“It’s only when the tide goes out that you learn who’s been swimming naked.”
This oft-quoted remark from legendary investor Warren Buffett has taken on renewed significance in light of the current worldwide economic turmoil. His observation can be applied to many things — customer relationships among them.
The true strength of a business’ relationship with its customers can easily be masked by strong economic times. When consumer confidence is up, personal income is rising, and individual net worth is growing — people are less apt to question and rethink who they do business with (provided they are not dissatisfied with the product or service).
But when times get tough and people monitor their spending more carefully, their allegiance to particular companies and brands really gets tested. They are more open-minded to switching products or providers. They become more price-sensitive. They scan the store shelves for more economical alternatives. They look more closely at their bills and seek out quotes to get a better deal.
And, with increasing frequency, they jump ship. In their 2008 Global Customer Satisfaction Report, Accenture found the highest incidence of consumer switching in the four years that they’ve conducted the survey.
The companies that weather these types of storms well (and haven’t been swimming naked) are those that have established rational and emotional connections with their customers, resulting in intense loyalty that repels the “itch to switch.”
A rational connection develops when the business delivers a product or service that actually works as promised, leaving customers satisfied and feeling as though they got a good overall value for the price. Sounds straightforward? It is, but many companies fail to nail these basics, undermining their customer loyalty.
With a solid rational connection in place, the emotional bond is icing on the cake. It comes about when a business crisply defines a sense of purpose — a bona fide crusade — that strongly resonates with its target consumers. Whole Foods has done this with their support of the organic and locally-grown food movement. ING Direct has done it with their campaign to help people save more money more easily.
By promoting a mission that people can really believe in — and delivering not just the basics, but pleasant surprises along the way — companies can create bonds with customers that transcend purely rational considerations (like price). That creates an awfully powerful dynamic that not only delivers competitive advantage, but also helps shield a business from the worst impacts of economic downturns.
It’s always a red flag if customers (particularly your best, most profitable ones) defect and start doing business elsewhere. But if more and more cracks are appearing in your customer relationships right now, in the midst of a recession, it might mean that the fundamental value of your offerings wasn’t nearly as robust as you had thought, and the bond with your customers wasn’t nearly as strong as you had hoped.
Which is just a polite way of saying… time to get a new swimsuit.