Archive for the ‘Customer Retention’ Category
Tuesday, June 23rd, 2009
Received wisdom has always suggested that strong brands will withstand a recession. The argument goes that in a recession there is a flight to safety and strong brands represent safety.
An interesting study carried out amongst consumers in the US suggests exactly the opposite. A half of all the people who had previously been loyal to a brand appear to have reduced their loyalty or defected during 2008. They are switching to the value brands offered by major supermarkets.
This raises the question, “will the same thing happen in business to business markets?”.
There is a possibility that it will not – at least not in quite the same way. Supermarket brands have now become some of the most trusted in their own right. For a number of years there has been a general migration to supermarket brands as people have recognised that the products in the supermarket packaging are quite probably made by the same companies that make premium brand products that cost 30% more.
Things are slightly different in industrial markets. The closest you get to the “supermarket brand” in industrial markets is usually referred to as a generic brand, a Chinese brand, an Eastern European brand etc. In fact, the word “reputation” is used just as often as brand.
However, it would be foolish and naive to think that business to business buyers and specifiers are slavishly buying products from their favoured suppliers at any price, without looking around. In the heady days before the recession it was not untypical to research a market and find that only 20% of companies were “price buyers”. Today it would be unusual to find less than 30% price buyers in any business to business market. The shift to value is occurring everywhere.
Brands left to ponder price of loyalty
By Andrew Edgecliffe-Johnson in New York
Published: June 22 2009 03:00
Big brands’ best customers have been defecting in droves since the beginning of the US recession, according to a study. By this year, more than half of a typical US brand’s most loyal shoppers in 2007 had switched to rival products.
A two-year analysis of 685 grocery and pharmacy-stocked brands, using data from 32m consumers’ supermarket loyalty cards, found that in 2008 the average brand lost a third of its formerly highly loyal customers.
The study will alarm packaged goods groups, as the most loyal customers – those choosing one brand for more than 70 per cent of their purchases in a category – should also be their most lucrative.
"Defection is top of mind for brand managers now because they’re the most profitable customers," said Eric Anderson, associate professor of marketing at Kellogg School of Management, Northwestern University.
"Price and promotion have become so salient at retail, that what we thought was the loyal customer can be moved with discounts," he added.
Past recessions have seen similar defections from top-tier national brands to stores’ private-label goods, Mr Anderson said. Academic research showed that customers could be quickly persuaded to switch by a cheaper price but took far longer to switch back.
The study was conducted by the CMO Council, which represents chief marketing officers, and Catalina Marketing’s Pointer Media Network, which has equipment in 25,000 stores analysing buying behaviour.
Catalina can provide a two-year anonymous purchasing history on individual customers. Brand managers and retailers who had seen the data had been startled by it, said Todd Morris, senior vice-president at Catalina.
"They’ve always known there was churn but could never put their finger on how big the issue is."
The study comes as marketers are leaning more heavily on research and on targeted advertising, as they seek to improve on the "spray and pray" approach of mass media marketing formats, such as 30-second television advertisements.
The Financial Times Limited 2009
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B2B Marketing, Branding, Business To Business, Customer Retention, Economic Downturn, Value |
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Thursday, May 7th, 2009
Focusing on customer satisfaction and loyalty is important at the best of times. Right now, when times are tough in many industry sectors, developing a loyal customer base is even more vital to business survival.
We at B2B International always extol the virtues of customer loyalty. And, on the face of it at least, it would seem that customer loyalty is on the rise – that is if membership figures for loyalty rewards programs are a good indication of a wider trend.
According to new figures released by Colloquy, membership in U.S. loyalty rewards programs has now reached 1.8 billion, which amounts to a 24% increase on their last loyalty marketing industry census published two years ago.
The average U.S. household has signed up for 14.1 loyalty programs – from financial services, airlines and hotels to department stores, restaurants and much more – although it should be noted that the average household only actively participates in 6.2 schemes.
However, don’t fall into the trap of just reading the headline figures. The emphasis for any company should not be to concentrate solely on increasing membership numbers. It must be to focus on creating and developing a program that offers value, which can revive lapsed members and can turn its engaged members into profitable, loyal customers.
While loyalty schemes are obviously not appropriate for all organizations – especially those in industrial and b-to-b sectors – the underlying principles remain the same. It’s a well known fact that it’s more cost-effective to retain existing customers than to find new ones. Listen to your customers; find out if they are satisfied and if you could be meeting their needs better. Whilst customer satisfaction may not necessarily lead to customer loyalty, it’s a valuable first step in the process.
