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The Ledge of Allegiance
What history—and a survey of current behavior—can teach us about the threat to customer loyalty.
For the rest of the January 2010 issue of CRM magazine please click here
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For the rest of the January 2010 issue of CRM magazine please click here.

As the global economy recovers from one of the most challenging business environments in decades, history may provide a few lessons.

At the onset of the Great Depression, for example, two companies dominated the packaged-cereal market, but one—The Kellogg Co.—emerged stronger when the economy improved, and remains an industry leader today. 

What made the difference? Kellogg put its foot on the gas during the Depression, doubled its ad budget, moved aggressively into radio advertising, and pushed a new cereal with a catchy slogan: “Snap, Crackle, Pop.” (Thank you, Rice Krispies.)

Fast-forward 80 years to the current recession. Companies have struggled and taken a more cautious posture, given the decline in consumer spending, currency fluctuations, and retailer cutbacks. Many have simply hunkered down, conserving cash and hoping the economic storm will pass, leaving them intact. The Kellogg Co.’s results, however, suggest that’s not a winning strategy. 

As I wrote in my previous column, companies that get it right create their own upturn. [See October 2009’s The Tipping Point.] They identify the business opportunities that exist, based on an understanding of what their customers want. They also stay abreast of evolving customer attitudes—an effort that requires a continuous process. One snapshot of that process, as it began to evolve in 2009, can be seen in the results of an Accenture survey of 5,600 consumers across 14 countries. 

Nearly half (48 percent) of consumers began to look for better deals or to better understand their purchase options, and they indicated that they felt more empowered to act on what they learned and to change their spending patterns. 

Additionally, the survey found only limited consumer loyalty. Two out of five surveyed consumers said they were very satisfied with their providers, but only about one in four said they felt very loyal, despite the strong satisfaction responses. In other words, while satisfaction is important, it’s not necessarily an indicator of loyalty. 

People were very willing to explore provider alternatives, and the inconvenience associated with changing providers dissuaded only one in four consumers. In fact, nearly 70 percent of consumers said they had already changed their mix of providers, either switching entirely or shifting some business to new providers, in at least one industry category in the previous six to 12 months.

The trend toward switching seems likely to continue. Globally, the percentage of respondents who reported they were thinking about switching providers in the next six to 12 months was consistent with past switching behavior. Additionally, 31 percent said they may buy fewer products or services from their providers and 13 percent said they may exit a category altogether. 

What’s contributing to this lack of allegiance? The survey suggests consumers have become highly price-sensitive, and that price and value are likely to dictate their behavior. Consumers are placing a premium on “getting value for their money,” and many don’t believe they are.

So how can companies differentiate themselves to attract the business of today’s consumers? By earning consumers’ trust while serving up quality products and service options, offering convenience, and delivering reliable, responsive customer service. 

Moreover, companies determine their destiny in their response to today’s economic challenges. Those that panic and batten down the hatches in preparation for the worst are likely to experience just that. Those that take thoughtful steps to understand what their customers want and make adjustments to capitalize on the bright spots are more likely to excel. More important, making selective and intelligent investments during the downturn can improve any company’s position, regardless of what lies ahead.  


David Rich (david.b.rich@accenture.com) is the managing director of the CRM practice at Accenture, a company that specializes in management consulting, outsourcing, and systems integration technology. 


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To contact the editors, please email editor@destinationCRM.com
Every month, CRM magazine covers the customer relationship management industry and beyond. To subscribe, please visit http://www.destinationCRM.com/subscribe/.

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To contact the editors, please email editor@destinationCRM.com
Every month, CRM magazine covers the customer relationship management industry and beyond. To subscribe, please visit http://www.destinationCRM.com/subscribe/.
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