Economic gloom
The economy, at least the one portrayed by the media is apparently struggling. Runs on banks, house prices collapsing, doom and gloom on the high street, the pound falling, younger people worried about mortgages, older ones about pensions. I suppose that’s hardly surprising if the Prime Minister chooses a Work and Pensions Secretary who he believes to be “incompetent”. The UK Consumer Confidence Index1 continued to fall in December and is now down to 85 from a high of 110 in March 2005. But what does that mean? According to its sponsors, “The Nationwide Consumer Confidence Index measures the population's view of the current position and future prospects of the UK. The index takes into account the general economic situation, employment conditions and personal expectations of the months ahead.” In other words, Jo and Josephine Bloggs expect ‘things’ to get worse rather than better in the future. Well at least it proves that people really do watch television and occasionally still even read something in a newspaper. Of course, Jo and Josephine haven’t got a clue what’s going to happen to the economy, but we can hardly blame them for that since research has shown that on average professional economists, investors and bankers have no more success in predicting financial futures than a monkey making random selections.
You’ve never had it so good!
So where does this leave customers? In a great place actually. Objective analysis confirms that most Jo and Josephines have never had it so good. Employment levels are higher than ever. Unfilled vacancies abound. The December jobless figure was just over 800,000 – the lowest since 1975! Homeowners have seen the value of their chief asset treble in the last decade and, for most of them that value continues to rise. Yes, read my lips – in most areas house prices are still going up, by 16% in London in 2007, by 12% in Scotland and the UK average by 9.3%. Even the prediction for 2008 is for an average 3% increase2. True, a few thousand people in the City will have been devastated that their bonuses didn’t even reach 7 figures in December but the economic impact of that human tragedy won’t extend much further than the Ferrari, champagne and personal shopper sectors of industry. No, most customers have never had it so good.
It’s official - UK customer satisfaction up!
Further evidence comes in the form of the UK Customer Satisfaction Index3 conducted by The Leadership Factor on behalf of the Institute of Customer Service. Figures from the latest wave released this month show customer satisfaction in the UK overall moving up by 4% to 69.4%. In customer satisfaction terms, 4% is a big increase over 6 months. So how can that make sense amidst all this doom and gloom? Simple! If customers still have jobs and money they benefit from all the economic pessimism. Companies get worried about future profits, competition intensifies and giving customers a good customer experience to keep them becomes more important. The main factors driving the improvement in UK Customer Satisfaction Index are higher customer satisfaction with prices plus strong increases in core service areas such as keeping customers informed, delivering on time and treating people like valued customers.
Competition drives customer satisfaction
This shines through when we look at customer satisfaction within sectors. Customer satisfaction is highest where competition is strongest, in sectors such as retail, insurance and automotive. The easier it is for customers to switch, the harder suppliers have to work to give them a flawless customer experience, or they’ll simply go elsewhere. It’s also noticeable that some very competitive sectors have recorded the biggest gains in customer satisfaction this time around. As well as insurance, the sectors working hardest to improve their customer experience is utilities, albeit from a very low base.
Improving customer satisfaction
I’ve been immersed in customer satisfaction for over 20 years now and it never ceases to amaze me how long it’s taken for companies to take on board the evidence that customer satisfaction pays. After all, it was as long ago as 1986 that the American Consumer Association told us that it costs at least 5 times as much to win a new customer as to keep an existing one. What I’ve noticed over that time is that some organisations have been much more successful than others at improving satisfaction. Why is that? Fundamentally it’s entirely down to how much they want to do it. If it’s a really important corporate objective, driven hard from the top, and provided they act on the conclusions from accurate customer satisfaction surveys, companies always improve customer satisfaction and loyalty, sometimes by a big margin. By contrast, when organisations pay lip service to customer satisfaction, but really they have other priorities, they never deliver a consistently good customer experience and customer satisfaction and loyalty don’t improve.
Leaders in customer satisfaction
Look at the leaders in the UK Customer Satisfaction Index. John Lewis and First Direct, to name two sector leaders that have a fully deserved reputation for making the customer experience their top priority. In the UK Customer Satisfaction Index their customer satisfaction scores are 89% and 86% respectively. John Lewis is a massive 16 percentage points ahead of its sector average for customer satisfaction and First Direct 13 percentage points ahead of the average for other banks. Contrast this with the other end of the customer experience spectrum. Local Government has a sector average of 58% on the UK Customer Satisfaction Index, with no improvement this time around. Since some organisations like the local ambulance and fire services do very well on customer satisfaction, you can just imagine how poorly people rate their customer experience with the average local council.
Low customer satisfaction at Currys
Of course, apart from the fact that you’d think councils would have a duty to give their council tax payers a good customer experience, what penalty is there if they don’t? much harder to understand is how a company in a very competitive sector, like retailing for example, would allow itself to have really low customer satisfaction over a significant time. I’m thinking about DSG, formerly Dixons, and including Currys and PC World. Two years ago at the The Leadership Factor’s Customer Satisfaction and Loyalty Conference held a Stamford Bridge, I remember highlighting the massive growth in online shopping that Christmas and asking how bricks and mortar retailers like Dixons/Currys were going to compete in a market where one supplier’s Panasonic 42” plasma was identical to its competitor’s? Short of closing all the stores and becoming an e-tailer, the answer, of course, was to make the in-store customer experience so good that people would be happy to pay a little more in-store because the overall value was greater and they ended up more satisfied. In 2005 UK customers spent £19bn online, a 13-fold increase in 5 years. In 2007 it was up to £46bn and still rising. What have DSG done? Neither one thing nor the other it appears. They’ve invested heavily in on-line, without success. According to results released by Brand Republic this month, Play.com and Amazon have the highest customer satisfaction amongst UK online retailers at 76% and 75% respectively. Trailing well behind are PC World (59%) and Currys (60%), though neither is quite as bad as B&Q, which brings up the rear at 53%. Unfortunately for DSG, the customer experience in-store doesn’t seem to be any better. The 2007 Which? High Street Shops Survey placed Currys 49th out of 50 on customer satisfaction (only JJB lower) and PC World joint 43rd alongside MFI and Woolworths.
Low customer satisfaction = low profits
Not surprisingly, DSG’s share price has plummeted in recent months as they continue to lose customers and miss their financial forecasts. Most short-sighted analysts look no further than internet competition for the explanation. But it is possible to sell electrical goods from shops as the following quote from January’s Retail Bulletin confirms:
“One of the most telling things over the Christmas period was that while DSG was complaining about a lack of customers for electrical goods it was a very different story in the electricals departments of John Lewis, which were rammed with people looking to splash out on the latest gizmos.”
And we all know which retailer has the highest customer satisfaction. Maybe DSG is getting the message. Their new CEO, John Browett, was Operations Director at customer-focused Tesco. Maybe poaching a John Lewis executive would have been even better, but they also have very high employee satisfaction at John Lewis!
References
1. www.nationwide.co.uk/consumer_confidence
2. Financial Times / King Sturge, 5th January 2008
3. www.ukcsi.com
