalty—more so than any factor we studied—which in turn contributes to financial performance and greater shareholder value.2
The economic rewards of mastering retention and loyalty can be considerable. A study of 16 retail banks conducted by Accenture in North America found that converting customers from a low to medium level of loyalty and from a medium to high loyalty can yield a 20 percent increase in profitability per customer. For some banks in our survey this translates to $6.0 billion in incremental profit.3
Additional research conducted by Accenture, however, has found that many firms seem to be failing to satisfy customer expectations with appropriate customer experiences. The challenges to being "customer-centric" in the current business environment are many—we see them falling into three distinct categories.
• Knowing the Customer. In mature markets, customers are growing more diverse and specialized, and they expect providers to understand their changing needs and interests and cater to them. As more companies turn to new markets for growth, they are encountering entirely new consumer segments, with distinct values and preferences of their own, that must be studied and understood.
• Reaching the Customer. Channel fragmentation and proliferation make it harder for companies to reach the right customers with the right messages at the right time. Increasingly, consumers control the messages they are willing to receive and notice. Digital and social networking channels play a growing role in their lives—particularly for younger consumers—and most companies are still learning how to factor these effectively into the marketing mix. If they are targeting foreign markets for growth, companies must also find new routes to these markets—typically, a mix of direct and indirect channels—to reach and connect with local customers successfully.
• Delivering a Differentiated Experience. The new complexities of knowing and reaching customers ultimately impact the experience companies create for them. Customers tend to have distinct preferences regarding multiple factors that shape their perceptions of and satisfaction with the experience: product functionality, price and service terms, the variety and availability of service channels, to name a few. Understanding and addressing all these preferences is indeed challenging—particularly for companies that serve a large, demographically varied customer base, spanning geographic markets.