What is The Current State of Customer Loyalty?

Is customer loyalty on the decline or improving? We often find that clients want to evaluate their own performance relative to the “norm.” It is always good to look above and beyond your own data as a means to provide context for the trends you are seeing (I did a blog series on this topic a while back that you may find useful). One thing to remember when using benchmark data is that you should be able to evaluate the fit and appropriateness of the benchmark as well as the worth (and rigor) of the underlying data.

 

A well-respected benchmark of customer sentiment is the American Customer Satisfaction Index. This index has been existence since the mid-1990s and has a regular, regimented schedule of studying satisfaction trends across a wide variety of industries. The consistency in how the data are collected and reported provides some rigor in the process that can be absent in some benchmarks. In addition, despite some criticisms related to its concentration in the B2C space and the black-box nature of the calculations, it has been analyzed and vetted by a number of academicians. In the most recent update, the ACSI authors state that the ACSI has hit the lowest levels since 2008.

 

We, too, have seen some evidence of a shift in customer sentiment toward more of the High Risk category (you can learn more about the Walker Loyalty Matrix here). Interestingly, there is a similar trend starting to occur among employees – more and more employees are becoming less engaged, and are planning to look for new work when the recession ends. My colleague Chris Woolard (Walker’s employee expert) has blogged recently on this topic.

 

The convergence of the decline in both customer and employee sentiment suggests, to me, that a more macro-oriented dynamic is at play.

 

What is driving these shifts? Becca Lewis blogged about the impact that the economy has on customer behavior at the start of the economic downturn. The combination of the simultaneous shift in customer and employee sentiment is interesting; at the risk of analyzing without immense statistical rigor, here’s my assessment of what is driving this phenomenon among both customers and employees:


·         In a challenged economy, companies are delaying or deferring purchases as long as possible; this has the effect of hitting the P&L of service providers, who remain committed to maximizing shareholder returns. To achieve this, they cut any and all extraneous people costs as well as any discretionary expense items.

·         Customers who are purchasing run into roadblocks – they have to wait longer for salespeople to respond (because staffs have been cut), they wait longer in queues for customer support, and they are forced – either by their provisioning groups or by sheer survival instincts – to negotiate harder with vendors. This has the result of providing a negative customer experience. This situation not only exacerbates the P&L situation, but it creates a stressful environment for employees.

·         At the start of the recession, there was evidence that employees were simply grateful to maintain employment; however, over time, the stress created by more work among fewer associates, coupled with frustrated customers, creates a situation where employees are waiting for the tide to shift so they can seek greener pastures.

 

In short – an environment in which the customer experience suffers hurts everyone – customers, employees, and the company at large (including shareholders).

 

The good news is that companies and employees alike can get ahead of the curve by focusing on a few good strategies. I will cover those in my next two blogs.

 

Mark A. Ratekin

Senior Vice President, Consulting Services




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