Poor Service, Not Price, Creates Customer Churn: Study

While the Web has made comparison shopping easier, marketers should focus on the service they offer to customers at least as much – if not more – than their price points, according to a new study.

Two-thirds of the respondents throughout numerous countries surveyed by management consulting firm Accenture reported moving their business to other companies as a result of poor service, up from 59% in last year’s survey.

More of them changed who they bought from because of poor customer service than because of lower prices – 68% to 53%. Within the United States, this discrepancy was even more pronounced, with 73% saying they had switched service providers due to poor CRM, compared with 47% who changed because of lower prices.

These defections come with a cost: Half of the consumers surveyed reported taking $4,000 worth of business with them when they left.

Consumers are becoming more demanding, the survey found. Nearly one third said their service expectations were higher than they had been a year ago, and more than half said their expectations were higher than they were five years ago. These trends were especially evident among Chinese, Indian and Brazilian consumers: 60% said their expectations were higher than they had been a year ago, and 84% said they had jumped from their levels five years ago.

This may be because emerging countries have caught up with CRM-enabling technology gains during the last few years. Eighty seven percent of consumers in emerging markets said technology has improved customer service, compared with 44% of those within mature markets.

Across the board, 20% of respondents indicated they would leave a company immediately due to poor customer service, up from 13% a year ago.

Accenture surveyed 4,189 consumers in Australia, Brazil, Canada, China, France, Germany, India, the United Kingdom and the United States during July and August 2008.