Majority of Executives Claim They Don't Deserve Customer Loyalty

Companies continue the downward trend of taking their customers for granted and the overall relationship between company and customer is getting worse, according to the 2004 annual survey and Customer Experience Management (CEM) report from Strativity Group, Inc. in cooperation with CustomerSat, Inc.

"These results indicate a major vote of no confidence by executives, an inability to move from intention to execution and an overall failure to deliver successful customer strategies," stated company founder and author of upcoming book, Passionate & Profitable.

  • 59% of senior executives claim they do not deserve customer loyalty - up from 45% in 2003
  • 83% do not know the average annual customer value
  • 65% agree that their executives do not meet frequently with customers - up from 54% in 2003
  • 31% affirm that they have the tools and authority to serve their customers - down from 37% in 2003

Disconnect Between Strategy and Ability to Execute

According to the 2004 CEM survey conducted with 212 senior executives worldwide, 76% of the participants responded that companies have put customer strategies higher on their agenda then they did 3 years ago. Highlighting the dis-connect between high-level executive strategies and employees actual ability to execute; only 31% of respondents affirmed that they have the tools and authority to actually serve their customers, down from 37% the year before. Not coincidentally, 59% of the executives claimed they do not deserve customer loyalty.

Ignorance to Costs and Revenues Associated with Customer Relationships

When asked about the economics associated with managing customer relationships, a large majority of executives did not have access to basic information: 83% did not know the average annual value of a customer, 89% did not know the cost of a customer complaint, 90% did not know the cost of total resolution while 62% did not know the annual customer retention rate. Despite focused attention from academia and the media directed towards the value of existing customers and the cost inherent in obtaining new customers, companies are ignorant to the costs and revenues associated with their customer relationships. In light of much of the cost-cutting going on at many companies, this lack of understanding is startling.

"Companies continue to pay a great deal of lip-service to their customers and customer strategies yet very few of them can demonstrate long-term success in forming strong, sustainable, and profitable relationships with customers," says Arussy. "Our study demonstrates that despite the pick up in the economy, companies have not improved their investment in their customer relationships."

Diminished Commitments, Superficial Commitments and Reduced Employee Loyalty

25% of North Americans stated that they are investing more in people than in technology - that number is down from 38%. In return, executives are witnessing a diminished commitment on the part of their employees. The focus on technology rather than people, and the lack of tools and authority have lowered the employee's experience in the workplace resulting in a laissez-faire attitude. Employees are continually being asked to do more, with less due to the continuing cost-reduction mentality. With the economy doing somewhat better in recent years, over-confident, company management perceive employees as even less significant then before. Due to their own lack of knowledge regarding the economics of customer relationships, management misunderstands the growing role employees play in the total customer experience. The emphasis on productivity over quality (18.8% agreed that their compensation plans emphasize quality over productivity; down from 33% in 2003), not surprisingly, has resulted in 42% of executives who feel that their employers DO NOT deserve their loyalty, up from 27% in 2003.

Despite lofty declarations about the importance of the customer, management's commitment is superficial at best. Only 44% of the survey participants agreed that their company is truly committed to the customer (down from 58% in 2003). In Europe, that number dropped from 46% to 35%.

Other highlights include:

  • 57% agree that their company does not conduct a true dialogue with its customers (up from 55% in 2003)
  • 65% agree that their executives do not meet frequently with customers (up from 54% in 2003)
  • 54% agree that the role of the customer is not well defined (down from 60% in 2003)

Less Selective about Customer Criteria

Over the course of the last year, companies have also become less selective about who the customers are that they partner with. Over 45% agree that their company takes any customer that is willing to pay, (up from 42% in 2003). Lack of customer selection or the availability of selection criteria, implies acceptance of a customer that may prove to be unprofitable or an ill-fit with the company's value proposition and price point. With demonstrated disregard and ignorance of the cost of services and customer maintenance, executives find themselves dealing with discounting demands, margin erosion, negative word of mouth and higher than average service costs.

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