The white paper Loyalty – How To Win Devotion From Your Customers makes an interesting read for anyone wishing to find out more about customer loyalty.
Posted in
Customer Retention, Customer Satisfaction, Customer Satisfaction Research, Loyalty, Market Research, Needs |
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Tuesday, March 31st, 2009
The American Marketing Association’s flagship publication, Marketing News, recently ran an article entitled ‘Look Farther Afield, which described how research should answer certain questions for marketers hoping to expand into new markets. This feature was contributed by B2B International’s very own Julia Cupman. Julia’s full original article is serialized over our next 3 blog entries:
The recent economic turmoil involving long established financial pillars has had a resounding impact on business. Many companies have experienced declining sales and confidence in the economy is dwindling. Numerous economists are claiming that it is the worst financial crisis since the Great Depression, but while the seriousness and consequences of the problem cannot be denied, it is only an economic stymie if businesses allow themselves to lose confidence and focus.
The fear invoked by the Wall Street tremors has led to a fierce slashing of budgets, in particular marketing budgets. Why are marketers feeling the pinch with decreased spending power when it is such a crucial time to understand customers’ requirements and meet their needs before they potentially defect? Indeed, just a 5% reduction in the rate of customer churn can increase profits by as much as 85%.
Given that most businesses lose around half of their customers every five years, it is frightening to think how many customers have been lost in the past few months alone as a result of the faltering economy. The case is already clear: do nothing, and suffer.
The drive towards lower costs and consequently lower prices is increasingly resulting in the substitution of value with low price – an area where not everyone can compete as profit margins are squeezed dry. In fact, a company that seeks refuge in cutting its prices may fatally delineate its own downfall as it could devalue its offering and denigrate its brand. It is thus paramount that in times of a weak economy, businesses seek proactive means of remaining competitive, and cutting prices may not be the answer. This begs the question as to what companies – especially their marketers – can do to give their business a welcome lift in times when the only direction appears to be downward.
Sell more
This may seem absurd when it is challenging to simply retain customers and to ensure that turnover and profits do not slip. So how can selling more be possible, and in what way is it a panacea?
It is necessary to think outside the box. With sell more, think sell elsewhere, think sell farther afield, think new opportunities. Of course entering new markets is not appropriate for all companies, but it is an option that many companies could consider, particularly if they are faced with stagnating demand domestically.
Thus, if growth is not occurring locally, chase it internationally. The growth forecast for China next year, for example, stands at 9.5%, contrary to 1.8% for the EU. Indeed the BRIC countries (Brazil, Russia, India and China) offer a plethora of opportunities as labor is often cheap and readily available, investment is increasing and the prospects look good. Consider Russia and the helicopter industry, for instance. AgustaWestland is currently researching the opportunities in Russia, and Textron Bell has just signed up a new sales representative (Jet Transfer) in Russia which has committed to sales valued at over US$10 million. These two players have recognized an unmet need and a clear opportunity, as only half of Russia’s civil helicopters are in flyable condition and domestic production is limited.
This article, which goes on to describe many of the questions that marketers should ask in order to explore, scope and define market expansion opportunities, continues tomorrow.
Posted in
China, Customer Retention, Economic Crisis, Economic Downturn, Julia Cupman, Loyalty, Marketing, Recession, Russia, Sales |
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Wednesday, January 7th, 2009
Following on from blog article – Keep it short, keep it focused we felt it appropriate to continue the discussion around keeping things simple when asking customer satisfaction questions. This article puts forward the argument that there is no such thing as the ‘ultimate question’.
With customer satisfaction surveys increasing in length, the marketing industry will always be seduced by statements such as ‘this is the single most reliable indicator of a company’s ability to grow’. However, is the Net Promoter Score (NPS) concept oversimplifying things and losing sight of what customer satisfaction and loyalty studies really aim to deliver?
The fundamentals of the Net Promoter Score are that every company’s customers can be divided into three categories: Promoters, Passives, and Detractors. By asking — How likely is it that you would you recommend us to a friend or colleague? you can find out how likely a brand is to be recommended, and it will provide a good indicator of how well it will grow.
Customers respond on a 0-to-10 point rating scale and are categorized as follows:
- Promoters (score 9-10) are loyal enthusiasts who will keep buying and refer others, fueling growth.
- Passives (score 7-8) are satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
- Detractors (score 0-6) are unhappy customers who can damage your brand and impede growth through negative word-of-mouth.
