• August 22, 2005
  • By Coreen Bailor, (former) Associate Editor, CRM Magazine

CRM Software: A Customer Loyalty Problem

The CRM software industry has the lowest percentage of loyal U.S. customers compared to other software segments, including desktop, enterprise, and infrastructure, according to Walker Information's "The Walker Loyalty Report for Software and Hardware." The report is based on 18,089 brand evaluations from 5,475 respondents; it analyzes results from 58 IT brands representing 30 companies. Walker found that 56 percent of U.S. software customers are truly loyal (those who want to continue their relationship and plan to continue purchasing service from their current provider), four percentage points higher than those truly loyal to their CRM software providers. The U.S. enterprise software sect has the highest percentage of truly loyal customers, with 59 percent, while 57 percent of U.S. desktop software customers are truly loyal, and 55 percent of U.S. infrastructure software customers are truly loyal. The U.S. CRM software sect also had the highest percentage of high-risk customers--those with low commitment and low intention of furthering the relationship--at 22 percent, four percentage points higher than the U.S. software composite score for high-risk customers. Twenty-one percent of U.S. CRM software customers surveyed felt trapped, in comparison to the 22 percent for the U.S. software industry, and 5 percent were deemed accessible, meaning they are loyal, but may defect for reasons outside of the provider's performance, one percentage point higher than the overall U.S. software industry. U.S. CRM customer concerns--including TCO, product quality, reliability, and ease of use--contribute to the poorer showing in comparison to the other software categories. "The line of thinking is, 'If you were more customer friendly and you were more focused on me, you would be making products that are more what I want, that are easier for me to use, and that are reliable for me,'" says Phillip Bounsall, executive vice president at Walker. This is "where the CRM companies may be lacking a bit." Walker Information also segments providers into three categories--loyalty leaders, companies with high percentages of truly loyal customers and low percentages of high-risk customers; those in loyalty limbo that have poor scores for truly loyal customers or high-risk customers, but not both; and loyalty laggards with low percentages of truly loyal customers and high percentages of high-risk customers. Microsoft was the only CRM software provider to earn the loyalty leader distinction in the United States. Sixty-three percent of its U.S. customers are truly loyal, 20 percent feel trapped, 13 percent are high risk, and 4 percent are accessible. "There is a halo effect from their brand and their leadership position that is impacting how people feel about this product," Bounsall says. SAP is the lone European CRM software loyalty leader, with 48 percent of its customers deemed truly loyal, 24 percent considered trapped, 20 percent high risk, and 8 percent classified as accessible. SAP in Europe within the enterprise software category was not included, however, because "they had good scores, but they didn't have enough responses to set them aside," Bounsall says. The CRM industry has the lowest loyal-customer base in the U.S. for the software industry, but it is higher than it is in Europe. Just 43 percent of European CRM software customers are loyal, while 25 percent felt trapped, another 25 percent are high risk, and 7 percent are accessible. But comparing the loyalty between European and U.S. customers is an apples-and-oranges matchup, according to Bounsall. "They're the same questions asked about the same companies, but people in different cultures tend to answer the questions differently so it creates a bias in the answers." Overall, loyalty is a stronger measure than satisfaction, according to Bounsall. "If you look at the U.S., for example, 82 percent says they're satisfied with their vendor, yet 44 percent has a negative attitude. If you get 44 percent with a negative attitude, it seems odd that a full 82 percent could be that satisfied. If satisfaction is a very high hurdle, it's probably just not a high [enough] hurdle. [Satisfaction] is not an emotional attachment." Related articles: A Telecom Study Picks Verizon as ''Loyalty Leader''
What Follows Loyalty Leaders? Growth. 5 Ways to Master Customer Loyalty
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