When it Comes to Customer Service, Loyalty Breeds Forgiveness

Ching Chiew Lian
Director, ACNielsen | eQ
ACNielsen Australia

Companies on a cost-reduction mission must be relieved to know that they can build consumer satisfaction and loyalty without “over-servicing” them. This seems to contradict the common belief that “Consumer is King!”

In a study that compares consumers of four mobile phone service providers in two culturally different countries, we analysed consumers'overall evaluation on their respective service providers along with their overall satisfaction and loyalty (continuity and recommendation intentions) in 4 incremental levels. The analysis led us to some interesting findings:

1. The overall performance of each service provider, measured using the eQ index, increases with increased satisfaction and loyalty. This reassures organisations' performance-based approach in building consumer satisfaction and loyalty.
2. Loyal customers are forgiving and they do not immediately consider leaving or tell their friends and relatives to stay away even though 7% have experienced below average services.
3. Maintaining a high service level and delivery consistency remains a priority. Consumers without a clear intention to stay and are less than satisfied, experienced low service levels that are 3 times more.
4. The threshold of tolerance is estimated to be 10% of ratings in below average performance levels. This is when consumers would start to look for alternatives.
5. Highly satisfied and loyal consumers' eQ index hover around 80. This suggests that when a business sets an improvement target of 80, it has a pretty high success rate in cultivating a healthy pool of consumers to sustain its business.
6. As satisfaction and loyalty levels increase, the eQ index increases at a decreasing rate. Therefore, driving improvement from a lower performance level that increases the index from 60 to 80 yields a higher rate of loyalty returns than increasing the index beyond 80.
7. Consumers' overall evaluations are more stable at higher levels of satisfaction and loyalty. This shows that maintaining a strong eQ index of 80 would result in a stable level of consumer retention.
8. On the other hand, consumers' overall evaluations differ by as much as 40 points (eQ index range from 30 to 70) at levels of dissatisfaction and low loyalty. Therefore, a company that appears to perform better would still be at risk of losing its consumers, especially when performance is below 80. The findings also reveal that there are non-performance related factors influencing consumer attrition.