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Poor customer service, not price, driving most customer churn, study says

As the global economy plunges into a recession, organizations may be better served by focusing on customer service rather than pricing, a study from Accenture suggests.

The notion that customer service is imperative in a recession got a major boost from a recent study by Accenture.

The New York-based consulting and services firm surveyed more than 4,100 consumers over the summer and found that service -- more than price -- is a clear differentiator.

According to the online survey, 67% of respondents reported switching companies because of poor customer service, compared with 59% last year. U.S. respondents were even more service sensitive, with 73% reporting that they switched companies owing to poor customer service, compared with 47% switching over lower prices. All indications are that the importance of customer service is only growing. Four years ago, when Accenture first began conducting the annual study, only 48% of respondents said they were switching businesses because of customer service.

"That's a material jump in just one year and from 48% to 67% over four years," said Robert Wollan, global managing director of Accenture's CRM transformation service. "Those are monstrous leaps and trends."

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The surveys were conducted over the summer, when signs of the global financial crisis were just emerging, but the results are just as compelling, according to Wollan.

"When I think of a down market, I think every decision is amplified," he said. "Every [decision] to choose a particular provider or switch has greater importance to the consumer and to the companies."

Now, more than ever, is the time to challenge traditional practices, he continued. In particular, organizations need to segment their customers.

"There may never be a better or more important time to get closer to customer behaviors," Wollan said. "The clues are there."

While a number of factors can have an impact on the customer lifecycle and can get lost in high-level metrics, it's important to understand how individuals or groups are responding to customer service, particularly in a down market.

"The one-size-fits-all experience will do little to differentiate you to your customer base," Wollan said. "Customer expectations tend to be by segment or category or sometimes by individual."

That makes segmenting customers and understanding their touch-points with the business particularly important. Organizations that understand which customer segments make the biggest difference to the bottom line and where to reach them can focus limited dollars on the most effective places, Wollan said.

Meanwhile, consumers are becoming more and more demanding.

"All three indicators are vying for the lead vote on why people are moving -- execution of service, rising expectations, or is it an underlying cultural shift," Wollan said. "What we've isolated is that pricing is not necessarily the differentiator. Experience was more important than price as a factor in switching."

Also, competitors are now particularly adept at responding to pricing changes, he added -- so much so that pricing itself is becoming commoditized.

Based on the results of the survey, Wollan offers three pieces of advice for organizations seeking to improve customer service initiatives.

First, organizations should look for insight into the data they already have around customer behavior, which can be quite robust.

From there, they need to apply that to the customer lifecycle.

"It's not just a spot in time, it's looking for a trend to anticipate change and looking deeply at the channel preference among that mix of customers," Wollan said.

Finally, organizations need to establish their customer service baseline and the diversity of their customer base.

"Certain companies have a niche base, so their analytics may be focused on operational improvements," Wollan said. "With more diverse companies, it's on the execution side, such as field service, which can be a major investment. For others, it's online."

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