Customer loyalty is not dead, but some companies are doing their best to kill it -- driving away buyers by offering low perceived value, failing to back up products, providing limited selection or availability, or offering poor or inconsistent product service and support.
U.S. companies on average lose half their customers every five years, says Paul R. Timm, professor and former chair of the Dept. of Organizational Leadership at Brigham Young University's Marriott School of Management, Provo, Utah.
Despite "continuous improvements in the quality of manufactured goods, negligible price increases, and unending rhetoric about treating customers right, customer satisfaction is actually declining in the United States," says Timm, author of Seven Power Strategies for Building Customer Loyalty (2001, AMACOM). The corollary, of course, is that many companies are constantly scrambling to attract replacement customer sets, an expensive process.
"It costs five times as much to generate a new customer as it does to keep an existing one," notes Timm. Truth is, few companies even track customer-retention rates, much less inquire about what might be driving those customers away.
Timm, however, has been posing the question for 12 years through an ongoing survey of business customers and consumers that asks, "What turns you off as a customer?" The answers boil down to this: Somewhere there's a disconnect between service intentions and reality, and as a result companies don't live up to customer expectations. Incredibly, these often are expectations that the company has set up for itself.
"Customers are routinely surprised because most businesses fail to meet their own deadlines," says Timm. "When a computer-company technician tells a customer that its mainframe will be restored to service 'soon,' for instance, the customer might think 20 minutes, while the technician means eight hours. That's an expectation that's doomed from the start."
Timm's research found three categories of customer turnoffs that account for 97% of all responses to his survey: