Why simply the best isn’t always right

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Why simply the best isn’t always right
Finding Faster Growth
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Good performance alone cannot crack
the complex code that governs the
strength of your customer relationships
and the sustainability of your business. As
competition intensifies, it is essential to get
smarter about the experiences that matter,
and deliver return on the bottom line.

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The landscape of customer relationships is
undergoing a fundamental shift. Today’s consumers
have more information than ever at their disposal,
and more choice when it comes to acting on
it. Customers are increasingly challenging and
expensive to retain, and even more expensive
and difficult to replace. And the disappearance of
predictable customer loyalty is therefore putting
profit margins under pressure across markets
and categories.
An in-depth TNS survey of over 40,000 customers
across 20 countries shows relationships being
eroded even in traditionally ‘sticky’ sectors. Half of
US consumers now replace their car with a different
brand; 70% of Russians opt for a different company
when replacing their TV; 12% of Germans have
cancelled an insurance policy in the last year; 9%
of Spaniards have chosen a different fixed-line
telephony provider.
“Our customers are increasingly moving at pace in terms of their
expectations of what a multi-channel operation looks like. They expect
to be able to go into a store, have a conversation with you there and to
carry on at home online or through an app. We need to manage all of that
complexity and deliver a seamless customer experience across all of our
touchpoints.”
Spencer McHugh, Brand Director, EE

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Faced with such threats, an instinctive response
is to do whatever is necessary to keep customers
continually happy. Yet the same pressures that have
swept away the assumption of customer loyalty
make this an unsustainable strategy. Budgets are
limited, and crowded markets make it impossible to
be the best in all areas of the customer experience.
Before it can invest in strengthening customer
relationships, a business needs to know precisely
which experiences will have the greatest impact on
future behaviour.
“I think that demands are
going up. The expectations are
getting higher. And… the level
of competitiveness is getting
higher. This is how companies are
differentiating now, in terms of the
value they provide a customer and
being more engaging pre-sale and
post-sale.”
Asim Zaheer,
SVP Worldwide Marketing,
Hitachi Data Systems

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Mind the gap!
If you want to succeed as a business, you have to
identify what really matters to customers. If you
perform badly in these areas, people will stop
choosing you. But good performance is only the
entry price that earns you the right to build strong
and valuable customer relationships; it is never
enough in itself.
The most successful businesses are able to translate
what’s best about their performance into an
active preference on the part of their customers.
This ensures that they get regularly and repeatedly
rewarded for the performance that they deliver.
TNS’s TRI*M Index, which provides a powerful
measure of the strength of customer relationships,
shows a significant difference in fortunes between
the companies that are able to achieve this, and
those that can’t.
Let’s take the real-life example of a challenger
brand in the mobile operator marketplace. This
challenger has a proposition that has proven
very popular amongst its small but growing
customer base. Its customers are happy with
what it does for them, and this results in a strong
performance score. The mobile operator also has
a strong preference score, but the gap between
its performance and preference is a large one, the
biggest in its market.
What does this mean for the future of the
challenger brand? At the moment, it achieves
the same level of preference as the current
market leader, which is good. But it has to invest
vastly more in performance in order to gain that
preference, which could well prove unsustainable.
Like many businesses, the challenger’s long-term
future depends on maintaining strong performance
whilst translating that performance into active
customer preference more efficiently. The most
successful businesses in any category and market
always have the lowest gaps between performance
and preference. They have been able to close the
gap because they understand what really matters
to customers.
Source: TNS customer insight surveys 2013/2014 - a Western
European service provider market
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ChallengerMarket leader
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Performance
Preference
Translating good performance into active
preference

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Making memories
Today’s customers have many experiences of a
company across many different touchpoints,
but only a few of these moving parts become
sustainable memories that will motivate and
influence them in the future. Successful businesses
can identify these experiences and identify what
it takes to improve them. They no longer have
to perform excellently across every touchpoint;
they know they just have to beat the competition
in the ones that really influence their customers’
behaviour.
Shopping at IKEA can be a frustrating experience:
treks to large, out-of-town stores, an exhausting
experience pushing difficult-to-steer trolleys around
a labyrinthine layout. Yet customers love IKEA.
Although it doesn’t deliver an excellent customer
experience in every regard, it delivers exactly the
experience that customers expect, consistently,
and it focuses on the experiences that most readily
translate into positive memories. The hotdogs
and ice cream delivered at the end of the IKEA
experience exert more influence over customer
memories than even a clear instruction manual could.
IKEA delivers exactly the experience that customers expect,
consistently, and it focuses on the experiences that most readily
translate into positive memories.

