Customer loyalty in Information Technology industry declines
"Loyalty Leaders" score big wins over competitors in national study
INDIANAPOLIS — Customer loyalty to firms in the software and hardware sectors has decreased markedly in the past three years, according to findings of a national study on customer loyalty in information technology. The 2011 Walker Loyalty Report for Information Technologyindicates loyalty to IT firms has fallen from 54 percent in 2008 – the last time this survey was conducted – to just 43 percent this year. Based on nearly 2,000 brand-level evaluations completed by IT professionals and decision makers, loyalty is also declining among customers to channel partners. In this category, just 45 percent of customers were Truly Loyal to channel partners, compared to 54 percent in 2008.
"One bright spot industry-wide is more than 25 percent of survey respondents indicated a likelihood to increase their budgets and spending on IT in the future – perhaps signaling improving economic conditions," said Sonya McAllister, principal and senior vice president, Walker Information. "This is the first Loyalty Report for IT we've conducted during a recession period, which could be a contributing factor to the lower loyalty scores we're seeing as part of this study."
The fifth in the series, The 2011 Walker Loyalty Report for Information Technology identifies customers' attitudes, experiences and perceptions of software and hardware firms and channel partners. The North American study focused on 21 key companies in 2011.
Loyalty makes a difference – for the companies who have it
Those IT firms designated as Loyalty Leaders – based on earning higher percentages of customers who are Truly Loyal and lower percentages of customers who are High Risk – show distinct advantages over companies that lag behind in loyalty. Following are some of the most significant findings from the study:
- Loyalty Leaders outperform Loyalty Laggards by 18 percentage points on the likelihood that customers will continue doing business with the firm.
- Three-year average revenue growth is markedly higher for Leaders than for Laggards (nearly 20 percent for Leaders and negative 1 percent for Laggards).
- Leaders dramatically outpace Laggards in operating margins. On a three-year average, Leaders' operating margins were nearly 25 percent, while the Laggards were less than 5 percent.
"The study points to a series of financial linkages between loyalty and profitability that are inherent for firms that have more loyal customers," said Mark Ratekin, senior vice president of consulting services, Walker Information. "Loyalty is a good leading indicator of whether customers will continue to do business with you, and we've seen it play out again and again that Loyalty Leaders, by virtue of having an established, stable customer base, are often insulated from big financial shifts – especially in a weakened economy."