A Telecom Study Picks Verizon as ''Loyalty Leader''
Communications services companies are failing to answer the call of enterprise customers, according to "The 2005 Walker Loyalty Report for Communications Services," a new report that asserts that customer satisfaction is not a true indicator of loyalty. "There's a significant amount of less-than-happy customers in this industry," says Phil Bounsall, executive vice president of customer loyalty research and consulting firm Walker Information, which produced the report. "You've got to keep me happy, you can't just assume you're going to keep me."
The report found that 41 percent of enterprise customers are truly loyal to their wireless service providers, and 31 percent were deemed high-risk, meaning they have low commitment and typically do not intend to keep doing business with their current providers. That figure is indicative of the sector's churn rate, Bounsall says. Trapped customers--who intend to keep buying, because they don't see a valid alternative but are likely to switch providers if the right opportunity arises--account for 26 percent of those surveyed. Accessible customers, who are loyal, but might switch for reasons unrelated to the provider's performance, comprised 2 percent.
Verizon Wireless stands as the lone Loyalty Leader, meaning it earned high percentages of truly loyal customers. Companies with a low percentage of loyal customers but a high percentage of high-risk ones are classified as Loyalty Laggers, whose customers are either actively searching for new providers or intending to replace their current ones. Providers registering poor scores for truly loyal customers or high-risk customers, but not both, are in Loyalty Limbo, and customer relationships for these companies may be tenuous. Quality, value, and cost are the key drivers of loyalty in terms of how enterprise customers measure performance of their wireless service providers, according to the report. Truly loyal customers expect those providers to be customer-focused, brand leaders with a strong reputation. Network services, customer service, and the sales process have the largest impact on loyalty.
The wireless handset manufacturers earned the most loyalty of all the sectors (which also include ISPs, local wireline service, and long-distance service), with 46 percent of enterprise customers considered to be truly loyal and only 27 percent considered high risk. Trapped customers accounted for 23 percent and accessible customers for 3. Blackberry/RIM, Motorola, Nokia, and Sony Ericsson emerged as Loyalty Leaders in this category. Keeping with the theory that satisfaction doesn't indicate future intentions of behavior, however, 83 percent of handset customers report being satisfied.
"We don't believe [satisfaction's] a discerning measure that can help you improve your business," Bounsall says. "The key is, you can trap customers with your business model, but if you're also making them have positive attitudes about you, you turn a trapped customer into a truly loyal customer."
Local voice, the most mature sector in the communications services industry, lags all other sectors in loyalty. No companies qualified as Loyalty Leaders in this category and only 34 percent of enterprise customers are truly loyal (compared with a 78 percent satisfaction rating), 29 percent are high risk, 34 percent are trapped and 3 percent are accessible. The results strongly suggest competitors may be focusing attention on other sectors as local voice moves toward being an element of a bundled suite of business communications services offerings, according to the report.
In conclusion, the report found that customers are more forgiving in services that are technically advanced and changing. Competitive edge goes to those companies adding real value on the servicing side of customer relationships. Knowing the true measure of loyalty can reduce churn rate and increase revenue by 20 percent verses competitors over a three-year period, according to Bounsall. "Truly loyal customers will continue to do business with you," he says. "They'll let you provide them with additional services and products, refer you to friends, and not even search for or accept other offers."
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