10 Reasons Companies Fail to Improve Customers’ Loyalty
Every year, a top five priority for most companies is to improve their customers’ loyalty and experience. Unfortunately, most fail. For example, read the American Customer Satisfaction Index results or the Consumer Reports ratings. Considering the potential payoff for improvement, it does not make sense as you review this research.
- According to Harvard Business Review’s Employee-Customer-Profit Chain, a 1.3% improvement in customer loyalty scores results in a revenue increase of .5%.
- The Profit Impact of Market Strategy’s database found that companies who lead in service have 12 times the profitability and 9% greater growth than poor service providers.
- Bain & Co. found that a 12-point increase in the net-promoter score doubles a company’s growth rate.
- A report by the American Customer Satisfaction Index proved that the leading companies consistently outperformed the market. Customer service leaders outperformed the Dow by 93%, the Fortune 500 by 20% and the NASDAQ by 335%.
Why do so many companies fail to take advantage of the obvious bottom-line impact for improving service? Here are ten reasons companies fail.
1. Ignorance is Bliss
Recently, a company executive proudly shared with me that they survey customers twice a year. (What if this company only looked at sales or profit numbers that often?) Most importantly, the company leaders always talked about improving customer loyalty. Yet, they never made no serious changes. Therefore, they kept experiencing the same issues with customers and competition.
2. Vision Without Vitality
One company President said, “We don’t want to be the biggest company, only the best customer loyalty provider.” The President gave a five-minute speech everywhere he went; however, no plan or action ever followed. The company floundered.
3. The Panacea Approach
One CEO decided to use a Just in Time production strategy because it worked for his buddy’s company. He did it the same way but failed. As a result, he had to lay off a lot of people, and within two years lost his job.
4. Frontline Fanatics
A major airline responded to customer complaints by notifying customers of their new “Customer First” initiative for employees. Employees were not partners they were scapegoats. The airline’s service never got better. However, it eventually went bankrupt and was merged with a larger competitor. (According to service gurus, 85-95% of customer loyalty and service problems are management related not employee related.)
5. Do It All and Have It All
One leader happily reviewed with his team three flipchart pages full of customer service improvement initiatives. Not surprisingly, employees were overwhelmed, and business stalled. This overwhelmed the team, and ended up with negative sales results.
6. I am a Rock, I am an Island
A $27 billion company I know has tried to improve service for a decade but are still rated near the bottom of their industry. They refuse outside help or assistance. Certainly, they have settled for dismal customer loyalty and service, low stock prices, poor profits, and meager growth. Their strategic goals outline a commitment to the customer, but they do not really mean it.
7. Drive by Training
Many leaders send their employees to an online course or to a class to get “fixed.” I cannot tell you how many times executives have asked me for that kind of training. They never tried to upgrade organizational design, systems, processes, or cross-departmental collaboration. Even though training is a vital pit stop on the way to success, it is not a one-stop solution.
8. The Secret is Technology
One retail organization spent millions to improve customer retention through expensive new technology primarily because a big six accounting firm told them to do it. It did not help. Their sales growth continued to spiral downward. Therefore, investment and support of their people was an afterthought. Now, they are merging with a competitor to survive.
9. The Tool-Chest Dilemma
One company executive told me that they have consultants for everything. Take your pick from TQM, Six Sigma, The Goal, ISO, Kaizen, and numerous other approaches to get better. (You have heard the phrase, “program of the month.”) These multiple efforts were seldom executed well or sustained. Employees were drowning in meetings, data, paperwork, and confusion. Unfortunately, their customer loyalty improved very little. Guess how well they give service to customers?
10. The Perils of Poor Execution
How often do companies implement a grand strategy (Or a new customer experience plan.), and fail to achieve grand results? The promises of change become false exhortations, which of course demonstrates a lack of integrity. The trust within and around the organization dies. I believe companies need to get back to basics of focusing on understanding customer needs and wants and valuing their employees.
Pulling It All Together
Businessman Ross Perot once said, “Spend a lot of time talking to customers face to face. You’d be amazed how many companies don’t listen to their customers.” And, Doug Conant, former CEO of Campbell Soup added, “To win in the marketplace you must first win in the workplace.” In conclusion, see this complimentary white paper for how to be the best: 5 Cultural Habits of Customer Driven Companies.
Also, are you committed to your team’s success? If so, see this complimentary Coaching for Results eBook.
In addition, go here for our RealTime Learning & Training leadership and personal development website. Micro-learning and career advancement at your fingertips!
Finally, do you want to accelerate your leadership success? Go here for Rick’s Superstar Leadership eBook.