To calculate your company’s Net Promoter Score (NPS), take the percentage of customers who are Promoters and subtract the percentage who are Detractors.
Many large consumer brands have integrated the NPS into their customer loyalty programmes from Amazon, Apple and eBay through to Harley-Davidson, Google and Dell. However, despite its popularity amongst large corporates, research by Hayes (2008), "The True Test of Loyalty," Quality Progress, June 2008, shows that the "likelihood to recommend" question is no better predictor of business growth compared to other customer loyalty questions used over time e.g., overall satisfaction, likelihood to purchase again.
The attraction to the Net Promoter Score is its simplicity in that it requires just one question, it is easy to benchmark and implement across individual divisions or organisations as a whole. However the real driver of its ubiquitous use has been its claim that it is the only question you need to ask that tells you everything you need to know and this is where the problem lies. Word of mouth does not always boost sales and distribution and pricing can mitigate effects too.
In conclusion, there is no single question that can be used to monitor customer loyalty and satisfaction. NPS is a useful measure enabling changes over time to be tracked but a customer survey needs more elements to it to facilitate the changes to take place. Customer loyalty and recommendation behaviour are products of satisfaction with the total customer relationship from the product and service, they cannot be fully understood by one question.
The key to any customer satisfaction and loyalty survey is about understanding how satisfied customers are, why they think the way they do and how change can take place to increase satisfaction and loyalty in the long-term.
The Net Promoter Score has been around for over 5 years now and was announced as the ‘ultimate question’. Tracking a number over time is only a marked indicator and does have its values but the real work is understanding what makes customers satisfied and loyal and then delivering that through change management.
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Customer Retention, Customer Satisfaction, Market Research, Net Promoter, Recommendation |
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Wednesday, December 17th, 2008
Customer loyalty is of paramount importance in today’s economic climate. We have many opportunities to satisfy our customers but what if on the one occasion we don’t reach the dizzy heights we have set ourselves and a customer wishes to make a complaint!
New research conducted by Charter UK within the contact centre industry supports the theory that companies who manage their customer complaints well are more likely to retain their customers than those who don’t.
According to the research:
- 78% of those asked believe that managing complaints will help to retain customers.
- A further 50% use complaints management intelligence to form the basis of their customer retention strategies.
- 52% of respondents analyse their customer complaints to help drive business improvements.
- One in eight (13%) do not analyse customer complaints at all.
A quick glance at the website of the New South Wales Government’s Office of Fair Trading gives more weight to the argument that customer complaints should be thoroughly analysed and handled with care:
It may be hard to believe, but customer complaints are one of the best opportunities you have for keeping your customers loyal. Your most dissatisfied customers can actually become your best ambassadors – if their complaints are handled properly. At some time or another, you have probably experienced a problem with a business. When they dealt with your complaint reasonably, it felt good. You were taken seriously. A balanced, reasonable response to customer complaints builds customer loyalty.
Some interesting facts:
- Two-thirds of people who complain to an organisation are not satisfied with the way their complaint is handled
- 90% who remain dissatisfied with how their complaint was handled will not purchase from that company again
- Each dissatisfied complainant is estimated to tell 9 others about their negative experience.
Yet if you can handle a complaint well:
- 83% of customers who are satisfied with how their initial complaint was handled will become loyal to you and your brand
- The average satisfied complainant is likely to recommend you to 5 others.
From all the customer satisfaction and loyalty research we carry out at B2B International, what we do know is that you’re unlikely to be able to satisfy all your customers all of the time. By being proactive and understanding what customers are complaining about, it not only gives you a second chance to rectify a negative situation but it also allows you to take the necessary steps to go beyond the call of duty and maybe even delight the customer by doing something that is out of the ordinary. Make sure your company focuses on turning customer complaints into a positive experience and you never know, it could be the first step in rescuing a customer and gaining their undivided loyalty.
Of course, there is another school of thought – one which would suggest trying to avoid customer complaints altogether. Why put the emphasis on handling customer complaints well, instead of on trying to reduce the complaints in the first place?
In their recently published book, "The Best Service Is No Service", Bill Price and David Jaffe argue that, in gauging their effectiveness in terms of the number of customer calls they handle, most customer service operations have got it wrong. Price and Jaffe contend that many customers simply want to purchase your products and services; their only reason for going through to the customer service department is because something is wrong or unclear about the company’s offer. If you can eliminate the need for a customer service department, you can congratulate yourself on having got to the root of the problem.
Posted in
Customer Retention, Customer Satisfaction, Loyalty, Market Intelligence, Market Research |
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