Drive Customer Loyalty and Retention Through Service

CSS leaders have worked hard to deliver cost-effective, efficient service that reduces customer effort — an approach proven to mitigate disloyalty and one that remains Job No. 1 for the service organization. But new Gartner research reveals a huge opportunity for CSS to do more to drive tangible business outcomes, specifically by leveraging service interactions in a way that boosts customer loyalty outcomes such as retention, growth and advocacy. 

CSS leaders have historically focused on protecting the bottom line through efficient, cost-effective customer service interactions, designed to resolve customer issues as effortlessly as possible. To the extent that CSS organizations impacted loyalty outcomes, they did so through reducing downside risk. 

Customers who experience value-enhanced service interactions are far more likely to stay — whether the barriers to switching are high or low

“The best service organizations capitalize on interactions that impact  loyalty through ‘value enhancement,’” says Lauren Villeneuve, Director, Advisory, Gartner. “They not only resolve customer issues; they make sure customers leave an interaction more confident in their purchase decision and better able to maximize the value of their product or service.”

Gartner identified the impact of value enhancement activities on customer loyalty by analyzing thousands of customer responses to service interactions. Some customers reported that they weren’t just less likely to show disloyalty toward the company; they were more likely to advocate, renew and spend more.

Pressure to do more to drive customer loyalty

CSS leaders report mounting pressure to deliver this kind of contribution to customer retention and loyalty goals. When asked, 69% said senior leaders view service’s role in driving retention as more important or a lot more important than three years ago. In response, many have relied on a familiar strategy: Improve the quality of the service experience in hopes it will lead to more loyal customers.

But while a good service experience may prevent customers from leaving, it isn’t enough to make them stay, because customers are ultimately loyal to the company’s product or service offering. The role of service in increasing loyalty is therefore twofold: Resolve customer issues in a low-effort manner and help customers derive greater value from the product or service.

The imperative to drive loyalty has only grown during the COVID-19 pandemic. Customer retention has become more urgent yet more complex as customers respond to the worsening economic climate by, for example, delaying purchases, shopping around more extensively for better prices and trading down from brand names to generics.

Value enhancement drives results

Gartner analysis of thousands of service interactions showed that customers who derive value from their service interactions are far more likely to stay customers — even if they are actively considering defection and regardless of whether the barriers to switching are high or low. 

The average probability that the customer would stay when presented with an opportunity to switch was 82% after a value-enhancing service interaction, compared to 61% after the common approach of providing low-effort problem resolution. 

Notably, key loyalty metrics other than retention also improve. There is a 97% chance of positive word of mouth and 86% likelihood of increased wallet share after value-enhancing service interactions.

Many interactions are ripe for value outcomes

The research suggests only about 15% of customer interactions currently produce value enhancement, but many more could. The opportunity largely depends on the reason for the initial contact, because the greatest chance to enhance the value the customer perceives is during inquiry calls. The lowest likelihood is during complaint calls.

Inquiries have increased as a percentage of all contacts in recent years, while the percentage taken up by complaints has declined, and these consultative exchanges offer service reps more chances to demonstrate value.

Depending on the mix of calls, value enhancement could now occur in 35–50% of conversations.

5 ways to drive value enhancement 

Demonstrating value to customers during service interactions can be done in many ways, but research shows these five to be particularly effective:

1. Validate customer purchase decisions. Reassure the customer that their purchase decision was a smart one.
2. Anticipate customer needs. Predict what features your customer may find valuable in the future based on their current needs.
3. Help customers achieve a goal. Outline the product features a customer should use based on their goal for partnering with you.
4. Educate customers on better uses. Rather than focusing on how customers have been using the product incorrectly, teach them how best to use it.
5. Advise customers on new uses. Introduce the customer to newly introduced or untapped product features.

Notably, these activities can take place in live and self-service channels. By operationalizing value enhancement, service leaders can double or triple the frequency with which value enhancement occurs. To do this, CSS leaders will need to predict the opportunities (identifying which customers are open to value enhancement, to what degree and when), matching customers to the best resources (e.g., specialized reps), and scaling delivery through automation.