Customer Insight

Created and published in house by TLF Research. Customer Insight magazine is our way of sharing features, case studies and latest thinking on creating an outstanding customer experience. All designed to inform, stimulate debate and sometimes to provoke. We hope you enjoy reading it as much as we enjoy creating it!

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Why Do Customers Switch

By TLF Research

 In September 2011 I took a family holiday in Turkey with a leading tour operator. The sun shone, the 5 star hotel was clean and well appointed, the food fantastic and my children loved it. All in all a recipe for the perfect holiday, one very happy customer you might think and a guaranteed repeat booking for next year...or maybe not?

A recent study by the Institute for Customer Service says firms are already feeling the impact of customer churn and that the battle for customer loyalty is going to intensify. Loyal customers spend more, are less price sensitive, provide free promotion through recommendation and referral and cost less to service! However, the study found that 47% of consumers currently describe themselves as more likely to switch suppliers in the future meaning there’s over £2.2 billion of revenue there to be won.....or lost.

Back to my holiday. This was my first trip with this particular tour operator having religiously booked with another operator for the previous six years. So why do customers switch? Loyalty is driven by satisfaction and when it comes to satisfying customers the recent ICS study found that 71% of businesses and 83% of consumers ranked customer service as the biggest driver of loyalty ahead of product, brand and marketing. So clearly customer service is what delivers results but where does it sit as a priority in board rooms up and down the country? With 35% of business leaders identifying customer churn as the number one threat to their businesses customer insight is increasingly vital.

An online survey by The Leadership Factor showed 42% of people spend between £1,000 and £2,000 annually on holidays and 4 out of 5 people are still taking foreign holidays so tour operators can’t put their economic woes down to the economy alone. It’s down to not knowing enough about what matters to their customers and delivering on it. I calculate my total spend on holidays until the time my children are ready to fly the nest will be somewhere between £35-40,000. Alongside losing that revenue senior managers in the ICS survey estimated that on average it cost their business over £6,500 to replace just one lost customer and took, on average 58 man-days of effort.

So will I be switching again? All in all I was a happy customer and would comfortably score them 7/10...but that isn’t enough to guarantee I will be back for more. Companies need to focus not just on the performance measures that make the business function but equally on understanding what is of greatest importance to the customer. What factors will have a real impact on a customer’s feelings about who they choose to do business with? Satisfaction drives loyalty, loyalty drives profit and great service in the areas that matter most to customers drives satisfaction. The message is clear; listen to your customers and build your service around their needs or be prepared to work harder and invest more in acquiring some new ones!

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