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Customers in context
Memories exert a big influence over future
behaviour, but they are not created in a vacuum
and they don’t exert their influence in a vacuum
either. Behavioural economics teaches us that
human beings are contextual creatures, and
customers are no exception. When it comes to
translating performance into preference a huge role
is played by the competitive context in which that
performance takes place, and the individual context
that shapes how customers respond to it.
You are not alone
One of the main reasons why strong performance
doesn’t always translate into strong preference
is that there are other companies that customers
believe to be just as good, or even better. And
this means that apparently strong customer
relationships can look very different when viewed in
the full competitive context.
“The level of loyalty is not as strong as it used to be several years ago.
There is more price sensitivity out there and willingness to move. Restricted
budgets and challenging economies increase customers’ willingness to take
good enough at a reasonable price. This also allows new competitors to
approach our accounts.”
Asim Zaheer, SVP Worldwide Marketing, Hitachi Data Systems
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In TNS’s global study of customer relationships,
one example we looked at is a BRIC market bank
that appeared to enjoy extremely strong customer
loyalty. Of this bank’s customers, 40% had a strong
relationship with it. Closer analysis though, revealed
that many of these relationships were not exclusive.
The bank’s customers have relationships with other
providers too – and many of these relationships are
just as strong. In fact, 70% of the bank’s customers
are considering using other banks in the future and
more than a quarter of its total business could be
classified as ‘at risk’. As this example shows, any
view of customer relationships that excludes the
external context risks being dangerously misleading.
70% of the
bank’s customers
are considering
using other banks
in the future.

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Individuals not averages
Just as misleading is any view of customer
relationships that excludes the impact of changing
circumstances. This individual context can have
a huge influence over customer loyalty and the
propensity to remain with a business or leave
it. Retail banking in general has low levels of
customer churn, with 70% of customers saying
that switching provider would be very inconvenient.
However, when customers move house, their
likelihood of switching banks almost doubles.
Energy providers, mobile networks and banks all
come under substantially greater threat when an
individual has children or when their economic
situation changes.
It doesn’t always take dramatic life changes to shift
the nature of customer relationships. TNS data also
reveals that customer preference consistently fades
over time, despite perceptions of performance
remaining steady. When it comes to delivering
the memories that make a difference, businesses
must pay particular attention to customers at these
vulnerable stages of the life-cycle.
When customers move
house their likelihood of
switching banks almost
doubles.
Three
months
Six
months
Twelve
months
Eighteen
months
Constant performance
but fading preference
Customer preference consistently fades over time
Source: TNS customer insight surveys 2013/2014 – retail bank in
a BRIC market

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Lots of dots to join
Understanding customers and their individual and
competitive contexts means integrating insights
from an ever-expanding range of sources. CRM
data, operational metrics and social media listening
are all essential ingredients for cracking the
Customer Code, and identifying the experiences
that can deliver most impact and the best business
outcomes.
This matters because, as such individual-level
analysis often proves, the best is not always
right for a company when it comes to customer
experiences. Over-investing in experiences where
you are already good enough can often draw
resources from those better suited to building
sustainable, motivating customer memories.
Similarly, businesses are often guilty of racing
for the cutting edge, without asking if new
technologies or services really offer a competitive
benefit that will drive preference.
Let’s return to the example of mobile operators
and the question of which of two technologies
might be most worth investing in. In this as in other
sectors, we have to bear in mind that investment
decisions can have both positive and negative
impacts on customer experience. Cloud technology
may enhance some customer relationships, but
investing in maintaining a reliable mobile network
is essential for preventing many relationships from
collapsing. Both have a value – and the challenge
for customer experience research must always be
to specify precisely what that value is. Businesses
need to know which investment will simply drive
performance, and which will deliver the greatest
net gain in active customer preference.
“Like most organisations we have
a combination of market data
and of operational data and the
challenge is bringing different
views together in a way that can
be actioned. Our big priority is to
get actionable insights for front
line teams in customer service and
sales.”
Julie Woods-Moss,
Chief Marketing Officer,
Tata Communications

