Our Customer Loyalty Research – Does Stickiness Lead to the Next Sale?

If you’re in the business of serving cloud customers, we’ve got some good news for you, and some bad news.

The good news is: your overall market is up, your customers are planning to buy more, and they’re highly satisfied with their current providers (aka, you).

The bad news is: all the above good news doesn’t mean your customers are planning on buying any additional services from you.

What’s up with that? If you're satisfying your customer, doesn't that mean they will buy more from you down the road?

While it turns out that customer loyalty isn’t irrelevant, it does seem that the “stickiness factor” may have been over-generalized, according to Parallels most recent customer research.

Before we get into the loyalty data, let’s take a quick look at the overall market conditions.

According to the Parallels SMB Cloud Insights™ surveys, customers are adding cloud services rapidly, particularly in mature Internet markets, and they plan to add more in the near future.

On average, customers surveyed in the U.S. indicated they were using two cloud services in 2011, and that number jumped to an average of five services by 2014. Further, customers say they are planning on adding an average of four additional services by 2017. This means your customers are seeing the need for and the value of cloud services in a big way.

Our second proof point: the overall market is growing strongly.

Globally, the cloud services market is growing at a 26% compounded annual growth rate (CAGR), from $62 billion in 2013, to an estimated $125 billion by 2016. And specific sectors are growing even faster: for example, Unified Communications, which includes business-class email and hosted PBX services, is significantly outpacing the overall market, growing at 37% CAGR and is expected to reach $20 billion by 2016

Clearly, this is very good news. There is a huge market opportunity out there for partners who deliver the right mix of products and services.

Now, returning to the issue of customer satisfaction, and why loyalty may not guarantee a steady stream of add-on sales.

To uncover actual customer buying patterns, Parallels conducted detailed interviews with 773 SMB customers in the U.S., the United Kingdom and Germany, and found that 60% indicated they were “Very Satisfied” with their current hosting service partner, and a similar percentage said they were “Rather Likely” to stay with their current partner.

However, when we asked the question: “How likely are you to buy more cloud services from your current provider?” fewer than 1 in 3 indicated they had plans to buy more from their existing provider:

 

In addition, when we asked “How important is it to you to buy all or most of your cloud services from one provider?” we received an equally lukewarm response: only 37% felt it was important to buy additional services from one cloud provider, while 63% remain unconvinced. According to this data, loyalty and satisfaction cannot be proven to be a significant predictor of future purchase behavior by our customers.

 

So, clearly, there is a disconnect between how satisfied your customer is with your existing services, and whether they feel like purchasing the next service from you.

Why is this? And what can you do about it? Check out next week's blog for further details and the on-demand webinar, Loyalty, Satisfaction and the Next Sale: What Matters Most to Existing Customers?

Posted on August 14, 2014 and filed under Cloud Service Delivery.