Are Companies Failing in Their Customer Relationships?

To build better customer relationships, you have to do more than introduce a shiny new object or offer a steep discount to whet customers' appetites, according to research by customer experience consultancy Strativity Group.

As in personal relationships, companies that fail to plant the seeds for monogamy in their customer relationships will be at a competitive disadvantage, Strativity analysts wrote in the report "The Corporate Love Meter 2013: The Sad State of Company Customer Love Relationships."

One of the main reasons for this is companies' failing to maintain the kind of dialogue with customers that meets their needs and expectations.

In the global online survey, 74 percent of respondents admit that their companies have "open" customer relationships, in which they share customers with competitors through one-night stands or in an on-again-off-again capacity. These relationships tend to be transactional in nature and place an emphasis on price over long-term value.

Not surprisingly, customers who stray are the new battleground for businesses.

"The riskiest place to be as a company is in the middle, where you don't smell [good], but you don't stink," comments Lior Arussy, founder and CEO of Strativity Group and an author of the report. "The moment you don't smell [good] or don't stink, you're indicating to the customer right then that 'There is no reason for you to prefer me,' and this is when they resort to price [comparisons]. We're seeing a change where reliability is no longer a competitive advantage."

Only 29 percent of the companies surveyed claim to have an emotional connection with their customers. If a company doesn't have a relationship built on anything other than rational factors, its chances for monogamous, loyal relationships are greatly diminished, Arussy says.

But creating emotional loyalty and increasing the longevity of their relationships with customers can be a challenge for companies. More than half of loyalty program members in the United States are inactive, according to the National Center for Data Mining. Additionally, online small business resource provider Manta has found that only 3 percent of small businesses have obtained repeat business from daily deal sites like Groupon, indicating discounts might bring a bargain hunter in but do nothing to keep him coming back.

This is the classic example of price and relationships "diametrically opposing" one another, Arussy says. "If a customer is focused on price, it means [he is] loyal to the price" and not necessarily to the company.

"When we look at the challenges companies [face], many are focusing on what we call tactical customer experiences," such as Web site improvements or creating mobile apps for consumers, Arussy states. "They're doing a great deal to tweak the formula, but they're not re-evaluating their value proposition."
For companies that want a meaningful dialogue with customers, Arussy says it starts with an honest evaluation of what customers think. A business should also look at the costs to acquire new customers and retain the ones it already has for the last three years. Companies should then ask, "'Is it trending up or down?' If it's trending up, that means your customers are not finding value, and you need to put more into incentives," Arussy suggests.

Finally, a company should marry intent with execution. More than 50 percent of companies expressed a desire to "sweep customers off their feet," but Arussy says efforts could fall flat if the organization does not change at the strategic and operational levels.

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