Loss of customers, CEOs and trust: time to get real.

... The British all industries average customer defection rate was 16.9% per annum [in 2003]. By 2005 our annual average had risen to 19.1%. In 2007 it stands at 22.0%.

--Survey: Customer Churn Rate Rises by 15 Percent Pitney Bowes Group 1 Software, April 4, 2008

Here I am again--and I hate to bring this up again. But, well, customer defections are ... well, they are up again. I know, I know--we have discussed this before, but it seems to be getting worse.

There is good news. Thankfully, we are not in the mobile phone business where the churn has moved from 33.6 percent in 2005 to 38.6 percent in 2007. There, I knew that would make you feel better. It is reassuring that we are much better than those guys, unless, their current trends reflect our future trends. I can't remember any of our recent customers that do not have a cell phone. So maybe our customers aren't different--well, perhaps that is not such good news after all.

Seriously, it is disconcerting to see how pervasive customer defection is when we know so much and have worked so hard to reverse the trend. With all of our effort to strengthen relationships, it just has not happened.

Unfortunately, customer turnover is not the only sign of relationship instability. According to Challenger, Gray & Christmas, 370 CEOs of public and private companies announced departures in the first quarter of 2008, a 7 percent increase over the same period last year. This continues a negative trend. According to Booz Allen, CEOs of the world's 2,500 largest corporations were terminated at four times the rate in 2003 to that of 1995. The recent subprime debacle has already claimed several top executives in the financial services industry, and more instability is forecast.

And the news for those CEOs who remain is not comforting. The 2008 Edelman Trust Barometer reports trust in CEOs continues to sag in the 20 percent range in the United States, compared to 43 percent fur an average employee--probably not a good point to bring up at your next management retreat.

However, the topic of trust and credibility--of anybody or anything--does seem the right issue to address. According to Edelman, American brands such as Citicorp, McDonald's and Exxon Mobil now' suffer a 30 percent discount in Europe compared to here in the United States. Closer to home, only 20 percent of respondents trust corporate or product advertising.

It appears that the forces of distrust have overpowered our efforts to improve customer service, customer relationship management, brand building and confidence in management. Clearly there are exceptions, but when you see companies like Starbucks struggle, it makes you step back and say, "Something's going on here that smart people, great strategy, and focused effort have been impotent to overcome." You know the well-worn definition of insanity: doing the same things and hoping to get different results. It is time for organizations to decide what they believe about customer relationships--to lead is to decide. There are several possibilities:

* Some businesses and whole industries may conclude that relationships simply do not matter all that much. For them, they will fight it out on size and efficiency, innovation, cool branding or something else. They will be in favor of strong relationships, but will not go out of their way to compete on the quality, depth or duration of relationships.

* Others will conclude that relationships matter but that they don't have to be great at them, simply better than their competitors. If their competitors are also large, geographically dispersed organizations, they may be able to be win by being less awful than their competitors. Remember the old adage: The only reason armies win, is that they fight other armies.

* There is a third view: As our society experiences relationship decline in our personal lives and in the organizations where we work and are served, there will grow a pent-up demand in the marketplace making them more valued than ever. For example, Starbucks is competing in a marketplace that increased the number of independent coffee houses from 9,800 in 2000 to 14,000 by 2005. This view says that small and personal--restaurants, coffee shops, retail stores and banks--will be the winner in the second decade of this new century.

In order to take advantage of this new trend, organizations must find new structures that allow them to compete. For example, somewhat like the old franchise model, some large banks may consolidate and grow their back office functions and sell/lease their front office, customer-facing branches to local market owners/operators. Only then will customers get the look and feel of local relationships backed by the efficiency and scale of large entities.

We are at a moment of truth. We have clarity on this. The market place is increasingly a hardened target for our corporate ways. We can no longer assume that we can grow large and be competitive in strengthening customer relationships. It's time to get real.

Robert Hall is author of "The Street Corner for Winning Local Markets." E-mail: [e-mail]