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Home  Library  IT products alone can't build loyalty
IT customers say products alone can't build loyalty

Sean Clayton, Group Vice President, Walker Information

Riding the wave of a booming economy, IT companies have based their success on continuous product innovation. But as the economy slows down, customers are saying that it will take more than products to earn their loyalty. And the chances that they'll stay loyal to their current supplier are less than 50-50, according to Walker Information's 2002 National Customer Benchmark Study for the IT industry.

This startling finding, and the unmet customer needs behind it, suggests several opportunities for IT companies striving for competitive superiority.

Less than half of IT customers are Truly Loyal
Only 47 percent of customers surveyed plan and want to continue doing business with their current IT vendor - a level of true loyalty that is relatively low compared with other industries we've studied.

In fact, roughly one out of every two customers is not pleased with the relationship they have with their IT supplier and could already be considered halfway out of the door. Some 29 percent feel Trapped (unhappy, but likely to continue the relationship), while 21 percent are High Risk (unhappy and unlikely to continue the relationship). The remaining 3 percent are Accessible (pleased, but may not continue the relationship). This relatively low level of customer loyalty relates to what happens - or doesn't happen - after the sale.

The difference between satisfaction and loyalty

Supplier claims that 9 out of 10 of their customers are satisfied have become commonplace in the IT industry, even to the point of being touted by sales reps and in competitive advertising. Indeed, our benchmark study revealed that on average, 80 percent of customers are satisfied with their IT vendors. But how can satisfaction be so high when only half of the IT customer base is actually considered loyal to their suppliers?

At Walker Information, we believe in measuring more than just satisfaction. While satisfaction will tell you whether or not you are meeting customers' minimum expectations, merely meeting expectations is a weak foundation for building solid relationships with customers.

Our analysis has proven that measuring customer loyalty is a stronger indicator of future customer behavior than satisfaction. Our comprehensive approach segments customers into four loyalty categories (Truly Loyal, Accessible, Trapped, and High Risk), allowing companies to develop strategies targeted to each group.

Poor follow-through can sabotage customer loyalty
Walker Information's benchmark study measured the entire customer experience, from purchase through post-sale service and support. In contrast to customers' generally favorable views of IT companies' product quality, follow-through (including non-technical service as well as technical support) is viewed less positively. And while product quality is a key influencer of loyalty, it is the critical period after the sale -- when the relationship can begin to flounder -- that represents the greatest improvement opportunity for IT suppliers.

This finding should come as no surprise, at least to veteran industry observers. During the IT economy's boom years, companies were able to attract customers on the strength of product features alone. As customers flocked to vendors touting the latest technology, post-sales service and support took a back seat to R&D and upwardly spiraling sales targets. Lofty promises about product performance and ROI resulted in inflated customer expectations that often could not be met without substantial, unforeseen investments by those customers in professional services contracts.

Now IT companies are experiencing a double whammy. A contracting market and increasing commoditization of their products have combined to create an environment where the customer may now have the upper hand. As switching costs still remain high for IT products in general, the gradual adoption of platform-agnostic technologies such as Linux, XML, and Web Services may significantly reduce these barriers to exit in the future. In this scenario, service after the sale will become a key factor in both building customer loyalty and differentiating IT vendors in the marketplace.

Key results from the benchmark study suggest several other guidelines for IT suppliers looking to build customer loyalty-enhancing strategies:

Customers still want to be associated with IT leaders and innovators. While their products are gradually becoming more commoditized, the image position that IT companies occupy in the marketplace influences customer loyalty and presents an opportunity for differentiation. Not surprisingly, customers prefer to buy from vendors who are viewed as being innovative and guiding lights for the industry.

Don't assume that your customers consider you trustworthy. Remarkably, 30 percent of customers aren't sure they can trust their IT supplier - a perception that unquestionably weakens loyalty. Given the corporate scandals of the last 12 months and customers' increasing emphasis on the security of their IT infrastructures, building an image of being a trustworthy company should be a priority for all IT companies.

Customers remain in the dark when it comes to their IT vendors' values. Many customers aren't aware of their IT supplier's position on business ethics and philanthropy. These softer issues may become increasingly important as more and more people in the business world insist on doing business with responsible citizenship-minded companies.

Knowing how your customers' decision-makers feel towards you is not enough. IT suppliers who proactively seek customer feedback often limit their focus to the CIO/CTO who made the original decision to use their products and services. The benchmark study found significantly higher loyalty levels among these decision-makers (perhaps due, at least in part, to self-justification of their original vendor choice) than among the managers and staff who actually use the products and services of IT companies. While gaining insights from your customers' senior IT executives is critical, it also is important to keep a finger on the pulse of their IT managers and staff. Their less favorable experiences are likely to trickle up the organization and eventually impact future vendor decisions.

Loyalty isn't uniform across different size businesses -- don't forget the little guy. Dedicated account teams, top-tier technical support, and even involvement in product design decisions are some of the benefits conferred on large, enterprise customers by many IT vendors, translating into a higher degree of loyalty. Conversely, small to medium-sized businesses -- with fewer switching costs -- are more likely to be actively considering alternatives. These findings suggest that while IT companies' red-carpet treatment of their key customers is generally successful, developing a more effective strategy for servicing smaller to mid-sized companies presents a real growth opportunity.

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