How to Build Consumer Loyalty

Consumer electronics manufacturers are grappling with a vexing issue: how to make consumers more loyal to their products and companies. New Accenture research explored this question and arrived at three recommendations: First, manufacturers need to focus more on developing new, cohesive business models called "superstacks"; second, they should create more sophisticated social media programs; and third, they need to develop more extensive and predictive analytics capabilities.

These recommendations are summarized and explained in a new Accenture report, Building Customer Loyalty for Consumer Electronics Manufacturers. The research polled more than 10,000 consumers from 27 countries, focusing on their changing expectations across 10 industries, including consumer electronics manufacturing. The research uncovered intriguing statistics about customer loyalty that provide the underpinnings upon which the three recommendations were made.

The research found that:

• Only one-fifth (20 percent) of consumers say they feel "loyal" to their current consumer electronics manufacturers suggesting that 80 percent feel no loyalty.

• Only 10 percent of consumer electronics customers say "it's too much of a hassle to switch manufacturers" further implying that 90 percent are quite willing to switch.

• The top two drivers for customers to switch manufacturers are "competitive pricing" cited by 43 percent and "value for the money" referenced by 35 percent.

• Nearly half (48 percent) of the consumers surveyed "consider shopping around for better deals."

With these dynamics in mind, manufacturers need to understand how customer loyalty has been built in the past and how this needs to change now.

Superstacks
Historically, manufacturers have strived to increase customer engagement and add perceived value through product innovation -- adding new or improved features to combat perceptions of product commoditization. Now, however, innovation in consumer electronics is being driven more by a new business model Accenture labels as a superstack. A superstack is a more extensive and comprehensive integration of operating systems, semiconductor chips, devices, applications, and end-user services than the industry has traditionally achieved.

Instead of traditional product innovation, such as adding a global positioning satellite feature to a smartphone, superstacks are more about innovation, holistically and thoroughly bolstering the overall experience using the product. The Apple iPhone has been a trailblazing example of a superstack engendering exceptional customer loyalty thanks to its widespread, tight, and smart integration of technologies, applications, and services. A wide array of consumer electronics manufacturers are positioned to benefit from using the superstack concept and model.

In fact, according to another recent Accenture survey exploring the superstack trend titled Competing in a High-Tech Industry Superstack, 83 percent of surveyed executives from the consumer electronics and other industries said their businesses have been or are being impacted by superstacks.

Unlike one-off feature enhancements, superstacks have the potential to win more customer loyalty and satisfaction and prompt customers to pay more, and be less concerned with prices of products, because they will pay for the better customer experience.

To improve customer loyalty during the next several years, superstack innovation will be crucial for these manufacturers. They need to sell more than a "box" device. Selling add-on services such as customer service and cloud computing, key elements of superstacks, enables direct customer contact. If they have a focused superstack strategic business model, manufacturers can deliver these services successfully.

Analytics
To further enhance their superstack business models, manufacturers need to evaluate which systems, chips, applications, and services will best combine with their devices, such as smartphones and tablet computers, to deliver more significant value to consumers and generate more customer contact. While smartphones are one early competitive arena, makers of other consumer electronics devices such as smart TVs will need to find ways to integrate applications, social media, and other innovative services with their devices. In all these segments, creating intelligent superstacks will require more use of analytics by manufacturers to identify consumers' specific requirements.

Specifically, using more predictive and consistent analytics methods and processes, these companies will look upstream to identify reasons why their existing customers remain customers and apply those insights to the broader customer base. Such approaches would minimize customer switching. These companies will also seek to analyze the price trade-offs different customers may be willing to make against all components of the offer, including product features, customer support services and ongoing communications efforts, to provide optimized pricing for each type of customer.

Social media
Manufacturers will also benefit from interacting more with customers via social media channels. For instance, some consumer electronics companies are using online crowdsourcing platforms to encourage consumers to make suggestions for new offerings. Others have created sophisticated online communities that enable customers to interact with the company and each other.

Other companies provide ways for consumers to test drive prototypes of new offerings and give performance feedback. These social media forums embody an important part of a successful superstack strategy because they create value for consumers and provide manufacturers with a valuable way to engage consumers in the innovation process. The forums also have the potential to serve as an important source of data for analytics.

All these forms of engagement are particularly critical because these companies operate in an indirect channel model like many of the consumer packaged goods companies. Unless they collaborate with retailers, they do not typically possess substantial consumer data. Direct consumer engagement through social media offers a chance to shrink the separation from consumers and help drive customer-driven innovation.