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Customer behaviour in Ireland has radically changed in the last two years, and both retaining old and attracting new customers has become trickier than ever, writes Louise Hodgson.

The consumer that has emerged as a result of the economic situation is one that is much more astute when it comes to cost. So states Rebecca Gilmore, senior manager of CRM practice with Accenture. And she is correct: 2010 has brought with it a new, more informed and far more demanding consumer, meaning no business has a guaranteed loyal customer base anymore.

Gilmore continues: "Accenture's Global Customer Satisfaction Survey's research indicates that consumers are more demanding now than ever and many companies were not keeping pace in 2009, resulting in the highest level of switching due to poor customer experiences ever detected in any previous annual survey."

It should not be assumed that no one is shopping any more. Yes, many households are now operating on smaller wage packages and the spending splurge is certainly over, but the market has not been eradicated; it has simply changed. As Leanne Papaioannou, managing director of Chilli Pepper Marketing says: "Customers won't stop buying - they just buy differently."

"Many post-recession customers are now focusing on what makes them happy," Papaioannou continues. "It's not just about stretching their money, it's about recognition and service. Customers that may have been ‘shopping around' are now starting to settle into their new ways of life, and are reconsidering their values and what is really important to them."

There is an opportunity, therefore, for businesses to regain customers, but they can only do so if they know what they are dealing with. Irish consumers are no longer passive - they will not stay loyal to a product, brand or company that doesn't appreciate them, be it through price or service or both. Businesses now need to understand these new customers, but also thoroughly research the market in general.

"Switching was and is continuing to be the mantra for both B2C and B2B buyers," says Stephen Hegarty of SouthWestern. "Many businesses are forced to have a good hard look at their own cost base. Knowing your competitor's price is a good focus point and needs to be taken seriously to win new business."

The big switch

There was a time in the Irish psyche when switching insurance provider, bank or even grocery store was considered unnecessary. The last few months, however, have taught us a valuable lesson: that better price and services are worth looking for. For businesses, this presents both a challenge and an opportunity.

"Many of the 5,600 consumers surveyed [in the Accenture Global Consumer Satisfaction Survey] stated that they are open to ‘better deals' and few are discouraged by the inconvenience of switching providers. The switching trend looks to continue, further eroding customer loyalty and increasing pressure on organisations desperate to find a competitive advantage," says Gilmore.

"The trend of ‘shopping around' last year has created a more promiscuous customer in the grocery retail sector," says Etain Seymour, commercial director of dunnhumby Ireland. "More volume now goes through on deal. We are now starting to experience early signals of customers buying a little more. However, this time the change is slow as customers remain consciously cautious."

The question is, however, how can companies, which themselves have tighter budgets to contend with, attract and cater for this new kind of customer?

Papaioannou believes the key lies in retaining what customer base a company already has: "It is always interesting when you look at this from an overall business perspective: with marketing budgets shrinking, sales targets getting higher and the probability of selling to a new customer being between 5-20%, acquisition can become a very difficult and expensive process. It is only when you stop and analyse the potential in your existing customers that you realise the importance of really looking after them, especially the high-value customers.

"Many Irish businesses have realised this and therefore shifted their marketing spend from a focus on acquisition and some dabbling in customer retention, to a balanced combination of acquisition and retention strategies. They have started to look at retention marketing as a key part of their business strategy; this includes actively trying to understand their customers."

"Businesses that have been the most responsive to change and those that have remained relevant have been most successful at retaining customers," says Seymour. "Developing customer understanding is only the first step; turning this knowledge into action and being relevant (by basing your marketing activity on purchase behaviours over time) delivers success."

The thirst for knowledge

"Some of the big mistakes businesses make in their attempts to retain old customers is that they remain static; just producing the same service or product as always. Also they deliver a service that they think will match what the customer needs, but don't know. Listening to the customer is paramount, evolving through innovation to help bring value add. Just delivering the same old service or product doesn't cut it anymore," says Hegarty, who clearly places great emphasis on the customers' wants and needs.

