• September 22, 2004
  • By Coreen Bailor, (former) Associate Editor, CRM Magazine

What Follows Loyalty Leaders? Growth.

Establish a loyal following of customers and they will show their appreciation by returning to your company for their products and services needs. Seems simple enough, yet some companies haven't been able to fully master this behavior. According to Walker Information's annual "Walker Loyalty Report for Information Technology," the concept has trickled into the IT sector, with loyalty leaders in the IT industry experiencing significant growth levels compared with their counterparts. According to Phil Bounsall, executive vice president at Walker Information, when Walker examined the image of a company, the image as an industry leader is what matters the most to a customer: "There's a bit of a safety in choosing a leader." Companies including Cisco, Dell, EMC, Hewlett-Packard, IBM, Microsoft, Network Applications, Oracle, and SAP were all selected as loyalty leaders. But not all companies represented in the report earned impressive loyalty marks. The report, which bases its findings on information collected from more than 13,000 evaluations from IT decision-makers, influencers, and staff, illustrates the correlation between customer loyalty and financial performance. For instance, loyalty leaders enjoyed an average profitability of 12 percent, while those in "limbo,"--companies that could sway either to the loyalty side or to the laggard category--experienced a 6 percent increase. Companies deemed laggards experienced a loss of 11 percent. Additionally, 84 percent of the survey respondents are satisfied with IT companies, but only 44 percent contend that they are truly loyal customers. In fact, 30 percent admits that they feel trapped, and 23 percent are high-risk, with both low-commitment to and low intention of furthering the relationship. Bounsall attributes the significant percentage gap between satisfaction and loyalty to the limits of using customer satisfaction as a measure: "We just don't believe that satisfaction is enough. In order to be truly loyal you have to like the company and you also have to intend to do business with them. That intention to behave in a way that a loyal customer would behave is a higher hurdle than just saying, I'm satisfied." The report also examines each IT sector in terms of each category's loyal customers, with computer software earning the top slot at 48 percent, and networking equipment receiving the lowest rank, of 37 percent. Further angles include a look at customer experiences to uncover what customers deem important to them, as well as how the companies are performing in that area. Bounsall tells CRM magazine that product quality, purchase process, technical support, and servicing and consulting were determined to be the qualifications that customers view as most important: "It's the quality of product itself and the high-touch areas--the areas where there's actually a relationship or an interaction with others--...that seem to matter to people." Related articles:
An Unhealthy Relationship Consumers' satisfaction with insurers is suffering. Telco Customers Lack Loyalty The Loyalty Factor A research report says less than half of some retail customers are truly loyal.
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