A study from the John M. Olin School of Business at Washington University estimates that 40% of today’s Fortune 500 companies on the S&P 500 will no longer exist in 10 years. The study was published a couple of years ago, which means we should expect that to happen by 2025. That estimation is in line with Richard Foster’s finding from Yale University that the average lifespan of a company listed in the S&P 500 has decreased from 67 years in the 1920s to 15 years today.
The main reason for extinction? Businesses will stop being relevant to their customers.
What about today?
According to Marketing at Work, the average business loses about 10-25% of its customer base per year, mostly because repeat business is diminished and the company is spending time and money attracting new business. But is that the right strategy, considering loyal customers are worth up to 10 times as much as their first purchase, and it is six to seven times more expensive to acquire a new customer than it is to keep a current one? Is the strategy sustainable in the long run to avoid extinction? Why aren’t brands pursuing the opposite strategy instead: To retain current customers and keep them happy?
Perhaps it’s because making customers fall in love is easier than keeping the romance alive.
So, what does it take for brands to keep customers’ affections, especially in today’s day and age where consumers hold the power in relationships with brands?
The pursuit of loyalty
I recently traveled with Singapore Airlines with my family and requested a special dietary meal for my daughter. I called the customer service hotline while we were in Japan, and after a few minutes conversing with an officer, I was given the assurance that they would try their best to adhere to my request. I took it as a done deal.
Ten minutes after boarding the plane, I was approached by the lead flight attendant about the special meal, and I learned it was not what I requested. She didn’t give up there. She came back and showed me all the available meal options they had for that flight and told me she could serve multiple meals just for my daughter. When the meal was finally served, it was pretty close to my original request; she rescued the experience for us and I was won over.
A few days later, I called the airline’s contact center again to appeal for a refund for a pair of air tickets purchased under a non-refundable term. My daughter had become quite ill and couldn’t make the trip. I supplied a medical letter from her doctor and asked her to pass that on to the management and see what they could do. A few hours later, she called me back and told me that the management had granted the refund request.
So, going back to the question above, for me, what it takes for a brand to make me stay in love with it is commitment. It’s about having the assurance that they care about me and about keeping our relationship alive. In the examples above, Singapore Airlines clearly demonstrated that to me, and let’s just say starting an affair with another airline is not something that will cross my mind.
The modern dating games
Just as navigating through relationships in the modern age is tough, the same is true for brands to maintain strong relationships with their consumers. Consumers now hold the power in the relationship, thanks to the digital economy. As a result, consumers have much higher expectations of what they want brands to deliver, and they won’t flinch about breaking up with a brand that doesn’t meet these ever-increasing standards.
In March this year, SAP Hybris commissioned a survey of over 7,000 consumers across the seven countries in the Asia-Pacific (APAC) region to better understand what consumers look for when engaging with brands. The survey was developed to see what makes a relationship tick from the customer’s perspective – and what makes or breaks a customer experience.
What we found was a plain, hard truth of the new reality: 89% of those surveyed expected a brand to respond to them within 24 hours (with China and India being the highest at 94%), 78% would leave a brand if it used their data without their knowledge, and 73% would leave if they experienced unresponsive customer service.
We also found that an average of 82% of those surveyed were willing to share some information (like shopping experiences, email address, and mobile number) with brands, except for people in Japan (at 52%). But in return, these consumers expect brands to protect their interests when using their personal data. Trust remains an important currency in a relationship.
Love me tender, love me true
According to IDC, by 2018, one-third of the top 20 in every industry will be disrupted by digitally transformed competitors. That means retaining customers will be even more challenging than it is today, and there is a greater need for brands to invest more in their relationships with their customers.
Here are some tips:
Just like in a romantic relationship, we all want to feel special and loved. A bunch of flowers or a surprise birthday party are signs that the magic is still there. Consumers are no different. If they invest their time and money with a brand, they hope for gestures that reward and gratify. On this topic, what the study unveiled was receiving surprises topped the list (58% across the APAC region) on how consumers want brands to show their love.
Incentivizing customers, in the forms of gifts, discounts, and a satisfying customer service experience, is now a must-do for businesses to keep the romance alive with their customers. Do this and businesses can stay relevant to their customers and stay in the race. After all, no customers means no business.
What else must brands do to win the hearts of their customers? Download the full report for free here.