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The optimal return on customer relationships
In today’s competitive markets, securing customer
relationships requires significant investment.
Businesses should always demand to know exactly
what type of return that investment will deliver,
whether in terms of sales, customer advocacy or
both. And in each case, they need to identify the
‘sweet spot’ where their investment in customer
experience is delivering those returns as efficiently
as possible.
Customer advocacy is a powerful asset that is often
touted as the justification for investment, but it
cannot be assumed that advocacy follows naturally
from improved performance or better experiences.
Indeed, TNS’s TRI*M Index shows that there is a
non-linear relationship between the two and a clear
tipping point that needs to be reached after which
advocates are activated to speak positively about a
company. Companies planning to move the needle
on NPS scores and use advocacy to drive acquisition
need to start by identifying where this point is, and
what level of customer relationships are required to
get there.
When focusing on sales, businesses must identify
the point at which any further investment in
customer experience will deliver only diminishing
returns. There is a point after which strengthening
customer relationships further can deliver only
limited additional benefits to the bottom line, since
loyal customers are already giving a high share of
spend to the business. When we integrate TRI*M
data with customer behaviour data (spend, share
of wallet, churn) we can identify clearly where this
sweet spot lies.
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Strength of
relationship
+ 10 points
Sales:
+10%
Strength of
relationship
+ 10 points
Sales:
+1.5%
Optimal
balance
Strength of relationship
Sales(US$)
There is a point after which strengthening customer relationships further can
deliver only limited additional benefits to the bottom line.
The optimal return on customer relationships

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“Today’s customers are bypassing
existing business models in favor
of their unique experience and
requirements, especially with
instant access to peer reviews,
competitor offerings, and pricing.
Passivity in customer engagement
is dead. If you are not actively
engaging your customers by
understanding their needs and
providing the tools they need
when they need them, you are
losing.”
Jonathan Becher,
Chief Marketing Officer, SAP
Cracking your Customer Code
Understanding the hierarchy of importance for
customer needs, and questioning the level of
investment in different experiences is the essential
starting point for cracking the Customer Code.
Businesses cannot develop relationships that work
efficiently for them if they adopt the approach of
seeking to be the best at everything. Throwing
resources equally at all customer experiences draws
attention from the touchpoints that matter most,
drains future competitiveness and undermines
long-term sustainability. The companies that make
a genuine asset of their customer relationships are
those that understand which experiences matter
most to their specific customers – and which
therefore matter most to their business.
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About the authors
Stefan Schmelcher is Global Head of Customer
Experience at TNS, responsible for developing
the customer experience offer and expertise
globally. With his long time focus on integrated
customer management programmes, including
relationship assessment, experience optimisation
and real-time customer feedback, he leads TNS’s
worldwide network of customer experience
experts.
Stefan held various managerial positions in
research firms in Europe and North America
and has gained broad commercial experience
by consulting with many of the world’s leading
companies in B2B and B2C markets.
Susanne O’Gorman, Senior Global Director,
Customer Experience, is responsible for building
customer experience expertise, best practice and
knowledge and portfolio management at TNS.
With over 15 years of experience in customer
experience research, she joined TNS in 1998 as
Account Director for a large multinational client,
then the customer experience team in 2004
focusing on customer experience management
and employee research.
Susanne has a PhD in Sociology from
Regensburg University and a postgraduate
scholarship at the London School of Economics.
Charlotte Nau joined TNS as a Consultant in
the customer experience team in 2012. She
specialises in strategic and tactical customer
experience research as well as social media.
Charlotte is involved in the development of TNS’s
flagship solution TRI*M and provides worldwide
consultancy in designing and implementing
projects in this area.
She holds graduate degrees in Media and
Communication Studies from Johannes
Gutenberg University Mainz, Germany, and the
University of Memphis, USA.

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About TNS customer insight surveys
TNS customer insight surveys 2013/2014 explored
the views of over 40,000 customers across 20
countries in a range of categories. The studies
provide in-depth and actionable insights into
customer behaviour and used TNS’s TRI*M
methodology to investigate switching behaviour
and attitudes, relationship strength, the proportions
of at risk customers in each sector, the factors
influencing retention/switching, and more.
As part of the programme, TNS also explored
the views of CMO’s of global organisations
via a series of qualitative interviews to capture
their perspectives on customer experience
management today.

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About Intelligence Applied
Intelligence Applied is the home of the latest thinking from TNS, where we discuss the issues impacting
our clients, explore what makes people tick and spotlight how these insights can create opportunities for
business growth.
About TNS
TNS advises clients on specific growth strategies around new market entry, innovation, brand switching and
customer and employee relationships, based on long-established expertise and market-leading solutions.
With a presence in over 80 countries, TNS has more conversations with the world’s consumers than anyone
else and understands individual human behaviours and attitudes across every cultural, economic and political
region of the world.
TNS is part of Kantar, the data investment management division of WPP and one of the world’s largest
insight, information and consultancy groups.
Please visit www.tnsglobal.com for more information.
Get in touch
If you would like to talk to us about anything you have read in this report, please get in touch via
enquiries@tnsglobal.com or via Twitter @tns_global
For more information visit
You may be interested in...
www.tnsglobal.com/customer-code >
Behavioural economics the complete picture >
Making memories >

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