Smartphone Customers are More Satisfied; Will They Churn Less?

The latest J.D. Power “Wireless Smartphone Satisfaction Study” finds that satisfaction among smartphone customers is 796 (on a 1,000-point scale), an increase of 22 points from 2012.

While satisfaction  in all factors of the smartphone customer experience increased from 2012, satisfaction has increased the most in performance (26 points), as a few key attributes, such as operating system reliability, processing speed and video/camera picture quality, have improved significantly, according to J.D. Power.

One would think that increase in end user satisfaction automatically would translate into lower customer churn. Maybe not as much as one might initially think.

It is not unreasonable to argue that service quality leads to high levels of customer retention.

But a new study by WDS suggests that only about 13 percent of U.S. mobile customers are truly loyal to their service provider, defined as being resistant to competitive price promotions and forgiving of their service provider when things go wrong.

“Satisfaction,” one normally supposed, has something to do with customer loyalty. The notion is correct, but only up to a point. Of those customers currently at risk of switching in the U.S. mobile market, 40 percent are “moderately” satisfied. Only 37 percent of at-risk customers have “low” satisfaction scores.

The most shocking statistic is that about 23 percent of customers at risk of switching are highly satisfied with their mobile operator. In fact, WDS argues, 19 percent of all “highly satisfied” customers are considered to be churn candidates.  

The WDS loyalty audit therefore calls into question the conventional notions of how satisfaction relates to loyalty. In fact, even significant numbers of customers who have “low” satisfaction scores are unlikely to churn.

You might easily agree that if a customer has to contact a support channel more than once in a six month period, that customer is twice as likely to become a switcher.

But even “happy” customers will churn. Some 36 percent of those respondents who said they were satisfied with “value for money,” still were churn risks. Some 50 percent at risk of churn were “highly satisfied” with service reliability and 53 percent were highly satisfied with network coverage.

Still, satisfaction remains an important metric. A “highly satisfied” customer is 2.2 times more likely to be retained beyond 12 months than a customer who reports “low satisfaction.”

Typically, a rule of thumb is that customers with long tenure have a reduced risk of churn. But WDS says 25 percent of customers with six or more years of tenure are at risk of switching to another provider.

And satisfaction only goes so far. About 34 percent of “highly satisfied” customers are resistant to switching for a 10-percent price discount. But increase the discount to 20 percent and only 15 percent continue to say they “definitely” would not switch.