CX Is Flatlining - move faster

Retaining customers in a world full of choice

Is it still possible to keep a customer for life?

You might argue that customers no longer have reasons to be loyal to one brand. There is so much choice readily available. For instance, Fintech has made the choice of swapping banks as simple as downloading a new app. This is now normal behaviour for younger bank customers in a way that simply was not possible a decade ago.

The massive rise in influencer marketing recognises the power of social feedback in consumer decision making. We now feel directly informed about a product’s real-world benefits and shortcomings as opposed to what brands would like us to believe.

We also judge brands on so many more things than product and price. Increasingly, we hold them accountable for their behaviour and impact in the world. Some of us will stop buying if those standards are transgressed. Welcome to the world of purpose driven brands.

The underlying message I take from each of these examples is that customers continue to set new standards in what they expect from the brands they choose to engage with. Organisations that cannot keep pace will suffer. The warnings are already clear. The average age of an S&P 500 company is now under 20 years, down from 60 years in the 1950s. source Credit Suisse.

In other words, being successful as measured by keeping customers, maybe even for life, is much more challenging than it ever was. Few organisations have yet caught up or seem to understand what is now expected in return for their loyalty. According to both Nunwood and Forrester, CX improvements have stalled for a third year in a row. Their indexes reflect the reality that customers continue to evolve faster than most brands. Or that brands are stuck in their CX evolution.

Happily, there are a few who are moving forward and are being rewarded as a result. A 2019 global study by Accenture, “Way Beyond Marketing: The Rise Of The Hyper-Relevant CMO”, revealed a small number of innovative CMOs who are prioritising customer experience. As a result, they are helping their organisations generate shareholder returns 11% higher than those of their industry peers.

What’s their secret?

“Pioneering CMOs make the customer central to their thinking and vision. They create a Living Business that continuously adapts with speed and scale to achieve total customer relevance and sustained growth.” That’s according toJohn Zeally, Global Lead – Customer Insight & Growth at Accenture.

This suggests it remains possible to keep customers engaged over time. However, the price for that loyalty is ongoing listening, learning and adapting in order to attract and retain their interest. Moreover, this ability to adapt must be undertaken as a unified organisational effort.

Therefore, brands that manage to keep pace with their customers’ expectations can still expect to grow their business based on all those well-known statistics many of us have grown up with.

Loyal customers make up roughly 20% of a typical customer base but account for about 80% of total revenue. On average, they spend 60% more than new ones
Customer retention costs between 4 and 30 times less than customer acquisitiol
A 5% reduction in customer churn can increase profits by up to 75%.

Source: Chartered Institute of Marketing

In short, customers for life is a viable ambition. Lifetime value analysis shows why is makes sense commercially. But research also shows customers are less willing to be loyal. So against this trend of ever-increasing expectations, what does it now take to remain your customers’ choice?

Understanding What Matters to Customers

Aiming to keep customers for life means capturing their loyalty. As we shall see, the quality of customer engagement plays a growing role in enabling this outcome. To have a realistic chance of success, we need to begin by deeply understanding the behaviour of our customers and what matters to them.

The Decline in Loyalty

The duration of time in which customers remain loyal to brands is dropping. Opinium Research run an annual survey on behalf of Verint in which they poll 24,000 consumers in 12 countries across nine industry sectors.

They use a much more modest definition of loyalty than the ‘customer for life’ ambition we are discussing. They simply want to know how many customers remain loyal for a three-year period.

Their headline finding is that only half of customers worldwide have been with their service providers more than three years.

Every sector they polled experienced reduced retention between 2015-2018. As a side note, this was more concentrated in established industries such as banking, insurance and utilities.

Declining loyalty also became more exaggerated by generation. At the extremes, a 65+ year old was twice as loyal as a 18-25 year old. To be precise, just 30% of that age group were still loyal after three years. Why is this?

One clue comes through in another study. Endless Gain surveyed 4,000 US and UK retail consumers. They found the same behaviour. Younger generations felt less loyal that older generations.

Delving deeper, they showed how that generation’s greater willingness to share personal data drives an expectation for ongoing innovation and tailored experiences. When that is lacking, their attention is easily grabbed.

What can we learn so far?

It is clearly tougher to keep customers. Online window shopping combined with social influences makes it easy to literally shop around and switch service providers.

There are many reasons why customers move on. As we saw, a lack of innovation matters to younger retail consumers.

Whatever the reason, brands need to become fully immersed and see the world through the eyes of their customers. Then quickly respond to what matters or risk being left behind.

This behaviour is being stimulated by what McKinsey calls ‘liquid expectations’. It is fuelled by the constant stream of digital disrupters who come to market aiming to set new standards in customers experience. Once exposed, customers naturally expect others to catch up.

So, what needs to be done to keep pace with accelerating customer expectations? Here are some key ideas to consider that will strengthen your ability to track and respond to changing customer expectations.

Action List

Build deep understanding of what matters to each generation of your customers. In particular, understand their behaviour and motivations. This requires more than simple multi-choice feedback and scores
Produce insights that allow the rest of your organisation to easily connect with customer priorities. Stories are more powerful than statistics. Make it easy to understand the implications of emerging customer behaviour in terms of how different parts of the organisation need to respond
Make sure your customer insight team is adequately resourced and enabled to become an effective internal catalyst. Encourage multi-functional teamwork to accelerate the path from insight to action
Take inspiration from what other organisations are doing. For instance, pure play digital UK retailer Shop Direct opened a Customer Closeness Centre to listen, learn and improve its customer experience