How a bank, telco and health insurer blew their focus on customer
Are businesses really doing enough to look after existing clients or has short-termism blinded them to the detriment of service, quality and value? The Harvard Business Review this month spotlights whether businesses are undervaluing their existing customers. The article asserts that businesses need to evolve to measure and manage customers’ worth rather than focusing primarily on maximising shareholder value and winning new business.
- economic short-termism, i.e. shortcuts in product or service, erodes customer loyalty
- reduced loyalty equals fewer customers which in turn erodes shareholder value
- so companies that put customers first create greater value for shareholders
- accounting tools are emerging that better value that relationship
- companies need to start using them
Over the last few months alone I’ve personally come up against a bank, health insurer and telco, all making things far harder for me than should have been the case given I’d been a loyal customer for 10+ years. Each was given plenty of opportunities to read the signals (and believe me, I was blunt), take on board the feedback and respond back. They ignored it all. So obviously I took my business elsewhere.
It begs the question then, why are businesses so focused on new customer growth when surely, they should also be nurturing their existing clients? The fact that I was going to leave the bank, telco and health insurance couldn’t have been clearer for all of the various call centres, yet still, they chose to ignore it and follow their script.
It costs 5x as much to attract a new customer than to keep an existing one (and that’s probably light in the case of media agency pitches, given head hours and hard costs incurred).
As an industry, we all get sucked into the vortex that is 'pitchageddon', and it’s only in the last year or so that some agencies have walked away from the untenable, unprofitable terms being touted by some clients during the pitch process.
When you compare that the success rate of selling to an existing client is 60–70 per cent versus the success rate of selling to a new prospect is only 5-20 per cent, it should be a no brainer.
We are in the business of growth. However agencies’ focus needs to shift to sustainable growth, not growth at any means, while placing greater emphasis on servicing existing clients and ensuring their own people don’t burn out. Anything less is economic short-termism and ultimately, value destruction.