KEY POINTS:
A survey confirms New Zealand consumers are quick to give their phone or power company the flick if the service is lousy or the opposition can offer a better deal.
BMC Software commissioned a poll of more than 4000 people across the Asia Pacific region, including more than
600 in New Zealand, to find out how often and why consumers "churn" or switch from one service provider to another.
BMC concluded that switching suppliers is a national habit for New Zealanders. The survey found more than half of us - 54 per cent - dumped at least one service provider for another during the past year.
Businesses experiencing the highest churn rates over the past year were phone companies, insurance companies, and broadband suppliers.
Phone companies, which have usually been fourth on the list of churn ignominy, over the past year replaced banks on the top slot.
This no doubt has much to do with the recent telco sector regulatory shakeup. A key aim of Government reforms has been to encourage a bit of churn by opening up the market so disgruntled Telecom customers have an alternative.
No matter what the industry, churn costs businesses dearly. BMC estimates the switching merry go round is costing New Zealand companies in the sectors it surveyed $320 million a year.
BMC says the annual cost rises to a "conservative" estimate of $480 million if the impact of negative word of mouth is added.
So what prompts us to switch service providers? The survey found the most common motivation was finding a cheaper price elsewhere. But other major reasons cited by survey respondents included a belief the supplier they ditched responded inadequately to solving a problem with the service, there was some type of problem (a mistake, error, or failure) with the service, or there was no reward for renewing their contract.
On the flip side, when asked what suppliers had to do to retain their "loyalty", the most common response from customers was they needed to keep prices low.
Other requests from survey respondents to service providers were:
* Make call centre staff aware of their service history, so they don't have to explain an issue multiple times.
* Be proactive in informing customers about a problem with the service and how to fix it.
* Resolve service problems quickly.
* Reward customers for renewing their contract.
* Keep call centres in New Zealand.
The survey's findings related to customer demand for quality service gives BMC a chance to jump in with its sales pitch. One of the company's specialties is integrating corporate clients' various IT systems to improve information flow - including out to call centre staff dealing with customers who get grumpy if their service history doesn't appear on the screen when they call up.
Paul Arthur, BMC's channel director for Asia Pacific, says for technology-dependant industries such as telecommunications and banking, getting their IT right can improve service quality and thereby cut churn.
"Our strategy is very much along the lines of: it's cheaper, it's more cost-effective and more profitable to offer a better quality of service and therefore retain your customers than it is to go out and advertise and go to market to recruit new ones," Arthur says.
Telecom chief executive Paul Reynolds emphasised the need to improve service quality when he addressed analysts on the firm's growth strategy last week.
Two methods Reynolds outlined for cutting operational spending were enabling more customer transactions to be done online and shifting more call centre operations overseas. Interestingly, the BMC survey found customers liked companies that provided online "self-service" facilities, but they were opposed to call centres heading overseas.
BMC's Australasian managing director, New Zealander Mike Davies, says as consumers became more comfortable interacting over the internet, service providers are increasingly combining more sophisticated online self-service facilities with off-shore call centres. The theory is that most of the time customers will be able to resolve issues online, and will only need to pick up the phone on rare occasions when problems get complex.
"They [service providers] just need to be careful that when they do off-shore, that those people [working in the call centre] have access to the data to give the level of customer experience that a sophisticated user with a complex problem is going to expect," Davies said.