Service Recovery Crucial for Customer Retention

Service problems are bound to happen. How do you keep customer service errors turning into lost customers?

The most important factor is trust. According to the American Express Global Customer Service Barometer of 12,000 consumers in 12 countries, 70% of customers state they are willing to give companies a second chance after a bad service experience if there has been a history of previously received good customer service.

Even without a history of prior service excellence, up to 75% of consumers will still put up with two or more customer service experiences before taking their business elsewhere. As we noted previously, this tendency for consumers to give second chances to poor service providers was remarkably strong across all 12 markets surveyed.

What should you do when your employees create a bad service experience for customers? Two key service recover points stand out in this survey:

1) Over half (52%) of customers expect something in return after a poor customer service experience, above and beyond resolution of the problem they have encountered.

2) The vast majority of customers (over 63% in all but one market) want an apology, while roughly half want a credit to their account or some form of reimbursement such as a discount, coupon, or the provision of free products and services.

Providing rewards points was an unattractive compensation option chosen by less than one-third of respondents in each market.

Significantly, 70% indicated a discount would motivate them to return after a poor customer service experience, but this can be a costly way to retain their business. While the average discount that would motivate returning business was low in Japan (7%), it was a hefty 19% to 23% in nine markets.

A more cost effective way to maintain customer loyalty and ensure customer retention would be to simply create a series of positive customer experiences. That beats having to buy repeat business through discounts and free offers any day.

Read our most recent Monday Morning Marketing Memo newsletters for more thoughts on Customer Retention Marketing, or what I call the art of keeping good customers.

Consumers Give Second Chances to Poor Service Providers

Most consumers are forgiving and tolerant of a single poor customer service experience, according to findings of the American Express Global Customer Service Barometer.

According to the results of this 12-country study of more than 12,000 consumers, between 50% and 75% of consumers will put up with two or more poor customer service experiences before discontinuing business with a company. This ranges from a low of 49% in France to a remarkably high 77% in India.

Of course, those of us who have visited India are well aware of the infrastructure problems that often lead to bad customer service situations, so perhaps it is not so surprising that Indian consumers are more understanding and forgiving.

There is no doubt that consumers stop purchasing from companies that give them poor customer service. As we noted in yesterday’s blog post, up to 87% of consumers have vowed never to do business again with specific companies due to poor customer service experiences.

Over one-third of consumers in France (38%), Germany (33%), and the UK (33%) are unwilling to forgive even a single episode of poor customer service and are more prone to quit doing business with an organization after just one bad experience.

On the other hand, consumers in India (38%), Mexico (28%), Spain (24%) and Italy (22%) are more inclined to give companies three or more tries.

Significantly, 70% of consumers in this study claimed they will allow an organization a second chance after a poor customer service experience if they have generally had a history of good customer service from that company.

Consumers in Mexico (89%), Canada (88%), the U.S., Australia, and India (86% each) are significantly more likely to include prior service experiences in deciding whether to keep or drop their relationships with selling organizations.

This study confirms what we often tell our clients and workshop participants — creating a series of positive customer experiences is one of the best ways to ensure customer retention.

Read our most recent Monday Morning Marketing Memos for more thoughts on Customer Retention Marketing, or what I call the art of keeping good customers.

Up to 87% of consumers will leave due to poor service

Over eight of every ten consumers in six major markets have vowed never to do business with specific companies due to a poor customer service experience.

Consumers in Mexico, Australia, and Canada are the most likely to walk away and find other service providers when receiving poor or bad service, followed closely by consumers in Spain, the United States and the United Kingdom.

These findings come from the American Express Global Customer Service Barometer, a 12 country study of attitudes and preferences toward customer service released earlier this month.

At a minimum, across all 12 markets, six in ten consumers report they have decided never to do business with a company as a result of a poor customer service experience. The specific findings were:

Mexico — 87%

Australia — 86%

Canada — 85%

Spain — 82%

United States — 81%

United Kingdom — 80%

Germany — 77%

India — 77%

France — 76%

Italy — 73%

Netherlands — 62%

Japan — 61%

This research study was conducted with over 1000 adults 18+ in each of the 12 countries between mid April and early May this year.

Telstra Backflips on Fee for Paying Bills

Telstra, Australia’s largest telecommunications provider, has withdrawn a controversial A$2.20 fee imposed in September for customer payments made over-the-counter or by mail for monthly phone bills.

“This decision has been taken because it is the right thing to do by our customers,” a Telstra spokesman said. Telstra CEO David Thodey announced the decision to cancel the deeply unpopular fee at the company’s annual general meeting last week.

