Don't Try the Impossible to Keep Customers Loyal. Just Do Your Job.
What science uncovered may actually surprise you
Companies have been trying to identify key factors which will help them retain loyalty of their consumers for ages. The formula that was believed to work was to ensure customers' delight instead of just their satisfaction. To be clear, a satisfied customer is a person who buys a product or pays for a service and it meets their expectations. But the definition of a delighted customer is somehow vague. To make customers delighted, businesses are supposed to go the extra mile. Free gifts and discount vouchers offered by an always smiling staff sound just right.
This argument has been aptly discussed and explored by following researchers from the Customer Contact Council, a division of Customer Executive Board: Matthew Dixon, Karen Freeman and Nicholas Toman. Their research with the title "Stop Trying to Delight Your Customers" was published in Harvard Business Review's July-August 2010 issue. Dixon, Freeman and Toman argue that the past research on this topic has only generated misconceptions that were gravely misleading for entrepreneurs.
In their research, answers for the following three questions were explored
- What is the significance of customer loyalty for companies?
- What factors are responsible for increasing and decreasing customer loyalty?
- Is it possible for companies to retain and amplify customer loyalty without increasing their customer service operating costs.
Approximately 75,000 B2B and B2C respondents from around the world were questioned in this research. A number of methods was employed for conducting the study, such as interviews via phone by contact-centre representatives, web, email, chat and voice prompts. Extensive interviews with customer service managers were also part of the research survey. The research questions were used to measure the numerous qualities of the service experience and attitudes of the respondents. Demographic data served as the control variable for the analysis.
In their study, the authors explained that "what customers really want (but rarely get) is a satisfactory solution for their service issue. "The key findings about productive customer service strategies included one breaking point. Loyalty cannot be built on delighting customers but on actually reducing their effort to resolve the problem (that is, by providing them what they are looking for).
Furthermore, the authors concluded that deliberately employing this particular strategy can help in reducing customer service expenses, reduce customer churn and improve overall customer service standards.
Staggering 89 out of the 100 customer service managers who were interviewed stated that their main focus was on exceeding customers' expectations but despite their massive efforts, almost 89% of the surveyed customers said that they were dissatisfied.
The crux of this research is that company heads need to focus on eliminating dissatisfaction instead of maximizing satisfaction. It might be true that merely improving customer service cannot help in increasing customer loyalty but it can at least play a defining role in undermining disloyalty.
This research dismissed the conventional notion that firms that go above and beyond are able to retain customers. Instead, it pointed out that focusing on exceeding customer expectations, such as giving out free products (e.g. the famous BOGO- buy one get one offer) or free shipping and refunds can help in receiving marginal loyalty. However, this can also be easily reached by meeting their needs in the first place.
Let's explain this theory in an example.
If someone is looking for a good shampoo and he/she gets a very effective one from a specific brand, this customer will probably buy it again and stay loyal. However, if this customer is not satisfied with the effect, even if the brand offers a free bottle of shampoo with each product, they will start looking for other options.
The customer loyalty is directly proportional to good service and meeting expectations, not to offering exceptional packages and exceeding expectations.
In the light of these new findings we can propagate that: corporate leaders must focus on decreasing disloyalty by reducing customer effort. Doing so will definitely increase the likelihood of customer returning back and staying loyal.