Service Trumps Product and Price in Customer Retention

by Jeff Wiener on June 7, 2012

In a modern telecommunications market that seems to advance almost daily by exponential leaps and bounds–where communications technology has practically reached its saturation point–one of the greatest struggles for many telecom service and solution providers is customer retention. That is, in a market with endless choice, telecom companies are struggling to come to terms with an unprecedented churn rate, essentially the measure of customer turnover, as consumers switch back and forth between competitors in an attempt to find the best technology, deals, and the best service.

In such an ecosystem, Robert Machin, Solutions Marketing Director for the Comptel Corporation explains, telecom companies often instinctively consider the, “range of innovative products available to the customer, the technical quality of delivered service or QoS and competitive pricing,” as the key factors for retaining customers and extending the always lucrative service contract…but not so.

Instead, in a cutthroat telecommunications market where product and pricing parity reigns, research has shown that neither really factors into establishing customer loyalty, finding instead that most customers give little thought to price or products so long as the customer service is exceptional.

While such findings may seem counterintuitive for most telecom service and solution providers, the point is simple: when market parity reigns customers often struggle to distinguish between one company and another, meaning that in the eyes of your potential clients, there seems little difference between your phone system solutions and your competitor down the street.

In fact, with one or two exceptions (most notably the iPhone, although even that distinction is quickly disappearing) customers believe they will receive essentially the same range of products regardless of the provider, knowing full well that in this age of digital innovation it won’t be long before a cheaper more powerful device comes down the pike.

So you’ve conceded the fact that in the eyes of your average customer there seems little difference in your product line compared with your competitors, but surely price must be a significant determining factor?!  Again, as strange as it sounds, price has little to do with customer retention, given the fact that in a competitive capitalist market prices trend inexorably downward, meaning that even when one company offers a discount or a sale on a particular product, that move is usually quickly mirrored by other competitors.

As Machin notes, “As we have seen in other industries…only radical cuts–with serious impact on margins–are effective in influencing customers buying decisions.” Therefore, unless you’re willing to deep incredibly deep, pricing is practically a non-factor in lowering that pesky churn rate.

The one thing that will differentiate your business from your competitors, however, is your level of customer service, a point that on the face of it seems well within your control but–because of issues like supply chains, third party partners, and a host of other factors– is paradoxically often the most difficult thing to provide.

Personally, I’ve found that with Digitcom often looking indistinguishable from other solution providers when it comes to product and price, the thing that truly sets us apart is our unique ability to effectively mange our key customer interactions. This means that from the person you first connect with when looking for communications solutions to the technical expert that installs your system, everyone on the Digitcom team is tasked first and foremost with providing top quality customer service. Not only that, but by providing unrivalled ongoing support and customer education Digitcom works tirelessly to go that extra mile so that our customers know they are valued and appreciated… not just a number in a ledger.

The bottom line, if you want to distinguish yourself from the crowd it won’t take an overhaul of your products and prices, it’ll likely take an overhaul of your customer service. If you want to keep customers, keep customers happy.

{ 2 comments… read them below or add one }

Brenda June 7, 2012 at 8:48 am

I think you’re right that between the incumbents, price isn’t the issue. Why? Because they’re just playing slight-of-hand tricks to move dollars from one pot to the other. Customers know that, and therefore aren’t swayed by price as much as you may think. But i think that’s changing as some new people (like Dell Voice on the mobile side, where they offer totally free calling) are coming out with price plans so radically disruptive and so clearly different than the incumbents, that it resets the expectations of the consumer and brings price back to being a major decision criteria.

Will June 7, 2012 at 3:07 pm

I’m not surprised of this finding as companies in unrelated industries such as Zappos are making customer service their number one priority with everything else following afterwards.

If a company wants my business, I believe they should fight tooth and nail to make me happy so that I am retained in order to prevent any “churn”.

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