By Lea Pachta
74% of people have switched at least one product or service in the last two years.
Organisations are looking to strengthen relationship with key customers, which is fuelling demand for corporate concierge services.
Professor Merlin Stone of Oxford Brookes University estimates that over the past two years, organisations have lost up to 20 million good customers, which has cost them around £3.39 billion. The findings1, which form the basis of a new chapter in his report on the concierge market, also reveal that for 21% of these ‘switchers’, poor customer service was a major reason for their decision to leave, and 18% said it was because their new provider offered them enhanced features.
New research commissioned by WhiteConcierge, Europe’s leading B2B concierge and lifestyle management company, which sponsored Professor Stone’s report, reveals that over the past two years 74% of UK adults have switched a utility, telecom or financial product provider at least once. The concierge company estimates that this equates to 1.41 million people switching companies every month, or 32 every minute. Professor Stone estimates that between 40% and 60% of these are ‘good’ customers that the businesses would have wanted to keep.
The research revealed that the worst affected sectors for losing customers over the past two years is motor insurance, where 33% of people claim to have switched providers. This is followed by electricity (31% of people have switched providers) and home insurance (30%).
Commenting on the findings, Professor Stone said: “Organisations have to work harder than ever to keep their best customers. Consumers have become increasingly demanding and discerning, and with the rise of price comparison websites for example, it is now much easier to compare and switch products.
“The economic downturn has also prompted more of a shift towards customer retention strategies as companies look to keep the good customers they have, rather than acquire new ones, which is generally much more expensive to achieve. This is good news for the concierge industry because if it works well, it can leave a very positive impression on the customer.”
Jonathan Breeze, Managing Director of WhiteConcierge said: “Acquiring new customers can be a very costly process which is why in current market conditions many companies have shifted their focus to keeping the ones they already have. Price is undoubtedly one important factor for causing people to change providers but many companies cannot compete on this at the moment. As our research findings show, issues surrounding customer service experiences are also key and can be addressed more readily.
“Concierge is a particularly attractive option as part of an enhanced customer service offering; not only does it strengthen relationships but it can actually generate extra income as it can also be used as part of an acquisition and up-sell strategy. Over the last year, we have experienced 115% increase in enquiries from companies looking to introduce concierge services as a way to promote loyalty amongst their customers.”
Globally, the size of the concierge market is said to be worth around $1 billion (£700mn), but this could double within three years because there are so many factors fuelling growth. Professor Stone believes that the reasons for the growth in the concierge market include:
Rise of the mass affluent and high net worth market – The target for concierge services is typically mass affluent or high net worth individuals who are time poor and this market is expanding rapidly. In 2007, there were 531,000 demi-millionaires in the UK (those with investible assets of over £500,000), but this had increased by 7.49% to reach 571,000 a year later. By 2016, this could rise to 936,200.
Decline of free banking and new revenue streams – Companies, especially financial services organisations, need to protect and grow their revenue streams so a growing trend will be trying to persuade existing customers to pay for current products and services they currently receive for ‘free’, or charge more for those they do pay for. This will require expanding the product proposition, which is likely to include a concierge service.
Also, as UK banks face up to a difficult environment, they will increasingly be tempted to copy the European model and start charging for the majority of their current accounts.
Changing regulation – Increasing regulation could push companies towards concierge services. For example, new rules from the International Accounting Standards Board mean that the value airlines now have to place on their frequent flyer miles will be much higher and will cost them hundreds of millions of dollars.
This, on top of other problems facing the aviation industry, could result in some airlines selling all or part of their schemes off, or in order to just cut costs, restrict them to a more select group of customers or just make them less generous. To help counter the effect of this, more airlines will look to offer concierge services to their most valued clients.
A need for organisations to strengthen their relationship with their most important customers – It is estimated that a one percent increase in customer loyalty is equivalent to a 10% cost reduction. As the economy becomes tighter and pressures on margins focuses attention on reducing costs, the retention of the most attractive customers becomes even more important.
This will see companies increasingly only offer their best products and services to their key customers.
Customers are becoming more demanding and more global – Customers are becoming more demanding and if companies do not address this, they run the risk of losing them. A comprehensive concierge service can play a key role in addressing this issue.
Demand for concierge services – There are currently an estimated 27 million people across the UK, Germany and France who would use a concierge service if they were offered it — this is around five times the number currently using it. This illustrates that there is demand for this type of service, and as more organisations offer this, the number using it will increase.
Professor Stone’s report looks at how people came to be a member of a lifestyle concierge scheme. The findings reveal that 39% of people source it themselves, 22% were offered it through their work and 17% through banks. The most popular use for a concierge service is sourcing and booking restaurants (46%), followed by sourcing and booking a holiday (32%) and to identify and help with business travel (27%).
However, Professor Stone warns that if the concierge market is to realise its full potential, it needs to address a number of issues. It needs to ensure that the level of service it provides is high and that it can deliver a global proposition because clients will increasingly want this. Concierge companies also need to ensure that they invest heavily in their systems to ensure that they are reliable, comprehensive and above all secure.