Wireless Customer Satisfaction Doesn't Prevent Customer Churn

The conventional wisdom for most people, including executives at mobile service provider companies, is that there is a relatively direct relationship between "customer satisfaction" and customer churn. In other words, "happy customers" don't leave.

It doesn't appear that is the case. Perhaps perversely, even happy customers will churn (leave a supplier for another), and at surprisingly high rates.

Two out of three (66 percent) wireless and cable TV consumers switched companies in 2011, even as their satisfaction with the services provided by those companies rose, according to Accenture.

The paradox is that “customer satisfaction” does not lead to “loyalty.” Also, there are new precursors to churn, especially the growing pattern of consumers adding a second provider of a service, without dropping the original provider. That of course puts a potential full replacement provider into a relationship with a consumer.

The Accenture Global Consumer Survey asked consumers in 27 countries to evaluate 10 industries on issues ranging from service expectations and purchasing intentions to loyalty, satisfaction and switching.

Among the 10,000 consumers who responded, the proportion of those who switched companies for any reason between 2010 and 2011 rose in eight of the 10 industries included in the survey.

Wireless phone, cable and gas/electric utilities providers each experienced the greatest increase in consumer switching, moving higher by five percentage points.

According to the survey, customer switching also increased by four percent in 2011 in the wireline phone and Internet service sectors.

There is a new and apparently growing indicator of churn potential as well. In a growing percentage of cases, consumers are adding new providers, instead of switching entirely. That can disguise the danger of churn, as the original provider does not realize a new potential replacement provider also has established a relationship with a particular consumer.



“Companies are improving many of the most frustrating parts of the customer service experience, but they are facing a customer who is increasingly willing to engage multiple providers for a service and is apt to switch quickly,” said Robert Wollan, global managing director, Accenture Customer Relationship Management. “

Note the contradiction here: consumers were “more satisfied” and also “not loyal” because of that satisfaction.

Consumers reported increased satisfaction across each of 10 service characteristics evaluated. In fact, satisfaction rates on three customer service characteristics jumped by more than five percentage points from 2010.

However, only one in four consumers feels “very loyal” to his or her providers across industries, and just as many profess no loyalty at all. Furthermore, two-thirds of consumers switched providers in at least one industry in the past year due to poor customer service.

In emerging markets, these contradictions are even more pronounced. While consumers there reported greater customer satisfaction than their mature-market peers, they more often switched providers due to poor service across all industries (in some cases by a two-to-one ratio over mature markets), especially within the retail, ISP, mobile and banking industries.

Customer satisfaction, while important, is not the most-important measure of customer loyalty. In fact, even customers who say they are satisfied are not necessarily "loyal." The converse also now appears to be true. Even "dissatisfied" customers are not "disloyal."

Verizon, for example, gets higher satisfaction ratings than AT&T. But when asked whether they plan to switch providers, Verzon has just a one point lead over AT&T in the loyalty area. Changewave analysts think the Apple iPhone is the reason.

Verizon, the perennial leader in customer satisfaction among cellular service providers, earned a 42 percent "very satisfied" rating in ChangeWave's latest cell phone survey.

Tied for second were AT&T and T-Mobile, each with a 28 percent "very satisfied" rating. As a result, you might conclude, Verizon customers should less likely to defect to another provider. And, to be sure, only 10 percent of its current customers reported they plan to switch to another cellular provider.

But although saying they are less satisfied, AT&T customers who say they plan to switch carrier is just 11 percent. More surprising is the finding that 28 percent of users plan to switch to AT&T over the next 90 days, compared to the 22 percent who plan to switch to Verizon.

Presumably a new customer cannot yet have formed an opinion about the quality of a service. BSo the "switch to" data probably does not provide much indication of user expectations about the quality of service.

The switch indications would fit nicely, though, with an argument that a specific device is pulling new users into wanting a relationship with a carrier.

The Apple iPhone, which looks set to capture more than a third of smart phone sales during the next 90 days, is the answer. Customers are fanatically loyal to the device.

All of which ought to suggest a couple of really important implications. Measuring and creating "customer happiness" does not provide protection against churn. Even happy customers in the wireless and other areas show a marked willingness to churn.

The other thing is the clearly-growing importance of devices as the "thing" determining loyalty and churn resistance. People don't care about their "service providers." They care lots more about their devices.