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Guest opinion: the contradiction between customer service and customer loyalty

Author: Philip Harmer (pictured) is a senior partner and international commercial arbitrator at Stormcatcher LLP and head of SCAS. He is a barrister at law, commentator, speaker and author on corporate culture and corporate governance.  

Customer service is the number one influencer in consumer decision making, the number one reason they come back (loyalty) and the number one source of complaints; these three axioms are the ingredients for a sustainably successful company.

Traditionally car companies have pursued an apparent logical strategic presumption that improving customer service commensurately increases customer loyalty and decreases customer complaints.

However this creates three problems:

1. Time lag:
this cause and effect concept relies on the customers coming back (or not) which in the case of durable goods, like cars for instance, means waiting 2 or 3 years to find out whether they were satisfied enough to want to return.

2. Information Asymmetry:
If the customer doesn’t come back to make a repeat purchase, how could a company know what aspects of their service needs improving unless the customer is willing to make a candid complaint.

3. Efficiency:
As a consequence of the above points, the strategy is highly labour intensive and costly; having to drive standards of service up, while canvassing customers to come back through hosting ‘events’ and promotions while trying to deal with the complaints.T

hese problems are eliminated by a strategy reversal that actively encourages and actually welcomes customers to complain by making it easy, quick and effective.

1. Corporate Culture:
Perhaps most importantly is a cultural change from complaints being a nuisance to the company and the source of stress, anxiety and annoyance for both parties to a positive, calm and mutually beneficial process.

2. Loyalty:
Information customers give through a coherent, concise complaints process is contemporary, relevant and capable of guiding improvement.  Research reveals that customers who have their complaints dealt with efficiently and effectively are loyal and positively promote their experience to an average of 5 people; whereas dissatisfied customers tell twice as many people.

3. Efficiency:
Reducing complaints by reducing their causes increases loyalty, improving forecasting across the change cycle and commensurately reducing costs. With stress being the largest cause of employee absences and complaints being the largest cause of stress, employee productivity is increased by 10-15%.

First class customer service can’t be achieved through a war of attrition, with car companies hoping to eliminate complaints by forcing subjective standards of customer service up; any reduction in complaints is a false positive, attributable to customer apathy rather than company efficiency.

Only through the compilation of candid, real time customer data, yielded through a two stage prescribed process can companies gain the information capable of changing their corporate culture and deliver sustainable growth in a customer centric economy.

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  • max - 30/09/2014 11:56

    Culture is everything – no doubting why the FCA centre on this now – and worth remembering for TCF, it’s F for Fairness, not S for Satisfaction – the two are clearly not the same thing!

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