In our Monday Morning Marketing Memo dated 7 September, we wrote “If Mr. Thodey and his colleagues at Telstra are truly serious about improving customer satisfaction across the company, they need to have a serious look at the fees and surcharges that are not only driving customers crazy, but are also driving customers like me away.”

It appears that the senior management of Telstra has listened to customers like me, who spoke out vociferously against the imposition of this new fee, particularly at a time when Telstra’s corporate reputation and customer service levels are both being hammered.

One leading journalist in Australia referred to “the friendless Telstra” in an article last month, while the headline in an article last week read “Telstra arrogance towards customers exposed as Thodey moves on admin fee.”

As Mr. Thodey told the Telstra annual meeting audience, “We tried to impose this charge without first listening to the people it would affect.” He also admitted that the payment fee has caused customers to defect. [Nothing surprising in that!]

Removing this fee is a major first step in renewing customer preference for the Telstra brand. Hopefully Telstra has learned a great lesson about the need to listen to customers and engage its customer base in a proactive, two-way dialogue.

The other critical lesson here is the need for Marketing to have a presence in the Corporate Boardroom. Telstra’s Board is stocked with lawyers, accountants, financial managers and technical experts. Someone with a marketing focus could have easily advised the Telstra Board that this payment fee was not going to be readily accepted by the company’s customer base.

Is Brand Loyalty BS?

Brand loyalty is still alive, though declining, at the supermarket according to a survey just conducted by Tim Manners and The Hub Magazine.
Most interestingly, this survey was conducted online with over marketing 200 practitioners, who reported that their loyalty for ten or more brands has dropped in the past year from 61% to 54%.

Over half the 200 respondents claimed that there is such a thing as brand loyalty, even if their own loyalty buying habits have changed in the past year. Another 31% said their loyalties had remained unchanged. Only 9% of these marketing professionals said there was no such thing as brand loyalty.

Surprisingly, the split in loyalty between brands and supermarkets was almost equal, with 45.8% saying they are generally more loyal to the supermarkets where they shopped and 54.2% agreeing they are generally more loyal to the brands they purchased than to the stores where these are bought.

The key factors in supermarket store loyalty would appear to be convenience and seeking savings from sales, based on the comments submitted by a quarter of those who took part in the survey.

Most interestingly, almost two-thirds of the respondents (64%) said that their supermarkets’ loyalty or charge card program did not make them more loyal to the store. In fact, some indicated that these so-called loyalty programs infuriated them and caused them to shop elsewhere.

In terms of category responses, 68% said that they usually purchase more than one breakfast cereal brand and more than one bread brand. What isn’t clear from the responses is whether these purchases are due to the different likes of household family members (which could indicate strong brand loyalty to multiple brands) or if these purchases are a sign of little entrenched brand loyalty in these two categories.

For instance, in my household, we regularly purchase four breakfast cereal brands, due to different taste buds between our adult members and our two teenage boys. However, as we almost always purchase the same four breakfast cereal brands, ours would be a very brand loyal family for this category, albeit across four different brands.

Speaking of brand loyalty, is there such a thing according to these marketing professionals? Not surprisingly, they feel there is. A full 85% responded “no” to the question “is brand loyalty BS.”

However, the current state of play in loyalty may be best summed up by one respondent who wrote regarding brand loyalty:  “for certain brands and categories yes, for the vast majority no.”

Brand loyalty may not be dead, but it is certainly being applied to fewer brands and fewer product categories.

Of the 200+ respondents to this online survey, 30% were from consulting and marketing services firms, 16% from agencies and four percent from media.  The remainder were from manufacturers, the service industry, academia, and a handful of other industries. Over half (55%) of the respondents have more than 15 years in marketing, with another 17% having 10 to 15 years of marketing experience.

A full report of these survey results is promised for the November issue of The Hub Magazine, which will be devoted to the subject of loyalty.

Here’s a questions I hope Tim and his team cover: if marketing professionals, such as the ones in this survey, have declining brand loyalty despite their firm beliefs in the concept of brand loyalty, how can we expect the general consumer and populace to become more brand loyal?

After all, if marketing people do not “walk the talk” about brand loyalty in their own purchasing patterns, do we really expect the general public to listen to our marketing messages and “do as we say, not as we do?”

Slapping on the Fees

As a result of our previous post on Eliminate Stupid Rules & Fees, we were interviewed by Phil Dobbie recently for a BNET podcast.

You can listen here to the discussion in which I warn companies against slapping on fees to drive new revenue sources as I believe doing so risks increased customer churn and reductions in overall spend. Finding new ways to add fees to customers is a critical mistake made by inexperienced marketers.

