But what happens when your customers share a liking for competing brands? Is a favorable customer experience alone enough to drive improved business results when competitor brands are also commanding a share of your customer’s wallet? Mike Cuell demonstrates that a strategy which aligns brand values with customer experience will deliver competitive advantage and the potential for significant gains in customer loyalty.
End-to-end journey
Looking at data from 12,500 customer experience surveys spanning various brands of household and car insurance, the opportunity for brands to influence the loyalty intentions of their customers was clear; but only in the advanced stages of the customer journey (such as claims, mid-term adjustments and renewal). In these service areas, customer experience was a strong driver of loyalty.
But, in the case of new customers, the majority of whom were price motivated, customer experience had relatively low impact on loyalty intentions. Price competitiveness may be necessary to attract new customers but generating profits requires a strategy to keep them – not always easy these days with customers having instant access to price comparison websites. So, if it is not customer experience that can be relied upon to drive loyalty, what can be done?
Branded experience
The clues were found in the significant numbers of new business customers whose brand choices were driven by brand reputation. These new customers had the strongest loyalty intentions.
These findings suggested that firms might be more successful in retaining newly acquired customers with an appealing set of brand values backed up by delivery through the customer experience they encounter throughout the later stages of the customer journey. If so, customer experience should be a strong driver of loyalty intentions for customers motivated by brand. This was indeed the case when looking at the driver model for the brand motivated customers:
Figure 1: Impact of customer experience - all new business customers versus brand motivated customers
Figure 1 above shows that customer experience was a significantly stronger driver of loyalty for brand motivated customers, compared to the overall new business.
Delivering brand values
Drilling down into the individual aspects of customer experience it was found that ‘treated fairly’ accounted for 25% of the total impact of customer experience (see figure 2 below). It is not hard to see contemporary brand values in treated fairly: trustworthiness, honesty, straightforwardness, transparency all resonate strongly with customers in the current times.
Figure 2: Impact of individual attributes of customer experience for brand motivated customers
Business implications
Firms operating a pricing model that heavily discounts new business in order to attract new customers will attract large numbers of customers who are vulnerable to churn. In our insurance example, cut price premiums are unsustainable and customers don't like it when premiums go up. If they feel exploited then this strategy quite possibly compromises the running of a viable, high integrity business. Based on our findings, engaging with new customers through a branded customer experience will result in stronger loyalty - provided that the experience delivers on the promise.
An extension of customer tenure offers the opportunity of up selling and cross selling and the realisation of greater revenues. This need not be at odds with prevailing deal driven consumer sentiment. ‘Competitive premiums’ and ‘fair treatment’ for customers are clear brand promises linked to customer experience that if executed properly will drive stronger customer loyalty.
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