Gilmore too emphasises the need to know your customer: "Understanding the changes in consumer behaviours such as attitudes to what constitutes value, price tipping points and the triggers for switching is key to developing an effective customer strategy."

"The importance of understanding changes in customer behaviour extend to every part of the retail experience, including the way in which we communicate with customers," says Seymour. "The digital revolution has radically multiplied the number of ways in which we can speak to clients, throwing Irish companies into a global communication space. Companies must pay attention to these trends; understand them, respond and now be more relevant than ever before."

It appears that the companies that will be successful in the future are those that take every opportunity to get to know their customers and then, importantly, use that knowledge wisely in their business.

"High performing organisations utilise customer data and maximise every customer touch point to achieve this," explains Gilmore. "As price differentiation gets less and less in the battle for customers, keeping the focus on delivering consistent service and a valued customer experience becomes more and more important."

For an example of how knowing the customer can actively add to a company's bottom line, Gilmore refers to an Accenture client in the mobile industry: "The client was experiencing significant retention issues, and efforts to retain customers at the end of their contract term were having a limited success. By analysing usage patterns and behaviours during the contract term, the client was able to successfully target specific customers identified to be at risk, and achieved a 59% reduction in churn."

"Businesses need to find out what their most valuable customers want, how they think and how their behaviours have changed," agrees Papaioannou. "They should also seek confirmation of whether the motivations behind customer behaviour changes are long-term changes or short-term diversions."

Is it all about price?

Perhaps another misconception when it comes to customers today is that price is the most important factor in a business's offering. The fact of the matter is that prices have been slashed recently, and if a company truly believes it will only win by offering the cheapest product or service, it won't last long.

"Accenture's research indicates, not surprisingly, that price became the most important factor for consumers in choosing a new provider in 2009.  However, in deciding to leave a company, customers who switched were most likely to leave due to poor quality of service (62% quoted service compared to 48% quoting price)," says Gilmore, pointing to the facts and figures.

"Despite the marked influence of pricing, few consumers surveyed indicated they were willing to make trade-offs in product quality, functionality or customer service to receive a better price," she continues. "Moreover, respondents identified other attributes - including trust, product options, variety and quality, convenience and customer service - as key factors in retaining their business, in addition to price and value."

"The smart companies are doing business when they can reduce the price without impacting quality. The focus needs to be on innovative processes and systems that remove cost," adds Hegarty from SouthWestern.  

A question of loyalty

What has essentially happened in that last two years is that customers' loyalty to a certain product or brand has come loose. According to Gilmore of Accenture, "loyalty is more than just an emotional connection to a reputable brand. 

"An insurance company, for example, may attract new customers with an aspirational brand message, but the real ‘moments of truth' will occur on the occasions when the customer interacts with the company to make a claim or to renew their policies. This is the real telling moment. Companies are increasingly realising that getting it right on these ‘contact' occasions is what really matters, and are adapting the services provided according to the specific needs of different groups of customers."

If what really matters, therefore, is the customer experience, how can businesses ensure that the experience they are providing is the right one?

Keep your customers to the fore at all times, answers Etain Seymour of dunnhumby Ireland: "Customers must be at the heart of business decisions in every part of your operations so that your company delivers the right product at the right price, marketed through the right channel of communication for your customer."

"Excellent customer service is a key element in gaining customer loyalty," explains Liz McGonigal, managing director of Pivotal. "If a client has a problem, the company should do whatever it takes to make things right. If a product is faulty, it should be replaced or the customer's money should be refunded. This should be standard procedure for any reputable business, but those who wish to develop customer loyalty on a large-scale basis may also go above and beyond the standard.

"Customer loyalty can be achieved in some cases by offering a quality product with a firm guarantee. Customer loyalty is also achieved through free offers, coupons, and other rewards and incentive programmes. The ultimate goal is happy customers who will return to purchase and persuade others to use that company's products or services.  Once achieved, it equates to profitability, as well as happy shareholders," McGonigal concludes. 

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