Executive summary
Service providers need to use their data to build a consolidated view of each individual customer journey and gain critical insights into where to focus improvements. Only then will they be able to deliver consistent, high-quality experiences and avoid the costs of losing customers. More customers switch service provider on quality of experience grounds than price. However, in today’s complex, multi-channel businesses, service providers are struggling to understand the true experience of each customer and therefore where to focus efforts for reducing churn. Service providers need to use their data to build a consolidated view of each individual customer journey and gain critical insights into where to focus improvements. Only then will they be able to deliver consistent, high-quality experiences and avoid the costs of losing customers.
Stuck on the back roads of customer experience
Service providers, such as mobile network operators, Internet Service Providers (ISPs), utilities, retail banks, credit card providers and insurance companies, all face a common challenge: the main reason people switch service provider – or ‘churn’ – is the poor quality of their customer experience.
Survey after survey confirms that quality of service more than any other factor, including price, drives a customer’s initial decision to churn. A recent global study of consumers found that 73 per cent of those who switched service provider in the last year cited poor customer experience as a reason, compared to 58 per cent mentioning price. Other surveys back up these findings – such as a 2009 pan-European consumer survey, which found that a poor overall quality of experience drives a three-fold increase in the likelihood of churn, whereas a good experience more than halves the risk.
These findings are particularly relevant for the UK’s saturated markets, where consumer service industries are already highly price-competitive and, in our experience, many companies are enduring high, or rising, churn rates. With the cost of acquiring a new customer on average five times higher than the cost of retaining an existing one , service providers need to focus on delivering a first-class customer experience to ensure differentiation and to keep customers happy. In fact, Gartner research last year found that 95 per cent of business leaders see customer experience as their next strategic priority.
However, despite the almost universal acceptance of its importance, our work with service providers indicates that most have no way of measuring a customer’s experience objectively. They struggle to understand the impact service changes have on individuals and cannot focus improvement efforts accordingly. Moreover, the factors that drive churn seldom surface in customer complaints – only four per cent of unhappy customers voice their concerns – which means unhappy customers are difficult to identify and manage through existing customer feedback mechanisms.
In our experience, customer satisfaction surveys, and other direct methods that service providers traditionally use to get additional feedback, typically generate low response rates. We believe that they are also either usually confined to small samples or are reliant on customer panels which may not be representative. And the time gap between a customer experiencing poor service and subsequently deciding to leave may be too short for an organisation to respond using such techniques. The goal of firstclass customer experience will, it seems, elude many service providers in the next
few years.
