In 2015, Synchrony Financial, a commercial financing firm, authored an article that claimed: “Your value proposition is key to customer loyalty.” This seems like sound business logic: the more value a service provides for your business, the more likely you are to be loyal to that service provider. Right?
Businesses’ behavior toward their answering services providers seriously combats this claim. By analyzing findings from our 2016 Answering Services Survey, it is apparent that while a service's value proposition may be key to customer loyalty, it is most definitely not elemental or deciding when it comes to answering services.
What We Found: A Lack of Loyalty
We surveyed 301 US companies and found that despite expressing overwhelming satisfaction with their answering services, businesses are more likely than not to replace their answering services provider within the next six months.
Specifically, businesses reported satisfaction with their answering services on multiple fronts:
- 94% of businesses report positive customer interactions with their answering services
- Businesses claim to experience “no issues” (38%) with their answering service more often than any one specific issue or challenge
- 75% of companies experience either ‘excellent’ or ‘above average’ value from their answering services.
We assessed businesses’ proclivity to replace their answering services based on their size, volume of calls handled by their provider, how innovative they find their provider, and the level of industry knowledge their providers possess. We found that all of these possible influencers have a negligible effect on the likelihood that businesses will abandon, rather than remain with, their current provider.
By consulting industry insiders and analyzing data from our survey, we found five main reasons why businesses lack loyalty to their answering service providers:
- Service Mistakes
- Customer Service
- Monthly Nature of Answering Services
- Lack of Distinction Among Top Providers
Reasons Why Businesses Change Service Providers
According to Dan L’Heureux, Executive Director of the Southern Telemessaging Association, cost is the first and foremost reason why businesses are willing to abandon their answering services.
“People change answering services for primarily two reasons. First is cost - they think they’re not getting the value. They’re going to try and find somebody that can do it for less”-Dan L’Heureux, Executive Director, Southern Telemessaging Association
L’Heureux’s evaluation on this front is correct, for the most part.
Only companies that spend less than $50 per month on their answering services are likely to remain with their service over the next six months, a contingency that makes up less than 10% of the overall companies surveyed. This is likely due to the fact that since that level monthly spend is so small, the logistical burden of switching services is probably not worth pursuing. For all monthly price ranges above $50, businesses are significantly more likely to abandon their provider.
2. Service Mistakes
Service mistakes were also identified by Andrew Tillery, Marketing Director of Sound Telecom, as a contributing factor for the high level of movement between providers in the answering services industry.
“To see such a significant portion of answering service customers experiencing issues with call quality and technical problems would explain why there is a significant number of people likely to make a provider change,” said Tillery.
The more frequently businesses experience issues with their answering service, the more likely they are to change service providers. In turn, businesses that report 'no issues' with their answering service provider are actually more likely to remain with, rather than abandon, their provider within the next six months.
However, what this data indicates is that if a provider is not near perfect (which it seems approximately 38% are), the chances are decent that they will shed customers over the next half-year.
3. Customer Satisfaction
Another factor which leads providers to lose customers is a universally applicable business challenge: customer service.
“A lot of times I hear [businesses that are switching service providers] say it’s because they’re having a hard time getting in touch with the company they’re working with. So it’s a customer service problem”– Alicia Timoftica, Senior Sales Representative, VoiceNation
It is somewhat ironic that lack of communication between companies and their providers is a problem identified as a reason why businesses may change answering service providers. However, our survey provides data to corroborate Timoftica's claim. Of businesses that reported customer service issues with their answering service provider (10%, see graph above), approximately half are likely to switch providers in the next six months.
4. Monthly Nature of Answering Services
L’Heureux, along with Director of Operations at VoiceNation Eric Schurke, referenced another factor affecting businesses’ loyalty to a particular provider: the structure of business relationships between companies and their answering service providers. Answering services are typically offered on month-to-month basis, a flexible arrangement that allows businesses a solid degree of freedom to move freely between different providers.
That being said, both L'Heureux and Schurke also claim that the typical lifespan of an answering service contract far exceeds the six-month window in which over 40% of businesses we surveyed indicated they were prepared to switch providers. According to L’Heureux, the typical lifespan of answering services contracts are between three and five years in length. Schurke, on the other hand, insists that the average client retention period is between one and two years.
“We get customers that need us just for a month so they can have their staff off on some holidays. In general, if you look at our customer base, it’s probably an average of a year to two years.”-Eric Schurke, Director of Operations, VoiceNation
5. Lack of Distinction Between Providers
The fragmented nature of the answering services industry acts as the fifth and final hindrance to businesses’ loyalty to their answering service providers that we found.
This issue is most notably reflected in the market segmentation among top providers. No single provider controls more than 15% of the market.
Part of the reason why no one firm dominates the market is due to the similarity of top providers on a technological basis. Telephonic technology, especially on an automated level, is essentially mastered. Since automated answering services are still the most popular form of answering service used (54% of companies surveyed), it is unsurprising that businesses find trouble differentiating one provider from another.
According to Schurke, the lack of distinction between providers has to do with the limited number of software platforms available from which providers can operate their services, particularly at the scale top providers must provide to suit their higher volume clients.
“If you did a poll of answering services [providers] out there, most likely they’re using one, two, or three softwares. They’re all running the same business and features.”
– Eric Schurke, Director of Operation, VoiceNation.
Because there are so few software options, the services providers offer are essentially the same. As a result, businesses are unlikely to find one specific service provider extraordinary or develop particularly strong or lingering attachments to them – both of which are phenomena that could breed a sort of loyalty to a particular provider.
What Can be Done to Change This?
Due to the lack of differentiation between top providers, Clutch’s first report recommends that businesses identify particular features, specifically innovative technology and industry knowledge, to use as a guide to find a particular provider that best fits their specific needs as a company.
However, even though businesses recognize that the level of innovation and industry knowledge are important to their provider-vetting process – particularly for more technologically advanced services, like live virtual receptionists and Internet-platform answering services – their lack of loyalty remains. For example, even businesses that consider their providers 'very innovative' are more likely to abandon their providers than remain with them over the next six months.
This same result was found when measuring businesses' likelihood to leave against providers' level of industry knowledge. Even businesses that reported that their providers maintain the highest level of industry knowledge (a rating of 8-10 on a scale of 1-10) were still significantly more likely to abandon their services.
Further Recommendation: It's Up to the Providers
As previously stated, Clutch’s initial report outlining and analyzing the state of the answering services industry recommended that buyers seek out particular features of an answering services provider to help them differentiate between providers.
Ultimately, though, answering services providers cannot solely rely on businesses to take proactive measures to distinguish between them. Instead, providers need to make a concerted effort to differentiate themselves to make the choice easier for buyers. Specifically, they need to shore up their shortcomings, like in their technical and quality assurance capacities, to ensure that businesses have no issues to report with their services.
In addition, providers should work to develop unique platforms and technologies through which they can operate their services independently of existing platforms. Doing this will distinguish them from other providers that use one of the few other large platforms--a leading cause for the lack of differentiation within the answering services market.
If providers do these things, they are much more likely to establish a value proposition that's strong enough to capture elusive customer loyalty in this industry and work to reverse the concerning trend of businesses' abandoning their providers in the short-term. Customer loyalty breeds nothing but positive things for businesses, and the answering services industry as a whole could benefit from instituting these changes.