Most, perhaps all, suppliers seem to believe customer satisfaction is an “important” objective for their businesses.
It is simply common sense that unhappy customers are prone to switch their product or service providers. It would therefore seem to be equally good sense that satisfied or happy customers would tend to be loyal to their current suppliers.
But there seems to be better evidence for the former than the latter. In other words, consumer unhappiness does tend to be correlated with higher churn rates. That paradox typically is seen in virtually all consumer telecom services.
In other words, there seems to be a less certain relationship between “consumer satisfaction” and “customer loyalty.” Specifically, even customers that report they are “happy” with a service or product will choose another supplier.
The latest example is a new study by Accenture. Two out of three (66 percent) wireless and cable TV consumers switched companies in 2011, even as their satisfaction with the services provided by those companies rose, according to Accenture.
The paradox here seems to be that “customer satisfaction” does not lead to “loyalty.” It is almost as though “unhappiness” and “happiness,” as predictors of consumer behavior, are not opposites on a single continuum, but two different sets of indicators.
Failure to supply consumer happiness leads to churn. But success does not lead reliably to an absence of churn. Paradoxically, even “happy” or “satisfied” customers will desert a company for another.
Also, there are new precursors to churn, especially the growing pattern of consumers adding a second provider of a service, without dropping the original provider. That of course puts a potential full replacement provider into a relationship with a consumer.
The problem with that sort of behavior is that the original provider does not have any way of knowing a consumer is becoming disaffected. There might not be any visible signs of discontent such as a downgrade of level of service or a reduction in recurring spending level.
Instead, another provider is selected to supply some new additional value.
TheAccenture Global Consumer Survey asked consumers in 27 countries to evaluate 10 industries on issues ranging from service expectations and purchasing intentions to loyalty, satisfaction and switching.
Among the 10,000 consumers who responded, the proportion of those who switched companies for any reason between 2010 and 2011 rose in eight of the 10 industries included in the survey.
Wireless phone, cable and gas/electric utilities providers each experienced the greatest increase in consumer switching, moving higher by five percentage points.
According to the survey, customer switching also increased by four percent in 2011 in the wireline phone and Internet service sectors.
There is a new and apparently growing indicator of churn potential as well. In a growing percentage of cases, consumers are adding new providers, instead of switching entirely. That can disguise the danger of churn, as the original provider does not realize a new potential replacement provider also has established a relationship with a particular consumer.
“Companies are improving many of the most frustrating parts of the customer service experience, but they are facing a customer who is increasingly willing to engage multiple providers for a service and is apt to switch quickly,” said Robert Wollan, global managing director, Accenture Customer Relationship Management. “
Consumers reported increased satisfaction across each of 10 service characteristics evaluated. In fact, satisfaction rates on three customer service characteristics jumped by more than five percentage points from 2010.
However, only one in four consumers feels “very loyal” to his or her providers across industries, and just as many profess no loyalty at all. Furthermore, two-thirds of consumers switched providers in at least one industry in the past year due to poor customer service.
In emerging markets, these contradictions are even more pronounced. While consumers there reported greater customer satisfaction than their mature-market peers, they more often switched providers due to poor service across all industries (in some cases by a two-to-one ratio over mature markets), especially within the retail, ISP, mobile and banking industries.