every company knows that it costs far less to hold on to a customer than to acquire a new one. that’s why customer retention has become the holy grail in industries from airlines to wireless. yet defecting customers are far less of a problem than customers who change their buying patterns. today’s typical metrics of customer satisfaction and defection don’t tell a company how susceptible its customers are to changing their spending patterns. that’s at least what market research conducted by McKinsey has discovered.
“A better appreciation of the underlying forces that influence the loyalty of customers—particularly their attitudes and changing needs—can help companies develop targeted efforts to correct any downward migration in their spending habits long before it leads them to defect. Such an appreciation also helps companies improve their current efforts to encourage other customers to spend more. Our (McKinsey’s) recent two-year study of the attitudes of 1,200 households about companies in 16 industries as diverse as airlines, banking, and consumer products shows that this opportunity is surprisingly large. Improving the management of migration as a whole by focusing not only on defections but also on smaller changes in customer spending can have as much as ten times more value than preventing defections alone.” (> The Mckinsey Quarterly)
I find this research very promising not only for the area of product design but also for the design of services. it supports the idea that design is rather an outcome of co-operation among different disciplines (design, engineering, marketing, branding, communication, PR, etc.) than just an actual given fact. consequently design managers are well advised to integrate these findings in their evaluations of market scenarios.
finally these findings support the theses of michael schrage in his recent article about the threat imposed by chinese manufacturers not only by manufacturing and copying western products, but also by making them appeal and work better than the originals. accordingly consumers’ shift to such “improved products made in asia” (let it be automobiles or just MP3 players) might be an indication of asia’s better understanding of the value of the “management of migration”.
