Dave Rich makes the point in a Forbes article that loyalty to firms is declining, based on the commentary around Accenture’s 2009 Global Customer Satisfaction Survey. Without knowing all the details around the survey – who was asked, what products or services they purchased, etc.– it’s hard to support or deny these claims. But on the surface, it raises some interesting points.
Rich points to the fact that 69% of respondents have switched on one service or another over the last year. Let’s take that at face value and assume that this really is a change (I don’t know if it was up on prior years) or at least is relatively significant. What are the underlying factors that might have contributed to such a move?
The biggest two drivers of customers changing products, brands or services are informational barriers and switching costs. If customers don’t know about superior alternatives, they can’t choose them; if the switching costs are higher than the benefits, they won’t switch even if they might like to.
We have seen a massive change in the nature of informational barriers over the last decade as the Internet removed the last available fig leaf for businesses to avoid comparison, and social networking provoked peer-to-peer product comparisons. Even if – as I suspect – social networking is currently overstated in its impact on word of mouth (loud, but not accurate), the trend is pretty clear.
As informational barriers fall, competition increases and brand loyalty is threatened. After all, anyone making a profit is (theoretically) a signal to attack their markets. What about switching costs? Again, competition forces the reduction of these costs over time – it’s hard to lock customers in if your competitors are advertising lower switching costs and your customers are well informed of their choices.
Accenture’s observations should not come as a great surprise. The bad news is, it won’t be as easy to hold on to your customers. The good news is that it’s easier to grab your competitors if you are an NPS leader.