Eliminate Stupid Rules and Fees

Dark clouds on the economic horizon. Executives naturally concerned about how to attain revenue growth during a slowing economy.

Ah! The light bulb goes on. Let’s create new fees we can charge customers!

Wrong!

The wrong way to go about creating new revenue streams is to start adding fees to your existing services or service delivery. Doing so will only agitate your existing customers and have them start questioning why are they doing business with you in the first place.The last thing you want to be doing at the start of an economic downturn is to have your customers asking themselves why are they buying your products, services, or brands.Ben McConnell, author of Creating Customer Evangelists, suggests all marketers should vow to eliminate a stupid rule as part of their marketing strategies. “More rules are proportional to less convenience,” writes McConnell. “More rules = fewer customers. You either let the tyranny of one customer influence your organization, or not. When someone wants to add a new rule, how about eliminating an existing one instead?”

I would add to this: vow to eliminate stupid fees as well, and make a vow not to add any new stupid fees during the remainder of the calendar year.

Your customers will appreciate this. And so will your bottom line, though you probably won’t be able to prove so to any bean counters.

Questions to ask yourself:

What fees or surcharges drive your customers crazy? How can these be eliminated, or incorporated into your overall price structure?

What rules do you have that drive your customers crazy? How can these be eliminated or modified?

As we said above, the last thing you want to be doing at the start of an economic downturn is to have your customers asking themselves why are they buying your products, services, or brands. At least if you want to reduce customer attrition and improve your customer loyalty.

The Marketing of Presidential Candidates

You’d think that with the tens of millions of dollars they have in hand to spend on their campaigns that American presidential candidates would be better marketers. Or at least have better marketing results.

But alas they seem to have fallen to the same disease of short-term sales (i.e. votes) and quarterly results (i.e. the next set of primary elections) as many corporate CEOs. This is why even when they win they often lose for their support is not deeply engrained and there is no voter (customer) loyalty post election.

This is also because none of the current crop of candidates has shown any ability to strongly position themselves (i.e. brand themselves). There’s not a solid brand amongst them. These candidates have no branding power (unlike JFK”, Harry Truman and Ronald Reagan). As one astute observer wrote to me last week, the current crop of candidates can be described (branded in my words) as:

a) a mean-spirited woman

b) a slick-talking,” Oprah-backed inexperienced quasi-Muslim

c) an old man from Arizona with a trophy wife

d) a womanizing 9-11 opportunist from New York

And those are just the leading candidates!

Change seems to be a major topic in this election. Perhaps the true change that is needed is the way the few remaining candidates need to start employing strong branding and marketing strategies to create some brand power and customer loyalty building with the American voters.

Otherwise,someone in November is going to win the election and lose the electorate (ala the current incumbent in the White House).

Engaged Staff Create Incredible Customers

“To get incredible customers, you need to try to create it through staff,

Trouble in Toyland

It couldn’t happen at a worse time for the U.S. toy industry.

As the official Christmas buying season kicks off on Friday this week, following Thursday’s Thanksgiving holiday, the U.S. Consumer Product Safety Commission (CPSC) has launched an initiative to remind parents of a wide variety of toy safety hazards. This initiative is suppose to convince parents and others that CPSC has stepped up its inspection efforts (which led to CPSC recalling 61 toys involving 25 million product units last year) and that the Chinese government has signed new agreements to prevent lead-painted and other unsafe toys from being exported to the USA.

And earlier this week, the California Attorney General’s office announced that it was suing Mattel, KB Toys, Toys “R” Us, and Wal-Mart for knowingly selling lead-tainted products.

Meanwhile, leading consumer advocacy group U.S. Public Interest Research Group (PRIG) just released its “Trouble in Toyland” report, which points out that “hazardous toys are still sold in stores around the country.”

“It’s going to take toy companies a long time to earn back the trust of consumers,” says U.S. PIRG Consumer Program Director Ed Mierzwinski, whose organization claims that toy manufacturers have long fought responsible regulation of the industry.

MediaPost Publications Marketing Daily has a good article on this situation and you can read the whole story here.

Does anyone have examples of consumer fears or government agency actions in other countries that they would like to share? Please send them to us using the comment section below and we will upload these to this blog and also share them with our 1000+ Monday Morning Marketing Memo readers.

For now, however, as the all-important Christmas season gets under way, the toy industry in the U.S. is facing some major branding, corporate image, marketing, and customer retention issues. These folks may not have a whole lot to be professionally thankful for when they sit down to their traditional turkey dinners on Thursday night.