In a recent post, I discussed research that showed a strong correlation between customer experience and loyalty. While the correlation was strong across all 9 industres in the study (banks, credit card issuers, health plans, insurers, Internet service providers, investment firms, TV service providers, retailers, and wireless carriers), the level differed across the 112 companies we examined.
Let’s take a look at the firms whose customers showed the strongest and the weakest correlation between customer experience and both measures of loyalty that we used:
- Likelihood not to switch away from provider
- Strongest correlation: Cablevision (TV), Nextel, AOL, Bank Of America, and Quest
- Weakest correlation: Vanguard, Gap, E*TRADE, TD Ameritrade, SunTrust Bank
- Willingness to consider provider for another purchase
- Strongest correlation: Fifth Third Bank, Farmer’s Insurance, AIG, Merrill Lynch, and Cablevision (TV)
- Weakest correlation: Edward Jones, Highmark, credit unions, Blue Shield of California, and Medicare
Many people have asked me about what drives the differences across firms; which can sometimes be large even for firms within the same industry. I think that the key drivers are a combination of industry and company dynamics.
- Industry dynamics. Some of the differences are based on the structure of an industry.
- The ease of switching providers (it’s much easier to switch retailers than health plans)
- The range of customer experience options (if there aren’t any firms with better customer experience, then why not stay where you are)
- The level of product/service differentiation (if the product/service features are highly differentiated, then the customer experience is less important)
- Customer experience reputation (if an industry gets known for delivering either good or bad experience, then customers become more acutely aware of it)
- Company dynamics. Some of the differences are based on how companies go to market.
- Customer demographics (the makeup of a firm’s customer base will contribute to the correlation. Firms with older consumers, for instance, will likely have lower correlations)
- The level of product/service differentiation (if a company’s product/service features are highly differentiated relative to their competitors, then the customer experience for that firm is less important)
- Customer experience differentiation (firms that raise awareness of customer experience in their marketing will likely increase the correlation)
- Customer experience deficiencies (if a company provides very poor customer experiences, then customers who care the most may have already left)
The bottom line: How important is customer experience to your firm?