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The Service Provider–Customer Paradox
Fewer consumers are switching, but that doesn't mean they are happy
For the rest of the March 2011 issue of CRM magazine please click here
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We are seeing a paradox in customers’ relationships with their service providers, such as banks, utilities, and wireless carriers. In 2010, for the first time in six years, the percentage of consumers who switched service providers as a result of poor service (64 percent) declined, rather than increased, according to the annual Accenture Global Consumer Survey.

That finding reverses a five-year trend in which the number of consumers switching providers had risen steadily, from a low of 49 percent in 2005 to a high of 69 percent in 2009. The latest figure also seems to contradict the fact that satisfaction with customer service has decreased since 2009 in every one of 11 characteristics measured—from having customer service available at convenient times to accessing service through multiple channels. In short, customers expect more from their providers but think they are getting less.
Intuitively, the number of customers switching should be rising. After all, an improving global economy has brought more choices, while overall customer satisfaction has declined. In our analysis of survey results, as well as our own experience with providers, we have identified three major reasons that fewer customers switched providers in 2010.

First, customer-focused technology has influenced the attitudes of consumers. They report that the increased use of technology has improved their awareness of products and services along with their ability to handle customer service issues. More than three-quarters (77 percent) of consumers surveyed said that using technology in the pre-sales phase—including email ads, online banners, product comparison tools, and online ordering—has improved their experiences when deciding to buy a service provider’s offering. The implication seems to be that technological innovation gives consumers more information before they make purchasing decisions, which may also mean that more realistic service expectations are established earlier in the customer–provider relationship.

Second, consumers are getting more and better information from one another. Word of mouth is the source of information that survey respondents use the most (76 percent) and consider most important (56 percent) when deciding whether to do business with a service provider. Word of mouth is amplified by social media sites and networks, vastly expanding the reach of this traditional form of information sharing.

Third, participation in loyalty programs, which is rising, is an important lever to strengthen the relationship. Among the 10 industries surveyed, the percentage of customers who took part in at least one loyalty program increased in 2010 from 2009. For example, participation in retail loyalty programs grew from 45 percent of consumers in 2009 to 52 percent in 2010. Participation in hotel loyalty programs grew from 18 percent to 24 percent. Among wireless service providers, the number went from 19 percent to 31 percent. While the growth is significant, so is the percentage of consumers who were persuaded to remain with their service providers as a result of loyalty programs. Among retail consumers, that percentage increased from 49 percent in 2009 to 54 percent in 2010. Among consumers of wireless services, the number rose from 45 percent to 53 percent. Hotel consumers showed a smaller increase, from 49 percent to 51 percent.

Clearly, loyalty programs can improve customer trust and satisfaction. However, effective programs do more than reward customers for transactions; they build and strengthen the overall connection with consumers by creating specific, tailored experiences.

Even though the survey results identified a decline in switching, nearly two-thirds of consumers switched from at least one service provider as a result of poor service in 2010. Companies clearly are making headway because of technology and loyalty programs. However, they will need to complement investments in such programs with a sharper focus on reducing customers’ continued dissatisfaction in service areas like resolution and wait times.

When it comes to service, additional research conducted by Accenture has indicated that the characteristics that matter to customers vary widely depending upon their age, location, and income, among other factors. Service providers need a better understanding of those factors, how they influence customer decisions and customer loyalty, and how they vary across segments. Tailored rather than one-size-fits-all approaches tend to be more effective in building and retaining customer loyalty.

For example, households with annual income above $85,000 like it when companies provide special treatment for their more important customers. The percentage of respondents saying they like the idea of special treatment for more important customers also increases in proportion to education. Similarly, younger consumers—those between 18 and 45 years old—prefer to use self-service applications more so than their older counterparts do.

Customers like it when differentiated service offers are made based on needs that are relevant to them. Service providers must be careful, however, in how they structure offers that encourage customers to choose specific options. Incentives such as discounts can effectively guide customers toward lower-cost service channels, but service offers that limit customers’ control over the service received can adversely affect how customers view the company.

Service providers should keep three main principles in mind when developing such differentiated offers.

1. Know the customer like never before. Understand the demographic variables within each segment, including income, age, education, and job status, as well as the behavioral profiles that could define the segments. In addition, examine operational data hidden around the organization to create a context for the customer’s transactions with the company. Review past customer behavior by using internal customer transaction databases to build an understanding of the dynamics within each segment.

2. Make the offer clear and readily understandable and present it in the customer’s own language. In addition to aligning offers with the likes and dislikes expressed by each segment, providers must work harder to present service offers in clear language so as to avoid customer confusion and frustration. Offers must not be overly complicated, and they must be tailored to the customer’s interests and concerns.

3. Track offers to determine which ones bring in new customers and induce established customers to spend more. Examine social media for evidence that customers are saying positive things to their friends and acquaintances about the offer. Organizations need a better test-and-learn cycle with clear and easily verifiable metrics.

Companies are building up tremendous amounts of data about customers and their preferences. The analytics power to turn this data into actionable insights is developing rapidly, but companies already have the means to understand a great deal of what their customers want. The challenge is to convert this understanding into service offerings that generate immediate revenue increases while reinforcing customer loyalty and providing the kind of experience that creates favorable word of mouth.


Robert Wollan is global managing director of the Accenture Customer Relationship Management practice and co-author of The Social Media Management Handbook, published by Wiley in January 2011. Visit www.socialmediamanagementhandbook.accenture.com for more information.


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