How Important is the Role of Ethics in Customer Retention?

John Krautzel
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Lowering prices may be the traditional method to ensure customer retention, but research shows that the values and practices behind a company may be just as important to consumers. Studies by Echo Managed Services and Nielson reveal that customers factor a company's ethics into their purchasing decisions.

Ethics as a Key Decision-Making Factor

Ethical values and practices clearly matter to customers, sometimes even more than price. According to a survey by Nielson, 66 percent of consumers would pay more to support a more ethical business. Research by Echo Managed Services further reveals that for 12 percent of consumers, ethics is a primary factor when choosing a supplier. In terms of customer retention, ethics involves both business practices and environmental responsibility. For instance, in the monopoly-driven water sector, 20 percent of customers would switch suppliers just to support a greener company.

Companies thinking about ethics as a component of customer retention should keep in mind that poor ethics can have just as strong of an impact. The EMS study found that 16 percent of customers would stop doing business with a company that was involved in a negative story or simply didn't share the consumer's values.

What This Means for Companies

The numbers show that companies of all sizes have to start placing greater emphasis on the role of ethics in business success. Eco-friendly practices, ethical guidelines for management and employees, and a well-structured set of core values can help a business create or maintain a reputation of ethical excellence. Leaders should bear in mind that a single scandal can have devastating effects both in terms of customer retention and interest among investors. People are always wary of putting money into a business with a tainted reputation.

The Growing Role of Business Ethics

While the value and price of products and services are still essential to customers making purchasing decisions, ethics is sure to grow in relevance. The quick sharing of opinions, news and other information via social media and other online platforms allows customers to make holistic choices like never before. Combined with a green revolution and a greater emphasis on socially responsible purchasing decisions, this makes a focus on ethics essential. If companies don't begin to implement solid strategies to curb unethical practices and behaviors as well as improve business reputation, they may find customer retention to be harder than ever.

One in 10 customers consider ethics as a deciding factor in their buying choices, and two-thirds of consumers are willing to pay more to an ethical company, which proves that the role of integrity in customer retention is important. Key players in companies need to start placing a heavy emphasis on business ethics, environmental responsibility and social commitment if they want to stay ahead of the competition.

Photo courtesy of Stuart Miles at


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