The publication Business2Community recently published an interesting article, titled “Why Customer Loyalty is Declining and What Companies Can Do About It.” The piece challenges organizations to rethink their approach:
Various studies point in the same direction: customer loyalty is disappearing in a hurry. Consumers put less trust in brands and tend to switch brands a lot faster. The famous 80/20 rule (20% of the customers account for 80% of the turnover) has turned into a 60/40 rule (40% of the customers generate 60% of the turnover) and is slowly evolving towards a 50/50 rule. In the latter case, loyal and disloyal customers generate the same amount of income. This shift is putting quite a few established marketing tactics in doubt. Should marketers invest less in loyalty programs? Or should they invest more? Should marketers favor proven methods such as investing in mass media?
The write-up goes on to point out that companies are struggling to keep up with rising consumer expectations and notes that organizations with “an older infrastructure have trouble coping with today’s rate of change.” It also references a recent Harvard Business Review article, in which McKinsey explains that customer disloyalty is “caused by a lack of understanding across the various touchpoints rather than by customer dissatisfaction with a single interaction.” These two observations are directly related, because if organizations lack newer infrastructure or have failed to implement dynamic decisioning technology, they’re not seeing a complete picture of the various touchpoints (or customer interaction channels).
Demonstrating his insight, author Steven Van Belleghem lists pitfalls that explain the decline in customer loyalty, including the mistakes that organizations make below:
- Focus on individual touch points instead of on the customer experience as a whole. Companies are divided into various departments, with every department being responsible for the customer’s experience of one specific aspect of the customer relationship. There’s hardly any contact between the sales and after sales departments and invoicing is housed three floors down. Few companies take a holistic approach to customer relations, with just one person in charge of every aspect of the customer relationship. In a recent article in the Harvard Business Review, McKinsey claimed that disloyalty is caused by a lack of understanding across the various touchpoints rather than by customer dissatisfaction with a single interaction.
- No unique relevance to consumers. When customers are disloyal, they are really saying that a product or service was not relevant enough for them to remain a customer there. The product or service in question didn’t stand out from the competition. In recent years marketers have launched scores of innovations, often a new flavor or packaging. Too little thought is put into the role a brand has to play in consumers’ lives. The relationship is too rational in nature instead of emotional.
Enacomm’s Dynamic Decisioning Solution overcomes both of these challenges by taking into account all customer interactions across various channels and by utilizing data analytics to create exchanges that are personalized to each individual’s habits and needs – customer loyalty is earned through intelligent interactions. Our Dynamic Decisioning Solution helps your business treat each patron as if you know him or her, building customer satisfaction and increasing loyalty with each transaction, across every channel including stores and kiosks, contact centers, websites and the IVR.
Also of interest, Van Belleghem claims that loyalty programs are missing their mark. From the article:
Many companies thought there was a shortcut to creating customer loyalty: the loyalty card. However, all the latest studies agree that loyalty cards slash profit margins on existing customers. Instead of creating loyalty you’re really losing money. Loyalty is not for sale but must be earned.
Convergys studies have demonstrated that loyal customers consume more products and services and contribute more revenues to the enterprises they regard – but building loyalty must be done the right way to be effective. Invest in delivering customer care marked by intelligent interactions that are consistent across all channels; it’s sure to pay off.
Give us a call at 877-860-0025. Enacomm can help.