How to foster customer loyalty with service, not lowest prices

A recent report from CFI Group, “Call Center Satisfaction Index (CCSI) 2011,” quantifies the impact call centers have on customer satisfaction and loyalty across eight industries. It compares industries on many criteria, one of them being Future Intent, which has two dimensions, Intended Loyalty and Likelihood to Recommend.

The key finding for Retail is that as an industry, it ranks in the lowest group on those two measures. In fact, it ranks far behind Insurance, behind Banks and Credit Unions, and behind Cable/Satellite TV. It even ranks lower than Cell Phone Service.

 

Strategic choices for online retailers

Putting the pieces together for great customer loyalty.
Putting the pieces together for great customer loyalty.

Why are customers not loyal and not likely to recommend a retailer based on their call center experience? The report says it’s because “Cell Phones and Retail have become incredibly price competitive, leading consumers to shop around for the best deals on a fairly regular basis. … Retailers also grapple with loyalty on a daily basis as their business has become much more promotional as they try to lure customers into their stores/websites and away from their competitors.”

To oversimplify a bit, that means if you’re an online retailer selling the same or similar products as other online retailers, you have two strategic choices.

  • You can compete on price by continuously surveying online prices from competitors and continuously lowering yours to attract shoppers who care only about getting the lowest price; or
  • You can set a competitive price that still delivers decent margins, while also offering shoppers a better customer experience by delivering superior customer service.

Picking the first strategy is a race to the bottom that you can win only if you grab sufficient market share to make up in volume for the razor-thin profit margins you may realize on each transaction. In addition, this strategy doesn’t foster loyalty or lead to repeat business. Why not? Because if the customer experience of dealing with your call center is no better than the experience of dealing with any of a dozen other call centers for online retailers, customers have no reason to buy from you next time if another site is offering a lower price.

And one more downside to the “lowest price” strategy—it’s not a sustainable competitive advantage. How long will your “lowest” price remain the lowest price? A week? A day? Or maybe only a few minutes, until a competitor sees it and decides to undercut you.

Better Customer Experience = Repeat Business

Picking the second strategy, on the other hand, means you might not get every shopper who’s comparing prices, but you stand a much better chance of creating loyal customers and getting repeat business from shoppers who appreciate and see value in getting excellent customer service from the call center representatives who take their order, resolve issues, and “speak the brand” in every interaction.

Your price still needs to be competitive, but customers care about experience, and if your call center agents are more knowledgeable about products, more enthusiastic about your brand, more professional in their communications, and are following better procedures and policies, first-time shoppers are more likely to become regulars. When that happens, your overall revenue increases, customer acquisition costs go down, and more profit flows to the bottom line instead of being spent on marketing to continue attracting one-time visitors to your site.

So don’t join the race to the bottom by thinking of pricing as your only tool to win business in today’s highly competitive online retailing environment. Instead, find a call center that delivers the kind of service customers remember and will come back for, and you can develop a loyal following that leads to increased revenue, higher margins, and a stronger brand image.

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