Why do we prefer to switch provider?
By Cloud Direct • 11 Mar 2010
Why do we prefer to switch provider?
I recently received a bill from one of our web hosting providers. They had provided a good product with good service levels when needed and had done nothing specifically wrong over many years. I expect we were paying a ‘legacy' rate, having been with them for a long time without any increase or decrease in fees.
But one day I felt we were paying too much and that there ought to be cheaper services ‘out there'.
(As an aside, this was purely as a consequence of an expired credit card forcing me to logon to a system and enter new details - and then review the amount we were paying).
Despite the fact that we had been accepting this fee for several years without a problem, and that they had done nothing wrong, my spur of the moment reaction was to switch provider.
Importantly, I did not even think about asking the incumbent for a price reduction. Or even ask them to justify the rate we were being charged.
The event made me think about Backup Direct's own customers. We support several thousand businesses in the UK, who pay a monthly fee in return for which (we try to) deliver an excellent service.
We lose very few customers to churn.
Some of customers churn, unfortunately, because they cease to exist; some have genuine reasons to no longer need our services. But others leave us for reasons possibly within our control. Despite the significant amount of time and resource we invest in service levels, churn still happens, and every customer lost cuts at the heart of what we are trying to achieve.
Satisfaction is not loyalty
Many businesses focus on ‘customer satisfaction' as a metric of how well they treat their customers. But studies show that satisfaction alone does not drive loyalty. In one study, run by the consulting firm Bain & Company, 70% of a certain telco's churn customers were ‘satisfied' with the service they were receiving before they switched! At first glance, that seems odd.
What this statistic tells us is that having satisfied customers by itself is not enough in today's competitive and highly efficient market places.
Satisfaction can be seen as a Herzbergian ‘hygiene factor'. Hygiene factors prevent dissatisfaction when present, but do not create happiness (think of human hygiene - it prevents disease, but does not create well-being).
In business, providing a good service (answering the phone correctly, responding accurately, products working correctly, etc.) is the minimum customers expect. To achieve good satisfaction ratings, you only need eliminate defects in the products or service you provide.
Business should aim for loyalty and advocacy
When businesses seek to satisfy their customers' needs, they are aiming too low. Instead, businesses need to aim high to produce loyal customers who act as advocates of the business - driving referral and reducing churn.
To earn customer loyalty a business needs to do one of two things. Either deliver ordinary services exceptionally or deliver exceptional services/features well. But doing either or both of these things is really hard.
Looking back at Backup Direct's previous hosting provider - they were ‘only' delivering a good service well. The product had good (but not exceptional) features. And the service levels were good (but not exceptional). They did not meet the test of going beyond hygiene into loyalty.
Hence I had no loyalty to them. And everytime Backup Direct loses a customer I want to know why, and what and how we failed to go beyond the hygiene of satisfaction to the delight of loyalty.
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