157 – Captive customers. Why are they so special?

Posted by Colin Weatherby                                                                         850 words


The idea that our customers (i.e. the ratepayers, residents, businesses and citizens in the community) are captive to our services is not new, however the implications are seldom discussed in local government. What does it really mean for service providers when their customers are forced to pay for services they may not use, or for service levels that may not meet their specific needs?

The idea that we will have choice in matters affecting our lives has become sacrosanct in western society, especially if we are paying. Customer service standards today are unrecognisable from those of the last century. Nobody expects to wait. If what they want isn’t available, they expect the service provider to get it – and quickly. If service falls below the normal standard they expect compensation. Social media is giving voice to unhappy customers and putting pressure of organisations.

In this environment, getting customers to pay for services in quarterly instalments and then receive standard services designed to suit ‘everyone’, leads to obvious conflicts. In an open market people can segment themselves according to their ability to pay and the satisfaction or value they are after, as shown below.

price and satisfaction curve

When customers have choice they can position themselves on the satisfaction/price curve according to their ability to pay. In local government, there is much less opportunity for this positioning to occur. Some services enable supplementary payment for additional value (e.g. buying a yoga class at the gym in addition to general access to fitness equipment) but most have a standard offering (e.g. the customer service charter says that service requests will be actioned within 14 days or faster if the council considers it high risk).

For most services, the entire decision making about service levels rests with the council.

In this situation the relationship with customers needs to be carefully handled. Explaining the situation and ensuring that people are aware of their options becomes important. Treating people respectfully is even more important – if they can’t have exactly what they want then they must be treated nicely. If not, matters quickly deteriorate and complaints about behaviour are lodged.

It is critical to ensure that the value provided is visible to captive customers and then to ‘capture’ that value through their ‘loyalty’. Sayan Chatterjee provides the ‘visible-invisible simple rule’ to determine which attributes of services are more likely to be valued.   It is shown below.

Chatterjee visible invisible

The main focus for local government should be on reengineering services that the customer can see but does not care about and those that the customer cares about but cannot see. In the first instance, services such as parking control can be made invisible using technology to monitor how long cars are parked and then issuing infringements to any offenders.

In the second instance, services such as public place cleaning services, which are typically delivered overnight when no one is present, can be changed so that delivery occurs during the day. This has happened with footpath sweeping in some busy shopping centres and the act of cleaning is now evident to everybody present and it has overcome the misplaced belief that the service hasn’t been delivered – because often litter is dropped as soon as the cleaning has been completed.

Making the invisible visible correlates with the ideas in Peter R. Scholtes in the ‘needs–gets’ matrix. In it, Scholtes suggests that organisations stop providing what the customer is getting that they don’t need and that effort is put into giving them what they do need. The matrix is shown below.

gets needs matrix

Making visible what the customer needs and ensuring that they get it is the highest priority. Stopping delivering what the customer doesn’t need, especially if it is visible, is next.

Customer loyalty is a common measure of marketing performance in the private sector. It seeks to measure ‘brand loyalty’ using repeated purchases – i.e. more repeat purchases equals greater customer loyalty. In local government we are assured of repeat purchases because the customer is captive. The dimension of loyalty that is important is a favourable attitude that is high compared to other potential alternatives – i.e. living in your municipality is better than past experience or other potential choices.

Alan S. Dick and Kunal Basu have created a conceptual framework for thinking about customer loyalty, and they call the strength of favourable attitude the ‘relative attitude’, which they pair with ‘repeat patronage’ to define the loyalty relationship. Using this framework, they say that low relative attitude and low repeat patronage indicates no loyalty.

In local government we often experience low relative attitude and repeat patronage because customers are captive. Dick and Basu call this ‘spurious loyalty’. In their framework, however, it is not occurring because customers are captive. Rather it reflects ‘low differentiation between brands in a low involvement category’, in which customers make repeat purchases as a result of ‘situational cues’, such as familiarity.

“Loyalty signifies a favourable correspondence between relative attitude and repeat patronage”.

This is the goal for local government. Captive customers obtaining the services they need through visible service delivery and valuing those services, as expressed through a high relative attitude towards the council.

We can do it. They are special and they deserve it.

Chatterjee, Sayan 2013. Simple Rules for Designing Business Models, California Management Review, Winter.

Dick, Alan S. and Basu, Kunal 1994. Customer loyalty: Toward an Integrated Conceptual Framework, Journal of the Academy of Marketing Science.