July 22, 2008

New Chart: Service Tops Price for Customer Loyalty

SUMMARY: Customers and vendors differ on the primary reasons for parting a company. Vendors cite price pressure; customers say that it’s the service that pushed them away. The key takeaway from this chart: price does not play a major role in achieving customer loyalty.

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Customers and Vendors Disagree on Reasons for Loyalty
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This week’s Sherpa chart reflects a poll conducted with webinar attendees. We asked customers why they left a vendor, and we asked vendors why they think their customers left them. The two groups had very different answers.

Overwhelmingly, vendors reported that price pressures caused their clients to leave them. That’s natural because it’s usually sales people who bear the bad news, and they tend to identify price for two reasons. One: it’s beyond their control. Two: the customer often cites price as an easy answer that can’t be disputed and doesn’t cast blame on sales or on account management personnel.

When we asked the customers why they left, however, price ranked a distant second to service. That’s the key takeaway for this week.

The disparity underscores an essential point in this age of commoditization: customer relationships and customer service can bolster loyalty and provide a basis to charging a price premium. Loyalists are customers who have a vendor relationship that goes beyond price and feature sets – their experiences with the company, its employees, website, products and brand create a perception of value that transcends price.

The survey results revealed some surprising information about customer loyalty. First, customers are less likely to leave for a competitor over price and will give you the opportunity to keep the business. Second, they are more willing to pay a premium to continue their relationship. Third, they are strong external advocates of the brand.

Next week, we’ll look at the top ways to build customer loyalty.

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