Thoughts on customer retention and loyalty

The industry in which I work is dependent on customer retention and customer loyalty. We have seen some really good years, but also some equally poor years with bottom lines glowing in red figures. Many battles have been fought to win the customers' favor, increase market shares and remain a top player in the field. Even so, the battle for customer loyalty is a futile one.

Now, were it up to me, this would not be a problem as we produce and provide beautifully designed hardware, filled with innovative, top notch, high quality software with exquisite usability. Unfortunately, the customer base is not cloned from me, so the customer retention is a problem we must always consider. And here's an interesting fact: it is not just us, our competitors seem to have the same problem with customer loyalty.

Well, maybe not all competitors, "That Fruit Company" as one of our former presidents labeled them back in the days a decade ago when we were still among the top three players in the world and didn't really know yet that there was a big technology shift in the making. When "That Fruit Company" was the new obnoxious kid on the block that brought a new game plan, but played with his own rules.

Honestly, "That Fruit Company" are also extremely innovative, but they really are not playing on the same field, using a proprietary platform, having an elaborate (also proprietary) infrastructure and a large fan base that were followers even before the release of their first handset.

So the competitors I am referring to above, that we share customer retention problems with, are the ones playing on our field, on the same open software platform.

And maybe that is the reason why we are all suffering. We are too similar. Our products have too much in common and not enough differentiators to retain customer, leaving us to cannibalize on a common customer group to whom all products in the retail window look the same regardless of the brand logo imprinted on the cover.

In one of the video clips on the module 2 description site, Expectations and the disconfirmation model, Dr. Tore Pedersen talks about the relation between customer expectations and satisfaction. That higher expectations tend to result in a higher degree of satisfaction and a tendency to forgive shortcomings, whereas lower expectations make a higher threshold for acceptance and satisfaction.

I have never thought of it that way, rather the other way around, that high expectations poses a risk of disappointment if the expectations are not met, whereas going into something with low expectations provides a greater chance of a positive experience.

Maybe this is just what "That Fruit Company" is doing so well. Compared to many other players in the field, they do not have a great number of models, and the few variants they have per model series each have differentiating factors. For each release they boost expectations by creating an enormous buzz, with spec "leaks" and live streamed keynotes. Once the product is due for public release, the expectations are so big that, applying the theory explained by Dr. Pedersen, satisfaction is guaranteed, hence boosting customer loyalty and securing retention and business.

Internal and external customers

I left Uppsala 1999 with a Master's degree in English linguistics, and have since then worked mainly within the IT and telecom field with language and localization related work.
At my current workplace, although belonging to the software organization, my section does not deliver much code, but rather function as a subvendor to the various software projects, providing refined resources to platform and application development.

From a customer definition perspective, we can distinguish various types of customers that all have different expectations on us. On a higher level we can divide them into internal and external customers, with the software project being our primary customer. After all, it is their resources we refine governed by their requirements and deadlines, and the the quality of the material we supply to them influence the perception of their deliverables further down the line.
Other types of internal customers, once we have a finalized product or a functional prototype, are the various market and customer units who have other requirements on our deliverables, be it legal requirements, region or market specific requirements, or marketing requirements that we need to comply to.

Examples of external customers are the various telephony operators around the globe. They can have very specific requirements and expectations on what we deliver, and compliance to their expectations is crucial as their business constitute a large part of our revenue.
Finally, there's the end users, the consumers, the people who are the final buyers of our products. They are of course an external customer to greatly consider. If our deliverable, our part of the final user experience, is not up to par with the quality expectations of the end user, then it will not matter how much we complied to our other customers, internal or external. If we do not come through to the end users and provide them with a unique experience, we risk our customer retention as they may turn to other suppliers in search of that unique experience.

My expectations on this course is to gain a better understanding of the psychology and theories regarding customers and customer experience, and strive to find methods to apply this understanding as variables in our continuous quality enhancing analytics, with the objective to increase the satisfaction for all our various types of customers.

I also look forward to using social media as a means of study, a new format for me. I am not a particularly avid user of social media; my social media presence has so far not reached far beyond Facebook and LinkedIn. I did create a Twitter account in 2009, but I have hardly ever used it as I didn't really come to terms with how to use the 140 character communication format successfully and couldn't untangle the web of replies, retweets, mentions and other whatnots.


This post is the first in a series of reflections and assignments I will write as part of the course "Understanding Customer Experience" provided by Karlstad  Business School.