Most companies failing to satisfy customers
Forrester’s have released the 2010 results of their customer experience index and, while some improvements have been made, most industries are still failing to satisfy customers’ basic requirements.
Rated on three simple scales (‘Meeting Needs’, ‘Being Easy to Work With’ and ‘Enjoyability’), 9 of the 14 industries, on average, were still rated poor or below by their own customers.
While retailers hold top spot, high-margin industries such as banks, credit card and health insurance providers are collectively failing to meet their customers’ perceived needs.
This is in spite of the higher margins these industries can command and, by definition, the higher cost of each lost customer.
The Villain of the Piece…
There is always a hero and villain of each edition of the index. Many of you may not have heard of Barnes & Noble (which came top) but are no doubt familiar with HSBC.
HSBC’s customer experience scores were nothing short of parlous and may come as no surprise to the numerous detractors the bank has here in Asia. HSBC were also the subject of a feature in The New York Times as one of ‘the least trusted banks in America‘.
As if to demonstrate that the malaise is not simply related to their US operations, HSBC continue to vie for the wooden spoon award on the Customer Experience Leaderboard, a global forum for customers to ‘vote’ on their experiences.
Will someone please tell these companies about customer equity!
HSBC and others lower down on the list will, no doubt, proudly point to their sustained record of profit growth over the last decade or so.
Much of this growth has, however, been achieved through expansion and financial management than through increases in ‘customer equity’, i.e. the willingness of customers to say, stay and spend with their provider.
Wells Fargo has this. HSBC patently does not.
Companies’ business models are ultimately unsustainable if they do not genuinely ‘create and keep a customer’ (as Drucker aptly put it) as opposed to simply trying to create a matrix of trap whereby they can suck out as much money from their customers as possible to meet their own y-on-y targets.
Citigroup had a similar approach and, while enjoying decades of unparalleled global expansion, failed to maintain their customer equity long before their ill-fated bail-out in 2008.
Customer Experience = Shareholder Value
As we see in this article here, the real determinant of sustainable shareholder value lies in creating a resonant customer experience evoking trust.
While the majority of companies pursue short-term, year-on-year profit growth strategies (often diminishing trust), this carries with it huge longer-term costs as the same companies have to embark on all manner of advertising campaigns, price promotions and competitive gimmicks in order to win back or replace customers they have lost through their short-termism.
So while they can massage one year’s results, the negative consequences then get commuted to another year’s P&L.
This partly explains why until 2008 Wells Fargo was able to boast higher Return on Capital Employed ratios than HSBC – despite being in a more competitive marketplace.
The Customer Experience can give you a serious competitive advantage!
It’s for this reason that getting your customer experience right can give you considerable competitive advantage. This is because you are able to create more advocates (‘Say’), keep more customers (‘Stay’) and encourage higher rates of Spend as a result.
Consider that every one complaint a company receives is heard by 1,560 other people! What effect does that have on the company’s brand?
To calculate the cost of each complaint you receive or hear about, simply compute the lifetime value of a single customer and multiply by 1,560.
What you can do to increase your customer equity
The above calculation is one simple measure to track the impact your customer experience can have on your company’s bottom line.
Talent Technologies helps Asian companies improve their customer experience ‘outside-in’ through our simple and effective process.
If you are interested in sustainably enhancing the customer experience in your organisation, feel free to contact us here.