October 2013

 How Trust influences Churn and Customer Loyalty

Posted @ 0900:00 on 5 November 2013

Infographic : Loyalty marketing. How consumer trust influences churn and customer loyalty .Illustration using UK Energy sector case studyWhat can the Retail Energy market, the market for gas and electricity supply for domestic consumers tell us about customer loyalty?


Perhaps at first glance not very much at all. Most of the energy suppliers are in the headlines for all the wrong reasons

The Infographic shows some directional online research. In summary

• Despite high media coverage few have ever switched supplier

• Fewer still are planing to in the next 12 months

• Yet only a minority agree switching is too much hassle

• Almost half do not trust the energy suppliers in general

• Only around 10% say they are loyal to their current supplier

• New entrants have significantly better customer satisfaction scores according to Which though still low market shares


The findings illustrate some  key themes in loyalty marketing applicable to all sectors, including more competitive sectors. Some businesses don't realise they have a  "loyalty problem"


Choosing the right loyalty metrics is key . One simple measure like customer churn or defection rates is usually not enough.  In the energy market for example we see relatively low churn rates , relatively low intentions to switch accompanied by customer dissatisfaction and low levels of customer loyalty


Loyalty is something the customer feels towards a brand and is not always correlated with transactional behaviour such as the level of repeat purchase .  The majority of households have never switched supplier ie they continue to repurchase however only a small minority say they are loyal to their current supplier


 • Inertia clouds the picture and may give a false reading of loyalty. Inertia creates a barrier to consumers switching brands especially where the perceived benefits are not matched by the costs of switching


Trust is a key component of Loyalty. Where there is relatively high level  of distrust of a sector in general the consumer is less likely to switch as all suppliers are tarred with the same brush. This issue in particular can increase inertia and damage new entrants chance of success even if they make significant efforts to improve customer experience and offer differentiated services.



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Infographic : Customer Loyalty and Churn






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