Why Do Customers Defect and What Can We Do About It?

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Customers are difficult to maintain and it costs a lot to acquire new customers than to retain an old one. Hence it becomes even more imperative to retain customers and try and see that one size fits all strategy does not work here. Every customer is unique and needs to be handled differently.

Some of the major reasons why customers defect are:

  • Pricing: Customers are very sensitive to pricing and any increase in the same can lead to termination of relationship. This is especially true when the economy is on a downturn and customers are trying to cut corners at all possible costs. This defection can happen for any product whether it is banking service, mobile services, rental services etc. The moment price is increased and is offered a better pricing somewhere else, customer defects.
  • Service: Customers have varied options to choose from and a slightest dip in service standards will lead to customers’ defection. Service plays a vital part in the relationship and should not vary irrespective of what channel customers uses. Customers tend to be very finicky about how their servicing requirements are handled and tend to defect at a slightest hint of service not meeting their expectation.
  • Product: A bad product can lead to customer dissatisfaction leading to customer defection. A simple example of a new car introduced in the market without much emphasis given to after sales service and bad quality spares can lead to a bad publicity and word of mouth. This is worst publicity for an organization and will spell doom.

The obvious signs like sales going down, market share decreasing and negative word of mouth publicity are some of the pointers which convey that everything is not well. What customers really want is simple and meaningful relationship with organizations and expects a seamless experience to them when they call, contact, communicate, or go to buy something.

Organizations need to be extra careful and need to take care of certain things which will go a long way in understanding the customers mind and stop them from leaving.

Some of the concerns which can be addressed in this regard are as follows.

Keeping promises

Customers would have been sold a product or service with certain assurances on the pricing, servicing or the product features itself. Stick by it and don’t deviate. Don’t expect customers to run around the organization hierarchy to get their issues sorted. Deliver what has been promised. A good example was of bank whose sales representative promised a free gift during a sales promotion but did not stick by the promise. The affected customer life became a hell trying to get the issue resolved. The process of servicing needs to be simple and customers need to be clear on how to do business with the organization which will be beneficial to them. Adhering to what has been committed and sticking by it is an important component.

Social Media

Customers are becoming net savvy and access many social media sites like Face book, Orkut etc., for social networking purposes. The social media sites act as reference points between customers for experience sharing. Of late it is observed that the Social Media sites have gained ground for customers to air the good and bad experiences while dealing with a product, company etc. Organizations need to be watchful of such sites and ensure that negative publicity is nipped in the bud.

Suitable customer centric strategies and policies need to be devised to ensure that proper grievance redressal mechanism exists along with specified SLAs. Most of major airline companies have twitter account wherein the customers tweet about their experiences, lost flights/luggage etc and they are responded by the concerned airlines staff. This shows that social media is here to stay and is playing an important role in assessing how a customer is going to behave and what is expected.

Cross-Function Experience

Customers expect seamless experience across the different organizations departments. All information required and communication should be available in one single place and if the customer approaches a branch irrespective of where he or she has an account, the front office agent should be able to help.

An example of this was of a customer calling the bank to check the balances on his savings account. The next question he had on his credit card account and the agent referred him to another number to get clarifications and which was not the customer expected. So this means creating a single view of customer for all the organization staff to access and also provide uniform response across the different channels. Uniform data should be available across the different channels creating a feeling of one organization across the hierarchy.

Customer Satisfaction Surveys

Have regular surveys conducted to see how satisfied the customer is and what are the issues which are bothering them. The surveys can be conducted online, through face to face interactions, through feedback from websites or response received from mailers. Once the feedback is there it is of prime importance to see that action is taken on those points. Top management commitment is of vital importance here in resolving the issues and also helping people in closing the gaps.

Empowering Staff

Many times customers defect because the agent or employee whom they were interacting with was not able to help them or provide the right information. It basically boils down to the organization not having a proper empowerment policy in place. Give adequate powers to people across the hierarchy to take decisions and close issues which need urgent action.

Employees should be able to close call or offer an up sell / cross sell or reverse finance charges without escalating the matters to their superiors. A major bank has seen its customer satisfaction scores drastically go up after it empowered its front end staff. The staffs were able to take the right decision resulting in less customer calls and also leading to increased customer referrals.

Innovative Products

The market is full of newer products which will be an incentive for customers to defect. It is important to have the feet firmly on the ground and build a culture of innovation within the organization. Have regular meetings between the teams which interact directly with customers and also the marketing team to know what will fly and what will not. Such interactions help the backend product/marketing staff to understand the pulse of the market. Have regular customers meets across the different customer segmentation to understand what is it that the customer is looking for and if need be encourage them to come out with ideas which can be rewarded.

A brilliant example was of an IT company which came out with a tool which actually helped customers to cut down the processing speed and actually save millions of dollars. The innovation was a byproduct of regular interactions between the customer and the IT Company. Customers expect products which are innovative and can help them and it is the responsibility of the organization to provide the same.

To conclude, organizations need to get their act together and ensure that customers don’t defect. An existing customer is more profitable than acquiring a new one and customers need to be immune to what is happening within the organization. Customers need to be made feel special and also should get value for money for the relationship.

Disclosure: The opinions expressed herein are my own and do not reflect those of the company

2 COMMENTS

  1. I enjoyed your post.

    What is interesting when you ask sales why customers defect you hear what you identified; Price…

    However if you ask buyers why they do not buy or stop buying, Price is not on the list as I discuss in my blog http://nosmokeandmirrors.wordpress.com/2009/04/23/warning-buyers-say-what-salespeople-do-wrongprice-is-not-on-the-list/

    Now more than ever teams must be focused on understanding and solving your client’s problems….or someone else will.

    Mark Allen Roberts

  2. I have subscribed to a popular gaming magazine for 15 years, but the magazine consistently offers a better subscription rate to new subscribers. I get the letter to resubscribe for $24 per year while the magazine is filled with inserts that offer a $20 rate to new subscribers. Does the publisher think that I’m too stupid to notice?

    When I called customer service to complain, I was somewhat cryptically told to send in the amount for the lower renewal rate and that my subscription would be renewed without any problem.

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