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Playing the customer loyalty card

Sept. 9, 2014
Here’s an unsurprising (to me at any rate) bit of research from the consulting firm Temkin Group: strong connection between improved customer experience and increased consumer loyalty, leading to increased company revenue.

Based on a survey of 10,000 U.S. consumers, Temkin Group found that consumers who receive a “good customer experience” are more loyal to a wide range of companies across all of the 19 industries within Temkin’s study.

Those industries are: airlines, appliance makers, auto dealers, banks, car rental agencies, computer makers, credit card issuers, fast food chains, grocery chains, health plans, hotel chains, insurance carriers, Internet service providers, investment firms, parcel delivery services, retailers, software firms, TV service providers, and wireless carriers.

The upshot of this study is pretty simply, explained Bruce Temkin, the report’s author and managing partner of Temkin Group: Great customer experience isn't just a nice thing to provide for customers; it's a critical component for improving the bottom line by increasing customer loyalty.

What kinds of dollar amounts are we talking about here? Well according to Temkin’s research, here are some numbers to chew on:

  • Auto dealers retain the most business from existing customers – $184 million over three years – when they improve customer experience (and I for one am sure heavy truck dealers would see similar though relative gains as well.)
  • Investment firms retain the least amount of business – $94 million over three years – among the 19 industries surveyed
  • In three industries, the typical company generates more than $100 million of additional revenues over three years via “word of mouth” by improving customer experience: supermarkets, fast food chains, hotels, and retailers.

Across all 19 industries in this survey, loyalty is highly correlated to the three components of the firm’s Temkin Experience Ratings: functional, accessible, and emotional. In almost all cases, the emotional element of experience has the highest correlation, Temkin noted.

Paul Newbourne, senior VP of logistics operations at third party logistics firm Armada Supply Chain Solutions, touched on how such themes are playing out in the freight transportation space earlier this year, particularly in terms of how carriers and shippers alike are forging more “collaborative” partnerships to provide benefits to each other.

“We believe that the trucking industry and the truckload segment specifically is starting to experience a paradigm shift where carriers will increasingly be in a more favorable position to choose who they serve and who they provide capacity to,” he explained in a conference call hosted by Wall Street investment firm Stifel, Nicolaus & Co.

“In our view, it will be even more important than it has been in the past for shippers and receivers to make sure that they are doing everything they can to present themselves as customers of choice for their carriers,” Newbourne explained.

“At the core of this are shippers finding ways to help deliver improved efficiency to their carriers’ networks while at the same time generating value for themselves,” he said. “In our experience over the last seven years, we have found quite a bit of success through the use of collaboration to deliver carrier efficiency improvements, while at the same time benefitting our clients’ supply chain networks.”

For starters, though, it’s the shippers that Newbourne thinks need to work on delivering far better “customer experience” versus carriers.

“Many carriers have become much more sophisticated in how they operate. They have a better understanding of their cost to serve a client’s business,” he stressed. “Many of our carriers, including a number of the industry’s name brands, have told us that they are starting to become much more selective in the clients and freight they choose to handle.”

In at least one case, Newbourne said a major carrier told Armada that they were pulling away from a very sizeable account because of the detrimental impact that account’s operating practices had on their fleet’s efficiency.

Interestingly, most of the carriers he interviewed noted that their drivers and equipment are typically utilized just 55% to 70% of their available time – with all of them indicating that with the additional cost pressures and increased regulations the only way for them to continue profitable operations is to either improve utilization or raise rates.

“This last perspective resulted in all of them saying, in one form or another, that they would really like to see their customers and their customer stakeholders find ways to work with them in a more collaborative manner so that they can find ways to help each other—especially if this is by helping them to improve productivity through utilization as opposed to having to discuss rate increases,” Newbourne noted. “They firmly believe this would help them maintain their profitability.”

So if carriers and shippers can improve the “customer experience” between each other, what might that deliver for both parties? Newbourne offered the following example.

“Overall, our carriers have indicated to us that if they had to choose between better utilization and higher rates, they would pick better utilization primarily because of the positive effect that it has on driver retention and the impact on their profitability,” he explained.

“We have seen this work in one instance when we had a carrier come to us for a significant rate increase in the low double digits,” Newbourne said. “As we talked about why he needed such a large increase, we found out that because of how he was operating he was sitting on our reefer loads an extra two days before making deliveries. So we worked through the details, made the appropriate arrangements, and allowed him to deliver those loads early.”  

End result? By eliminating those two extra days, the carrier actually withdrew its rate increase request, saying it was no longer needed. “So, we know this approach produces positive results,” Newbourne stressed.

Something to think about as trucking capacity is poised to only get tighter in the years ahead.

About the Author

Sean Kilcarr 1 | Senior Editor

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