Companies are wasting billions on attracting new customers through advertising?

By admin at June 6, 2010 | 9:33 pm | Print

A new study from Satmetrix, released ,shows that companies are wasting billions on attracting new customers through advertising whilst delivering a poor customer experience that has forced over 10 million* consumers to switch suppliers in the last six months alone. The main culprits for this switching epidemic are unfair fees or charges, poor product or service quality and rude or disinterested employees.

This research, created by Satmetrix, the Net Promoter® Company and leader in customer experience programmes, as part of its annual Net Promoter Benchmark study, shows that much of the £14 billion spent on advertising each year in the UK would be better spent on delivering a higher quality customer experience. In fact, only 2% of respondents trust advertising the most as a source of information when choosing a product or service. Instead, almost half of consumers (49%) see personal recommendations from friends, family or colleagues as the most trustworthy source of information. And, over seven times as many people (15%) trust consumer opinions posted online than trust advertising.

It is somewhat ironic that while politicians argued, during the recent election campaign, to cut waste, billions of public and private funds are being spent on the information source trusted the least by consumers – advertising.

Treat us fairly and treat us right or we’ll spend our hard-earned cash with a competitor
Famous for their sense of fair play, the British don’t like it when they are not treated fairly. As a result, almost a quarter of respondents (23%) saw unfair fees or charges at the reason for switching. An additional 7% switched because discounts were offered to new customers but not to them. Deborah Eastman, CMO at Satmetrix, says: “Business choices that seem to make sense from a financial point can negatively impact revenue and reputation if consumers don’t think they’re fair. If companies drop these bad profits, they will likely recoup lost revenue many times over by keeping their customers for longer and acquiring new ones through recommendations.”

The second most common reason for switching (22%) is poor product or service quality. Almost as many (19%) people leave because of rude or disinterested employees. And, 12% move because they can’t get anyone to deal with their problem.

Deborah Eastman says: “It seems that many organisations chose to invest in attracting new customers through advertising rather than invest in a good customer experience that creates loyalty. If companies listened more to their customers, and if employees could understand the impact of their behaviour by seeing customer feedback for themselves, then businesses could significantly reduce churn.”

The hidden cost of negative word of mouth

This report is a clear signal from UK consumers -‘Focus on me and the experience I receive or I’m off.’ But the results show that the cost to a company doesn’t stop with a lost customer, While 2% might trust what they read in an advert, almost two thirds of consumers (64%) look to other consumers to guide their purchase decisions, As a result, the survey shows that a negative experience will lead to a negative recommendation and with it the loss of a new customer.

Eastman continues: “This survey shows that we live in the Recommendation Generation and that the key to what gets recommended is the experience a customer receives. The companies that understand this and have invested in customer experience programmes are already leaving their competitors in their wake by creating loyal adovates.

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