Study reveals decline in IT customer loyalty

Study reveals decline in IT customer loyalty

WalkerInformation, a 65-year-old company that focuses on surveying customer brand loyalty, released its 2004 study of IT vendors this week, entitled, Customer Loyalty Management for Information Technology.

While the results reinforced the intuitive belief that loyal customers make for more successful companies, there was also an indication that the number of brand-loyal IT buyers is decreasing.

The survey included more than 13,000 products from 51 technology vendors in five sectors: computer software, IT services, networking equipment, servers and workstations, and storage systems.

There was a total of 4,877 IT respondents who were placed in four categories: Truly Loyal, Trapped, Accessible, and High Risk.

Truly Loyal customers are defined as those who want to and plan to maintain their vendor relationship and will recommend their products to others.

On the upside, companies with Truly Loyal customers as opposed to the also-rans had higher financial outcomes across a spectrum of indicators including average operating margin, three-year revenue growth, three-year operating income growth, and five-year stock price change.

Truly Loyal also had a 12 per cent profit margin, defined as aggregate operating profit margin over a three-year period, in contrast to the other vendors who had an aggregate negative 11 per cent profit margin during the same period.

However, what may prove more distressing to all of the companies in the survey was a decline in total number of loyal IT buyers.

Only 44 per cent of the respondents were designated Truly Loyal, down from 47 per cent when the survey was taken two years ago. Of the remaining 56 per cent, 30 per cent of the respondents were classified as Trapped.

"Likely to continue doing business with the company, but not pleased with the relationship" was how they were categorized, according to the survey summary.

An additional 3 per cent described themselves as Accessible. These are buyers who might not continue the relationship despite "being pleased".

High Risk customers, accounting for 23 per cent of respondents, were IT buyers that were unhappy with their current vendors with little intention of continuing the relationship.

The software sector witnessed the largest single decline in loyalty - 14 per cent - from 2002. Loyalty in the networking equipment area was down 8 per cent.

Only nine companies achieved the Truly Loyal designation across all five sectors: Cisco, Dell, EMC, HP, IBM, Microsoft, Network Appliance, Oracle, and SAP.

WalkerInformaton would not reveal the names of the companies in the bottom tier.

Overall, the survey indicates there was an increase in the number of satisfied customers. Eight out of 10 respondents listed themselves as satisfied with their supplier.

President and CEO of WalkerInformation, Steven Walker, said that although many customers said that they were satisfied with their current vendors, satisfactory was not a rating a vendor should be pleased with.

"Satisfied is not intense," he said. "It is wimpy."

The key factors in creating Truly Loyal customers, according to the survey, include product quality with the highest impact on attitude, followed by the purchasing process, tech support, and consulting services.

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