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Poor customer experience causing churn epidemic

By Peter Clark, Marketing Factbook

 

Many companies are wasting vast sums of money trying to attract new customers through advertising while still delivering a poor customer experience that has forced over 10 million consumers to switch suppliers in the past six months alone, according to a study published by Satmetrix.

The main customer issues behind what Satmetrix calls 'the switching epidemic' are unfair fees and charges, poor products, poor service quality, and rude or disinterested employees.

As a result the study, which was part of the company's annual Net Promoter Benchmark study, suggests that much of the £14 billion spent on advertising each year in the UK could be better spent on delivering a higher quality customer experience.

In fact, only 2% of respondents said they trust advertising the most as a source of information when choosing a product or service. Instead, almost half of consumers (49%) see personal recommendations from friends, family or colleagues as the most trustworthy source of information. Moreover, 15% said they trust consumer opinions posted online more than they trust advertising.

Famous for their sense of fair play, British consumers don't like it when they are not treated fairly. As a result, almost one quarter of respondents (23%) saw unfair fees or charges at their reason for switching providers. An additional 7% switched because discounts were offered to new customers but not to them.

Deborah Eastman, CMO at Satmetrix, noted: "Business choices that seem to make sense from a financial point can negatively impact revenue and reputation if consumers don't think they're fair. If companies drop these bad profits, they will likely recoup lost revenue many times over by keeping their customers for longer and acquiring new ones through recommendations."

The second most common reason for switching (22%) is poor product or service quality. Almost as many (19%) people leave because of rude or disinterested employees. And 12% churn because they can't get anyone to deal with their problem.

"It seems that many organisations choose to invest in attracting new customers through advertising rather than invest in a good customer experience that creates loyalty," said Eastman. "But if companies listened more to their customers, and if employees could understand the impact of their behaviour by seeing customer feedback for themselves, they could significantly reduce churn."

The cost of ignoring the customer experience doesn't stop with a lost customer, either. While 2% might trust what they read in an advert, almost two thirds of consumers (64%) look to other consumers to guide their purchase decisions. As a result, the survey found that a negative experience leads to a negative recommendation and, with it, the loss of a new customer.

"The survey proves that we live in the 'Recommendation Generation', and that the key to being recommended is the experience a customer has," concluded Eastman.

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Source: Satmetrix Systems
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