Accenture Dubs South Africa the "Switching Economy"

[Tom Spencer]

 

Accenture reports that poor customer service causes many people to switch providers, particularly in emerging markets.

 

Accenture estimates that the cost to companies in South Africa due to customer switching is worth US$47 billion, and has dubbed it the "Switching Economy". 

 

For more details, read the full article.

[ashleysherman]

Tom, 

 

I'm curious as to your thoughts as to why this is the case. Are there the same consequences to "switching" as there are in other, more developed countries? I automatically think of cell phones and the ridiculous contracts that are put in to place to prevent this problem from happening. T-Mobile has recently started a new advertising campaign in the US encouraging consumers to "break up" with their mobile carrier and let T-Mobile worry about the switching costs. 

 

Despite the costs associated, what are the ramifications of this culture? Has this trend increased accountability? Or have any measures been implemented to increase customer retention?

 

- Ashley

[Tom Spencer]

If a customer switches away from a company, then this represents lost revenue for that company. It also generally represents revenue gained by one of its competitors. So, switching is a kind of double negative. 

 

A common technique used to prevent switching is the long term contract, a tactic typically used by cell phone companies and gyms. 

 

For reasons that are not yet clear to me, companies appear to place more effort on "attracting new customers" than they do on "retaining old ones". I am not sure whether this creates the switching culture, or whether it is used because customer's have a tendency to switch.  If anyone is aware of research on this point, I would be interested.