Not Fade Away: Exhausting Customers in a Fierce Business Environment Erodes Profits through Loyalty Loss; Here, Some Winning Ways to Help Combat Customer Fade

By Bailor, Coreen | CRM Magazine, February 2007 | Go to article overview

Not Fade Away: Exhausting Customers in a Fierce Business Environment Erodes Profits through Loyalty Loss; Here, Some Winning Ways to Help Combat Customer Fade


Bailor, Coreen, CRM Magazine


Lackluster loyalty: It remains a constant problem as companies continue to miss the mark when it comes to creating and cultivating long-term customer relationships. The truism that it costs considerably more to acquire a new customer than it does to keep a current one has yet to influence many companies' behaviors around loyalty and attrition.

"The vendor community has only recently [been] getting to the point where it understands that if it doesn't do something to attract and maintain customers, long-term prospects aren't going to be what [companies] want them to be," says Denis Pombriant, founder and managing principal of CRM market research firm and consultancy Beagle Research Group.

Regardless of the industry, keeping attrition at its lowest level is a cornerstone of a company's success. Consider these process-oriented approaches to make the drive along Low Attrition Lane smooth.

THREE HIGH-RATE REASONS

A portion of the culpability for customer attrition rates rests with the state of today's marketplace--competition is tight. "Today there are multiple competing products in any category, so customers have more leverage. They can choose one over the other," Pombriant says.

Consumers' savvy also affects companies' ability to retain them. "The average consumer today has more information at his fingertips with which to make informed decisions about a relationship with companies than he has had in the past," says Jonathan Trichel, principal of customer and market strategy at Deloitte Consulting.

The most serious culprits behind retention and loyalty problems are tied, however, to many companies' lack of awareness of the importance of the customer experience, their short-term focus, and cost cutting. "There's a conflict between short-term results and long-term results," says Phil Bounsall, executive vice president of customer and employee loyalty management firm Walker Information. "Sometimes short-term results win out, and that can make companies do things that might result in short-term profits, but may not result in long-term loyalty or long-term sustainable value in their customer base."

SEE IT, SOLVE IT

Every business vertical has a unique set of loyalty issues, but financial services and telecommunications are two of the better-known sectors that struggle with creating and nurturing customer relationships. Of course, each industry--including financial services and telecommunications--has companies that have very loyal customers. But according to Trichel, low switching costs and ease of movement between competitors in the financial services and telecom industries--and the sheer amount of transactions and volume that these companies do with customers--"leave them open to a lot of dissatisfaction and churn."

Many companies in the retail and travel/hospitality industries also suffer high customer attrition rates. Retail companies, for example, often stumble when it comes to integrating online and offline channels for a more seamless customer experience. As more customers leverage the Web to research items and then purchase them in physical stores, or in many cases, buy items online, relying on siloed information can impact retailers' ability to level customer defection. Trichel adds, "In general, there's not very good tracking of customer loyalty and attrition rates in the retail industry." Travel/hospitality companies, specifically airlines, must contend with customer experience issues like seating comfort level and food and beverage service. Also, airlines operate under tumultuous business circumstances, such as heightened M&A interest, increasing fuel costs, and labor disputes.

Some customer churn is inevitable, and not all reasons that trigger customer defection are within a company's control. Customers may move out of a company's service area, essentially defecting by default. Confronting attrition motivators that a company can decrease, however, will help it enhance its go-to-market products and services and help it to more effectively compete. …

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