When did business stop caring about customers?
Have you had the feeling recently, that your IT service provider or the vendor of your exciting new technology doesn’t care about you quite as much as you would like? If so you’re not alone. For all the talk of ‘Voice of the Customer’ and ‘customer-centric’ services, an air of neglect seems to have fallen over the IT industry over the past few years: and it’s not doing anyone any favours.
There are a good few reasons why this is the case. First up is the boom in tech start-ups. While doing great work in creating new and innovative products that have the potential to deliver immense value to their customers, the business culture behind them isn’t necessarily set up to deliver on that promise.
That’s because most start-ups aren’t structured around customer care – they’re targeted on developing and nurturing the pipeline. Growth are the measures of success and the metrics that investors assess when allocating their funds. Net new business is the immediate goal.
In many start-ups those individuals who engage with customers at the beginning of the sales process have a quota they must meet. So, instead of building a longer-term relationship with clients, they end up in a situation in which they bring the customer in and then move on. And so, because customer retention is not considered as a measure of success, it isn’t a priority.
It’s not just start-ups of course. For many larger companies too, looking after existing customers is seen as a cost, not a revenue generator. As a result, customers are left with tech support – but not the account managers who are there to build relationships, understand customer’s problems and help find solutions.
A recent McKinsey report should act as a wake-up call. On average, large IT projects go 45 per cent over budget and seven per cent over time, while delivering 56 per cent less value than originally predicted. No one is going to keep customers happy with projects like that.
The second factor actually has its roots in a time before the start-up boom. Software-as-a-Service (SaaS), almost by definition, has changed the relationship between vendor and customer. Historically, when software was installed on-premise, it was more complicated to deploy and necessarily came with a lot of support. Very simply, it was harder to get the value out of it; so more work was put in to delivering the customer’s business case.
As a model, SaaS shortens the time to value significantly. It offers huge benefits in terms of cost and efficiency. But its light-touch deployment doesn’t encourage a deep connection with the customer. Indeed, it can become a very hands-off and distant relationship. That’s fine if the product is absolutely flawless. But not so good when it isn’t.
In the business to consumer space, initial mutterings from customers and their champions in the media have been getting louder and louder. Consumers see new customers get better deals from mobile phone companies, financial services or TV and broadband providers and feel that their long-term loyalty is not being reciprocated.
Companies aren’t blind to this shift and we are seeing a more human element creep through. For example, Aviva wrote to me saying that they had reviewed my premium and that I was paying too much. They then adjusted it and I now pay less. The result? I’m more loyal as a result. In regulated environments too – such as energy – providers have to provide a competitive analysis of if customers could be better off with another company.
That transparency might be mandated, but it will quickly become the norm. Whilst the old-style of competition is often good for service innovation and ultimately customers, it sets up a much bigger problem. With the pace of change in IT getting quicker, the customer and vendor landscape rapidly changing shape, and new disruptors entering the market ready to gobble up a rival’s client base, a vicious cycle is starting to develop.
New companies woo a competitor’s unloved customers, then focus on a successful exit or acquisition, leaving those same customers high and dry – and often with a legacy system that is only a few years old and no longer supported. Who wouldn’t be angry, distrustful and possibly litigious in these circumstances? If it continues, the IT industry will eat itself!
So how do we keep the benefits of SaaS (and other cloud-based delivery mechanisms) and start-up culture without continuously letting down customers? How do new players manage that fine balancing act between rapid client acquisition and sustainable growth? How do companies avoid easy complacency when they are – for now at least - beating predicted market share?
There are probably as many answers as there are vendors. But there are simple facts that no one in the IT industry can afford to ignore. Retaining existing customers is significantly less costly than finding new ones. Loyalty is a two-way relationship that is more fragile than it first appears. And customers are not just a number on a spreadsheet – they are the essential asset on which success depends.
And in practice? As customers, we can demand more transparency over our vendors’ retention and renewal policies. As vendors, we can recognise that good customer champions are actually sound revenue generators. And everyone can look at their definitions of success, give them a stress test, and ask: are they helping or hindering?