What Drives Client Loyalty in ERP Systems Integration Projec
The purpose of this article is to examine the relationship between systems integration performance and customer loyalty and to identify drivers of loyalty.
Shortlisting and choosing an ERP system integrator can be a long and arduous process, and oftentimes the customer keeps their fingers crossed that they made the right decision. The goal, of course, is to determine the best integration of the project. Since owning an ERP means upgrades, improvements, etc., the ideal scenario is for a customer to develop a long-term and mutually beneficial relationship with their systems integrator.
From a customer perspective, they want their systems integrator to...
Give what they say they can give
Complete the delivery on time (or within a reasonable time)
Bring measurable long-term benefits
From a systems integrator perspective, they want their customers...
Keep coming back for future projects
Be a reference when selling to other customers
In short, customers want their ERP systems integration to be well implemented so that their company can achieve their business goals, and system integrators want their customers to feel satisfied to drive more business in the future. This research reveals a strong relationship between how systems integrators perform and customer loyalty.
Given the scale and complexity of ERP systems integration projects, reasons for retaining a systems integrator for future projects (or not) can extend beyond effective delivery. Therefore, this research includes two different measures of customer loyalty - one at the company level and one at the individual level.
Future considerations: Possible re-engagement of the organization with the provider ...
won't shortlist (give up)
short list (consider)
will share again (keep)
Recommendation Likelihood: The probability that a key stakeholder will recommend a colleague to the systems integrator...
10 - highly likely to recommend
1 - Not likely to recommend at all
Using the ratings outlined in Fred Reichschild's bestselling book The Ultimate Question, customers can be categorized into one of three groups: promoters (scores 9-10), negatives (scores 7-8), and detractors (scores 1-6).
It's more difficult to get an individual recommendation from a key stakeholder than it is to get a recurring systems integration business. As mentioned earlier, there are many reasons why a company is re-engaging its systems integrators that are not performance related (more details to follow). Having an individual putting his personal reputation on the line with a fellow colleague requires a higher level of performanceOkta Training.
Performance and loyalty go hand in hand
It makes sense that system integrator performance and customer loyalty go hand in hand - but to what degree?
One of the key measures of system integrator performance is the Performance Score - a measure used to describe the performance of the systems integrator across the delivery lifecycle. The scale is weighted according to each customer's delivery priorities.
Looking at the three ratings of individual loyalty by those with high and low overall performance scores reveals that performance is a powerful driver of individual loyalty. The two sets are virtual mirror images of each other.
Three-quarters of customers who give low performance scores to their ERP integrator are considered detractors—which means they won't recommend their integrator and may misunderstand them when asked.
Conversely, two-thirds of individuals who report strong performance from their ERP integrator are promoters—those who are most likely to recommend the integration tool to colleagues.
How much influence do promoters have on their company's decision to retain an ERP systems integrator? The industry average for customer retention across all ERP system integrators is 55% (note the gray bar below).
The negative group below is just the industry average while critics and promoters have a noticeable influence on their company's decision making.
When an ERP systems integrator does well and builds a promoter, that company's likelihood of retaining the systems integrator increases by about twenty percent. When the integrator fails to perform at a high level, it can create a detractor, and that company is 12% less likely to keep its integrator.
The relationship between performance and customer loyalty extends to the company level, although the relationship is not as striking at the individual level. The chart below compares retention levels to those that offer varying performance ratings. It is clear that the performance of the system integrators enhances customer loyalty, but the levels of loyalty remain somewhat high despite the poor performance by the system integrators.
Why is there a stronger relationship between performance and loyalty at the individual level