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.

Li Ning: Make the Change

Chinese sports brand Li Ning has unveiled a new logo and slogan as it continues to pursue its global expansion aspirations.

The new slogan Make the Change replaces the previous Anything Is Possible, though the latter phrase is being kept in storage by the company for potential tactical use in the future.

According to the company, the new logo ”displays a modern interpretation of the iconic attributes of the original logo in a modern design language that spells out a global perspective.”

New Li Ning logo

The company has long been criticized for having a logo with too much resemblance to the Nike Swoosh and for a slogan too similar to the Adidas tagline “Impossible Is Nothing.”

Well known in its home market of China for its strong distribution system and competitively priced products, Li Ning has started expanding into numerous overseas markets in Southeast Asia and the USA. It has also begun sponsorship of a handful of western athletes, including a couple of NBA basketball players and European track and field and tennis stars.

The company was founded 20 years ago by Olympian athlete Li Ning, who became an immediate Chinese sporting hero when he captured three Gold Medals in the 1984 Los Angeles Olympic Games.

As we wrote in this blog back in November (see Li Ning: First Chinese Global Brand? under the categories Branding and Marketing), Li Ning wants to build the first truly global brand to emanate from China.

With this new logo and slogan, he may very well be on track to accomplishing this dream.

Is Shell Trying to Fill the “Beyond Petroleum” Void?

Deja Vu?

Into the “Beyond Petroleum” branding void steps Shell Oil.

This multi-national major oil industry player now has an aggressive new ad campaign, in which Shell is claiming to “unlock” a future world powered by new and numerous energy sources and cleaner fossil fuels.

Now where have we heard that one before?

The campaign, which launched just about a month ago, includes television commercials, print ads, online advertising, outdoor executions and two web sites — www.energygalaxy.com and www.shell.us/letsgo.

In the campaign, Shell informs us that the wolrd will soon be on the road to sustainable mobility and that the good guys and gals at Shell are “ready to help tackle the challenges of the new energy future.”

Not one to kick a fellow petroleum dog when it’s down, Shell’s spokesperson told Advertising Age that the campaign had been in the pipeline for almost a year and that the company felt releasing it now was “the right thing to do.”

BP’s Brand Hyprocrisy

The Beyond Petroleum positioning of BP may have been little more than hundreds of millions of dollars spent in greenwashing.

According to The Power Grid column in yesterday’s New York magazine, BP’s investment in hydrogen, wind, solar, and biofuels amounts to just 6 percent of its overall capital expenditures.

While this is certainly a significant amount in terms of dollars (or pounds) spent, it pales in comparison to what BP spends annually on oil exploration and production.

And this does not include, writes John Heilemann, “the tens of millions of dollars that BP has spent on lobbying against safety regulations, even as it’s compiled the most abysmal safety record of any major oil company.”

One key point in the article: safety violations by BP over the past five years totaled 760, as compared to only one for Exxon Mobil.

As we wrote yesterday, media monitoring firm General sentiment calculates that BP has lost $1 billion in brand value since the Gulf Oil spill.

It’s not the fact that BP had an accident that makes this brand suspect; it’s the manner in which they have tried to pass off blame and responsibility that bothers most.

Add to the above the 700,000 “friends” who have signed on to one of the three Boycott BP pages on Facebook, and you have a brand that is approaching free fall.

Sadly, the BP Board doesn’t seem to get this yet. By the time they do, it will be too late. (Another reason why Marketing needs to be brought into Corporate Boardrooms.)

The tombstone for the BP brand is being readied, and the graveyard of Enron, WorldCom, HIH Insurance, and myriad others awaits.

Trust Sinks as BP Spins

As BP continues to struggle to stop the flow of oil gushing into the waters of the Gulf of Mexico, its corporate brand image is sinking as rapidly as the destroyed Deepwater Horizon drilling rig that started this catastrophe.

The once ingenious branding campaign of Beyond Petroleum has disintegrated into “Beyond Belief” as the company continues to try to spin its message of “it’s not all our fault.”

From Day One BP’s strategy has appeared to focus more on preventing legal and financial responsibility for this ecological and human tragedy than on controlling the real damage being done to the environment and the many industries and businesses being impacted.

Watching a BP senior executive point the finger at the company’s subcontractors during a U.S. Congressional hearing did nothing to enhance trust in the BP brand (or its leadership). Neither did early reports that soon after this disaster BP was offering US$5000 payments to residents affected by the oil spill if they waived their rights to sue for any damages.

Here’s a company with record profits that seems unwilling to assume responsibility and throw all available resources into stopping the oil flow and cleaning up the damage done. Someone needs to tell BP how Johnson & Johnson reacted years ago when some idiot was putting cyanide into Tylenol tablets.

As Ian Berry points out in his So What’s Next? blog: “BP’s story now looks like spin and their reputation is in tatters.”

Interestingly, that same “it’s not our fault, the employees did something wrong” was given by the BP CEO after their refinery near Houston exploded in 2005 and killed 15 workers.

BP’s initial estimates of just 5000 barrels per day of leakage looks like a giant company spin statement now that more reliable sources are estimating the problem to be in the 90,000 to 120,000 barrels of oil per day range. This gap in the official BP line and what others are estimating is simply Beyond Belief.

A brand is a trust mark.

Is there any trust left in the BP brand?

I find it Beyond Belief to believe so.

Trust Is An Issue For Brands

I don’t put much stock in the annual 100 Best Global Brands report from BusinessWeek for two reasons: the valuations by Interbrand never seem to have any relevance and the list is too U.S. centric to truly be called a global brand ranking.

Nevertheless, there is one interesting and pertinent point made in the BusinessWeek article accompanying this annual listing. This concerns the element of trust, or what the article’s two writers refer to as “the most perishable of assets.”

According to the article, recent polling (in the USA) shows that distrust amongst consumers for business as a whole is growing. Citing a phone survey by public relations firm Edelman, only 44% of Americans say they trusted business, a significant decline from the 58% level recorded two years ago.

This point got me to dust off a posting from The Reputation Garage Blog from October 2008 that I had filed.

In that post, a reprint from an article that appeared in HR Leaders magazine, trust is called “one of the defining issues of the emerging century.”

Public trust in big business, governments, and even non-profit organizations has been declining throughout the 21st century. Here are some “fun” statistics that I gleaned from The Reputation Garage Blog:

* As few as 13% of all Americans place their trust in big business (and it’s not much higher for other mature consumer societies!).
* Only 39% of employees in a Watson Wyatt survey said they trusted senior leadership.
* Some three-quarters of US consumers feel that companies don’t tell the truth in advertising.
* Three-quarters of employees in big companies observed violations of the law or company standards in a 12-month period.

As economies start to rebound, marketers and organizational leaders have an important task in front of them: re-establishing their torn and tattered brands and re-building trust with all constituencies.

Failure to do so is not an option. Unless you want the tombstone for your organization’s brand to read “died of trust-related causes.”

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.