How companies can hang on to their customers

November 1, 2011: 12:34 PM ET

Despite spending significant sums on studying and improving customer experience, many companies are simply not seeing the customer loyalty they want.

By Eleanor Bloxham, CEO of The Value Alliance and Corporate Governance Alliance

FORTUNE -- What company doesn't want customers to have a positive reaction when they think about doing business with it?

But despite spending significant sums on studying and improving customer experience, many companies are simply not seeing results, according to a recent survey of 8,000 customer experience professionals in 2,160 companies globally by consultancy Beyond Philosophy. The findings provide a road map any company can use to court new and repeat customers.

According to Steven Walden, research director at Beyond Philosophy, companies in retail, banking, technology, and telecommunications tend to spend the most on so-called customer experience initiatives. Yet of the top 10 spenders, only one made a top 10 list of successes, according to the survey.

What are companies doing right and, just as importantly, what are they doing wrong?

'Lipstick on a pig'

HP (HPQ) and Dell (DELL) are two of the top 10 spenders on customer experience – and they do a fair job, but not what you would expect based on the cost and effort, Walden argues. What haven't they figured out?

Both companies provide a standard product that "does what it says on the tin," Walden says. They both have big organizations and spend dollars on thinking about the customer, but this is mainly from the perspective of usability, functionality, and fixing what's broken. From a customer perspective, "there's no wow there," Walden says, it's more about "putting lipstick on a pig."

A case of 'measurementitis'?

Other companies get it wrong by resorting to "measurementitis," says Walden. This often happens when a software vendor comes knocking and convinces a company that the way to improve customer experience is to measure every interaction with its customers. HSBC, another top 10 spender, is guilty of this, Walden says.

The problem with this approach is that companies will measure loyalty but then won't act on their findings. Why would they do this? Measurement instead of real action can be a draw for managers who want to create fiefdoms, Walden says. You can build a sizable team under you just by measuring things, but "you can't make a pig thin by weighing it," he says.

Customer surveys – or employee surveys, for that matter -- that result in no action are much worse than having no survey at all. It just fuels anger to ask people to state their complaints and take no action based on the results.

Turning a new leaf

By contrast, American Express (AXP), another top spender, is on its way up largely because they are concentrating their efforts on providing a "good feel" when customers call. The company has begun to stem its loss of customers, says Walden.

The Gap (GPS), another top spender, has even put the term "customer experience" into the titles of its in-store workers, but that has yet to improve the company's image.

Vodafone (VOD) is the only top spender that also made the most admired ranking in Beyond Philosophy's survey. How did they do it? According to Walden, they maintain a great brand image through their sponsorship of the Formula 1 auto racing events.

"Customer experience is at the heart of everything they do; it's in the culture and DNA of the organization. It comes from the top down. Like HP, Vodafone may not be massively innovative, but they operate from this clear statement of intent -- in contrast to HP, where customer experience is a program," Walden says.

Using emotion well

Who does it really well without spending a ton? Tesco (TESO) makes it because of "the strength of the relationship they create with the customer, as if you are part of their family," Walden says.

This contrasts with Wal-Mart (WMT), which is currently having trouble defining itself to customers and the marketplace. Even Family Dollar Stores (FDO), Walden says,  recognizes that price alone won't draw all the customers a retailer needs. How customers feel about the company matters.

Which brings us to the top three most admired companies: Apple (AAPL), Amazon (AMZN), and Zappos. What do all three have in common? Charismatic leaders with a young feel to the product and delivery, Walden says. They have maverick, cutting edge approaches -- and don't just listen to customers, they lead them. They are creative and don't get bogged down in analytics, he says. Customers love these companies because of the personal feel and emotional connection they provide, Walden says, and emotions not only connect you to the company, it makes you want to buy from them as well.

For Apple, the most admired in the survey, the question will be whether they can replicate the explicit attention to detail the late CEO Steve Jobs instilled.

Clearly, it's easier to create personal feel and emotional connection in a small company rather than a large one but, Walden says, Apple in the 1990s would not have made the most admired list. Jobs set out to change that – and CEOs can. They just need to know how – and maintain that focus, gaining support for their vision and holding everyone associated with the company accountable.

Eleanor Bloxham is CEO of The Value Alliance and Corporate Governance Alliance (http://thevaluealliance.com), a board advisory firm. 

Join the Conversation
About This Author
Eleanor Bloxham
Eleanor Bloxham
Contributor, Fortune

Eleanor Bloxham, an authority on governance and valuation, is CEO of The Value Alliance and Corporate Governance Alliance, an independent board and executive educational and advisory firm she founded in 1999. She is author of the books Value Led Organizations and Economic Value Management: Applications and Techniques, and publisher of the Corporate Governance Alliance Digest and her blog The Bloxham Voice.

Email Eleanor
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.