What drives customers to stay loyal to a company, especially when it comes to service needs? In a recent survey, Gartner asked customers when they are more likely to stay.
What is retention (rate)?
Retention or customer loyalty is measured by the so-called „retention rate“. It is usually used to measure how many customers have stayed with a company at the beginning and end of a certain period of time. Especially for contract customers, the retention rate plays an important role in securing the long-term success of a company.
The retention rate can also indicate problems regarding the customer lifecycles, for example, if an extraordinary number of customers leave the company within a certain period of time, there might be a reason that needs to be addressed as soon as possible.
In a recent customer survey, Gartner asked how likely customers are to remain loyal to a company after solving (or not solving) a customer problem. To make things interesting, Gartner also divided service into four distinct levels:
No problem solution
Problem solution with high customer effort
Problem solution with low customer effort
Added value for the customer
No problem solution occurs (27 %)
It is actually remarkable that every fourth customer remains loyal even if the company is not able to solve a problem. This should, however, not be an excuse to disregard these and all other customers. An unsolved problem might not immediately lead to the customer leaving but it does influence the relationship long-term. If another problem arises, even if it might be small in comparison, it might add up and end the relationship.
Solution with high customer effort (37%)
It is significant that a problem solution that involves a high level of effort for the customer results in a rather small increase regarding customer loyalty. Even though Gartner’s main focus in the study results lies on the added value, I personally think that the distinction between problem solutions with high and low customer effort is much more interesting for companies.
Because it implies that the problem solution itself is often not as important as the experience the customer had while the problem was solved. The more trouble a customer has – for example because they have to call repeatedly, pay additional fees or have solve it themselves – the more likely they are to leave. This should be an important lesson especially when it comes to self-service options and the growing number of support channels that prevent customer from talking with real people: even if the problems eventually get solved, they might still lead to customer churn in the long run.
Solution with low customer effort (61%)
Companies that offer easy problem solutions increase the retention probability by 24% compared to companies that offer complex problem solving. It is therefore worth investing in checking and optimizing solution processes for customers. This also applies to self-service options, as already mentioned. The easier they are to use, the more frequently they are used, thus reducing the workload on customers and your service staff. This also includes giving options when the self-service methods don’t seem to work for the customer.
Customer added value through problem solving (82%)
Gartner calls this type of problem solving „Value Enhancement“. A service experience that generates added value for customers. In other words, it’s not just about solving a problem, but about giving customers the right information and tools so that they are empowered to get more out of a product or service. This also increases confidence in the company. What’s more, Gartner’s survey also revealed that this type of service is almost always communicated to acquaintances (97%), which increases the share of wallet (86%).
According to Gartner, currently only 15% of all customer interactions can be attributed to value enhancement. Gartner itself assumes that every third customer interaction could deliver added value.
Incidentally, Gartner notes that specific customer complaints often do not offer the best opportunity for value enhancement. A proactive service that anticipates potential problems and therefore informs and helps even before a real service problem occurs is therefore recommended.
However, I personally think that value-added service can also be provided during a problem resolution process. If the interaction is friendly, fast and uncomplicated and the customer even learns something, the service employee – and by proxy the company – turns into a person of trust. This is the basis for strong customer relationships and it makes the customer happy, e.g. adds value to their experience.
Gartner’s 5 tips for Value Enhancement
The following tips do not have to be implemented in a face-to-face conversation. They can also be automated (in the form of chatbots, self-service, etc.).
Encourage customer decisions. To avoid buyer’s remorse, show customers why their purchase decision was the right one.
Anticipate customer needs. Act before problems even arise and build trust.
Achieve goals together with customers. See your customer’s goals as your own and help them on their way.
Inform your customers. Instead of informing customers about the wrong use of products/services, you should provide information about the correct or better use.
Stand by with help and advice. If there are new product features or possible uses, inform your customers about them.
Customer Journey Management helps you see all your marketing, sales and service processes from the customer’s perspective. Find out how you can implement CJM in your company.