Consumers drawing the purse strings ever tighter will fuel a war for customers more intense than ever, according to research by the Institute of Customer Service.

The organisation’s study of 250 retailers shows that more than half of respondents (52 per cent) believe they are seeing a growth in consumers’ ‘switch mentality’, meaning the customer’s decision to look elsewhere for cheaper goods and services.

This new breed of increasingly discerning consumer will present a real challenge for firms to keep customers interested. Two thirds of retailers (66 per cent) fear a significant threat of revenue loss as a result of this increased customer churn while a third (32 per cent) view the problem as the greatest threat to their business.

What will make the difference for those who manage to win trade in this cut-throat environment? Well, three quarters (75 per cent) of retailers claim that good customer service will be a critical market differentiator in the current climate.

The problem with this is that nearly all retailers (94 per cent) admit in recent times to cutting customer service back – 52 per cent to a large extent. Thus, the balance between the need to invest in customer service in order to boost trade and market share and the necessity of running a lean operation is held on a knife edge.

Customer service is crucial – and that’s coming from the people whose opinion matters the most. Some 83 per cent of consumers polled in the survey suggest that the quality of service they receive is very important to their loyalty as a customer.

It is a mantra worth remembering: service is the critical differentiator, and retailers have placed themselves at a competitive disadvantage by not safeguarding their customer service operations. Other businesses should take heart from their competitors’ failings – such inadequacies offer an opportunity to steal market share by doing it right.