Gain a new foundation for creating value.
Posted Mar 1, 2005
Many may legitimately argue that "It's all about the experience," and this is probably true in the majority of industries. It is not always the case for all consumers in all industries, however, and certainly not for most business customers with regard to their suppliers. In many one-time encounters, and in most continuous service/benefit relationships, the results of product and service purchases--their lasting impact on business customers' performance and consumers' lives--are often key determinants of customer loyalty, in many cases more so than satisfaction with experiences themselves.
For example, in studies of continuous service customers, of telecommunications service and health clubs, analysis has shown that the anticipation of future use and benefits overrides satisfaction with past use experiences in determining customer retention. Even when satisfaction with past experiences is high, customers will terminate their relationship if they anticipate little future use and benefit. And even when satisfaction with past experiences is low, they will renew the relationship if they anticipate significant future use and benefit.
Continuous benefit relationships, where the differences sellers make to buyers are more important than the buying experience itself, are common in supply chain and distributor/channel partnerships. Suppliers rely on an even price based on the types and levels of differences they make to business customers' performance. Outsourcing arrangements are often sold on the basis of guaranteeing or warranting the quality and cost results to be delivered. And many suppliers have sold performance-based pricing contracts for services as diverse as advertising, automobile painting, energy management, and crop production.
For consumers there are a host of service providers in what can be termed life-asset industries, where both single encounters and continuous benefit relationships deliver lasting significance to individual and family lives. These assets include competency (education, training, coaching providers), health (physicians, hospitals, fitness trainers, and a wide range of other providers), time (time management support and concierge services), and wealth (banking, investment, insurance, real estate, etc.).
When these industries are defined in terms of what consumers buy, instead of what providers sell, it is clearly the life asset and life quality impact customers are after, though service encounter experiences count, as well. Often such impacts take months (e.g., joint replacement surgery), years, or decades (getting a university degree and following the profession desired, having assets managed leading to ability to send children to college, retire comfortably) before customers know whether they achieve their goals, so experiences and the confidence they build in consumers' minds become critical to loyalty. But often (surviving a heart attack, gaining peace of mind from a good child-care provider), results are immediate and of great life significance.
A recent study found that consumers are frequently willing to defect from a provider that offers satisfying experiences if they are confident they can do better elsewhere. When asked if they would choose a familiar provider with which they had already experienced numerous satisfying encounters, or an unfamiliar competitor which had been rated significantly higher on quality processes and results by a credible source, roughly half of all consumers, and two-thirds of those rated as quality conscious, indicated they would choose the higher-rated alternative.
Of course, it can be argued that results are merely extensions of the purchase/use experience. But unless product and service sellers identify and track the business performance and consumer life impacts their offerings have, they are missing an opportunity to gain a far different perspective on and basis for customer experience marketing and management than is commonly included.
By identifying, customizing, and improving the business results and life impacts that many services and providers have on most of their customers--and achieving superior ratings of their outcomes by credible third parties--marketers, firms, and entire industries can gain a new foundation for creating value that will drive greater customer loyalty and retention, and thereby greater profitability for all.
About the Author
Scott MacStravic is semiretired after a 42-year career as a marketing executive, professor, consultant, and writer. He is the author of 10 books and more than 300 articles on marketing strategy, tactics, and applications. MacStravic holds a BA from Harvard, and an MA and a Ph.D. from the University of Minnesota. He focuses on research, writing, and consulting on customer/buyer-centric commerce/marketing/management, and on continuous significance relationships. Scott can be reached at firstname.lastname@example.org
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