Commentary

Creating A Winning Strategy For Building Customer Loyalty

Marketing executives are worried about customer loyalty. In an Accenture survey conducted in 2010, a remarkable 79% of marketing executives identified improving customer retention and loyalty as the most important business issue to address.

Unfortunately, these marketing executives have good reason to be worried. A separate Accenture research project -- a survey of almost 6,000 consumers in 17 countries of their attitudes toward the companies with which they do business -- revealed that, while consumer expectations are rising, levels of consumer satisfaction and loyalty are declining.

These attitudes are not all price-driven. In fact, customers are less, rather than more, willing to switch providers for the lowest price than they have been in previous years. Instead, customers are placing more and more emphasis on the overall customer experience; on their providers' use of technology for customer interactions, especially during the "pre-sale" period; and on their ability to trust the company with which they do business.

While there is no magic formula for building customer loyalty, the research does identify elements that drive customers away. A poor customer experience -- caused by an employee's low level of skills, bad attitude, or disrespect for the customer's time -- is a "moment of truth" which may have lasting impact on how a customer sees a company. Almost two-thirds of survey respondents (64%) said they stopped doing business with a provider after a single bad experience with the company's marketing and sales practices.

The research also indicates that consumers are seeking -- and not finding -- a tailored experience from their service providers. Only one in five consumers (21%) said that their provider delivers a tailored experience "very well." The increased use of technology has improved customers' experiences, particularly in emerging markets, but consumers still expect and use multiple channels, both traditional and digital, to interact with companies.

Companies are dealing with better informed, more-empowered customers with higher expectations than ever before. While the challenge of retaining and increasing loyalty may seem daunting in these circumstances, marketing executives do have useful resources to draw upon, especially if such resources can be deployed in a coordinated manner. These include:

1. Recognizing the Importance of Word-of-Mouth. Referrals remain the most important source of information influencing the decision of whether or not to do business with a specific provider. The explosion of social media, however, has vastly broadened the reach of word-of-mouth endorsements. Though the majority of consumers are not yet using social media in a business context, their trust in social media is growing, as is their willingness to write about brands, products, or services on social media sites.

2. Building and Protecting Trust. Trust -- or loss of trust -- is an increasingly important reason for consumers to switch brands or providers. We believe that executives may underestimate the impact of news that damages their brand image; 43% of survey respondents said it would be "frustrating" to be confronted with such news when making a buying decision. Companies need to be more vigilant in protecting their reputations, and more innovative in developing and implementing programs that foster a sense of trust among current and potential customers, tapping into the power of social media to expand and amplify such programs.

3. Strengthening and Evolving Loyalty Programs. Although both the adoption and effectiveness of loyalty programs have increased, most industries scored low in terms of persuading consumers to stick with the companies that provide them. Companies need to do more work in exploring what does and what does not work with loyalty programs, which in some situations can be a powerful inducement to customer retention.

4. Improving Training. Organizations can improve the overall customer experience by improving the training of employees who come into daily contact with customers. This training must be extended across all channels so that the customer experience is both consistent and enjoyable.

Customers vary widely in terms of age, income, purchase intention and likelihood of switching from one provider to another. Our research and client experience indicates that the younger age group (ages 18 to 44) tends to have more conditional loyalties and is more prone to deal-chasing if their expectations are not met. Conversely, consumers over 65 are more emotional in their attachment to brands, and they are more "inertia-based," i.e., less likely to switch providers, because they have never thought about it and/or they perceive the effort to switch to be too great.

An important first step in building and retaining customer loyalty might be a review of current deployment of analytics to make sure that customer insights are both identified and incorporated into key decisions about product development and channel utilization.

Armed with the insights from effective analytics, marketing executives can place more emphasis on the things that matter to customers. They can isolate the factors involved in delivering the kind of experience that customers value across multiple channels, creating customers who are not only loyal but who are active advocates for the company and its products and services.

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