Just How Important Is Customer Service to Customer Loyalty?
Chances are there is an unrelenting push from the C-Suite to improve your customer loyalty scores. Regardless of how you measure it, customer loyalty continues to be a major hot button for companies and, in turn, a leading source of pressure on customer experience leaders and contact center executives.
Yet, where's the proof that customer service has a large enough impact on loyalty to drive significant increases in loyalty scores? We sought to find the answer to this question in a report titled 2014 Convergys U.S. Customer Scorecard Research: Key Findings on Customer Loyalty and Satisfaction, which uncovered the top drivers of loyalty and the level of influence that customer service has on this elusive goal, both directly and indirectly.
Loyalty Has Stabilized
While 2013 saw a precipitous drop in reported loyalty, 2014 U.S. Customer Scorecard Research showed a leveling off and even a slight improvement. In 2011, 59 percent of the respondents surveyed indicated they were loyal to a company. In 2013, this figure dropped to 52 percent—a fairly significant decline of 7 percentage points. In 2014, customer loyalty recovered slightly, with 55 percent responding positively.
While not yet returning to previous levels, customer loyalty appears to have stabilized. The burning question for the customer service organization is this: What sort of role has customer service played in loyalty improvement?
The Factors that Determine Consumer Loyalty
It turns out that though quality of service is important to consumers, it's just not the most important factor. When it comes to customer loyalty, product and pricing loom the largest—at least so long as the product or process does not fail.
When consumers were asked what was most important to them when deciding whether or not to recommend a company, 61 percent of them reported that the product is the single most important aspect they consider. "Product" in this case would include the following: product quality, product reliability, and product performance. Price came in at 16 percent; interestingly, only 11 percent of respondents said that service quality was the most important factor, a drop of 3 percentage points compared to 2013.
Compared to product and price, then, customer service has a smaller impact on consumer loyalty. Does this mean that customer service quality doesn't matter when it comes to customer loyalty? On the contrary, customer service is extremely important to help prevent customer disloyalty.
Understanding the Impact of Good and Poor Service
Similar to earlier studies, the research shows that when customers talk about service, it's more often after a bad experience. In 2014, 8 in 10 dissatisfied consumers reported telling others about a recent negative interaction, doing so in person or via phone, social media, email, or text. Meanwhile, only 5 in 10 extremely satisfied consumers reported telling others about their positive interaction. Based on the results, poor service quality appears to drive disloyalty and negatively impact the purchase decisions of others.
We believe that these findings don't necessarily mean that good customer service is irrelevant in driving loyalty. In fact, because product plays a majority role in loyalty, delivering good customer service may be a crucial factor to help mitigate the negative impact on loyalty caused by product problems. If customer service can quickly and easily resolve product issues, it can indirectly assist in preventing disloyalty and counteracting consumer disappointment in the product or service.
Focus on Service Improvements and Feedback to Product Groups
Savvy companies should use these findings about the role of customer service in customer loyalty to guide investment in contact center improvements. For instance, focusing on eliminating drivers of dissatisfaction and reducing customer effort can help you improve poor service quality, which in turn helps to reduce customer disloyalty and influence customers who place more importance on service than product or price.
Finally, the contact center can help the company improve customer loyalty by being a valuable channel for product and process feedback, carrying the voice of the customer back to those critical areas of the company responsible for product and service quality, reliability, and performance.
Michael Cholak is vice president of analytics solutions for Convergys, a global leader in customer experience management. Prior to joining Convergys, Mike worked as a marketing research analyst at Market Facts, where he supported several Fortune 500 accounts.