Frequently Asked Questions

1. Why is measuring loyalty better than measuring satisfaction?

2. I keep hearing about asking the "one question" or using the Net Promoter Score. It sounds pretty great, but how can just one question provide all an organization needs to improve customer loyalty?

3. What method does the Loyalty Research Center recommend for collecting feedback from customers and employees?

4. What kind of scale does the Loyalty Research Center use and why?

5. How long is the typical survey that the Loyalty Research Center recommends?

6. Which is most critical for companies to measure - their customer or employee loyalty and why?

7. Aren't focus groups or other types of qualitative methodologies sufficient for identifying what organizations need to do to increase their customers' loyalty?

8. How much does it cost to design and conduct a customer loyalty program? What are the factors that affect price?

9. My organization does not have the budget for doing this type of research. Can't we conduct our own customer loyalty program rather than using a vendor who will be more costly?

10. How do I know that we'll be getting input from all my customers and not just those who have gripes with us?

11. Can customer feedback be used to evaluate my employees' performance?

12. Can customer input be part of our managers' bonus plan and, if so, what is the best way to do that?

 

Satisfaction is not a good predictor of future buying behavior. A customer might say they are 'satisfied', even 'highly satisfied', but not intend to use you again or engage in any other behaviors desired by a company such as 'buy more', 'recommend you to others', and the like. The Loyalty Research Center uses an index that combines several questions known to define loyalty. Testing of this index against satisfaction reveals far better prediction of actual customer retention with loyalty.

Back to Top

 

The fact is that one number can't provide all an organization needs either to assess or improve customer loyalty -- the greatest appeal of Net Promoter, the simplicity of one number, is as well its greatest downfall.

Frederick Reichheld has argued that the net promoter score (NPS), derived from the single survey question (whether customers would recommend a brand to a friend or colleague), provides a superior measure of loyalty -- a very good predictor of customer behavior, and correlates strongly with measures of company growth. Not only does this appear to be far too simplistic to be true, but, there is now evidence showing how difficult it is to isolate specific customer-defined weaknesses, let alone put improvement action steps in place, with this one number approach.

Methodologically, NPS and its calculation have some serious limitations. The percent top 3 responses minus percent bottom 3 responses on a 10-point recommend scale create issues around:

• Lack of precision: scores are collapsed into 3 categories, losing the precision and ability to calibrate customer perceptions/intended behavior/loyalty
• Net score: differing scenarios of detractor versus promoter percentages can result in the same NPS score masking what's really going on and providing potentially inappropriate interpretations and treatments.
• Macro level information: does not allow for management of loyalty at an individual customer level

The Loyalty Research Center commends NPS on its appeal to CEOs. It has helped to heighten the visibility and importance of customer loyalty throughout organizations. However, NPS is now at a crossroads which will determine its long term viability as a loyalty improvement tool. To date, the jury of corporate users is, at best, mixed in its assessment of use beyond face appeal.

Back to Top

 

There is no one data collection method that the Loyalty Research Center generally recommends, which is what makes us unique from most other research companies. While many of our competitors may tell you that one method is better than others, it really depends on the research objectives, the type of customers/employees responding (such as age, B to B vs. B to C, position level, industry, language skills, and the like); desired depth of feedback, etc. Each factor must come into play before a preferred data collection method can be identified. In fact, depending on the situation, a mixed mode may be preferable. Since LRC does not own facilities for specific data collection capabilities -- you'll find our recommendations are driven solely by your needs and not ours.

Back to Top

 

The Loyalty Research Center recommends using a 5-point Likert performance quality scale with verbal label anchors of Excellent, Very Good, Good, Fair, and Poor. The selection of this particular scale for measuring provider performance is based on considerable testing of a wide variety of scale types in terms of ease of respondent use and understanding, response validity, response discrimination, as well as ability to meet statistical analysis criteria for results interpretation. On all criteria, the 5-point label anchored scale tested as good as if not better than other scales that are commonly used.

Similar, rigorous testing, revealed the 5-point label anchored (Strongly Agree to Strongly Disagree ) Likert scale for capturing multi-item image perceptions to be the preferred response option.

Back to Top

 

Excessive survey length will not only frustrate respondents, causing them to terminate or drop out early before completion (driving up project costs), but is also likely to produce invalid results. Respondents will rush through their answers, not giving carefully 'thought through' responses, in order to 'get done.' So length is an important consideration in survey design. However, length is more a factor of perception than actual length of time it takes. Factors impacting respondent perceptions include: interest level, ease of understanding and responding, as well as incentives for effort and time.

In B to B, an upfront understanding of why the survey is important and likely usage of results is the incentive for taking time to provide feedback. LRC strongly recommends that sponsors alert their business customers to an upcoming survey as well as provide reasons for why input is needed. This will address the 'what's in it for me?' question that business customers are sure to have. It's very important to communicate organization changes that were made as a result of prior customer feedback initiatives or you'll find your customers less willing to provide their input a second time.

LRC has found that with good survey design, proper notification and communication of benefits, a typical first time baseline relationship telephone survey can run between 12 - 14 minutes for consumers and up to 17 - 20 minutes for business to business customers.

Back to Top

 

Both customer and employee loyalty are critical measures for organizations to understand in order to improve their business success. If the question is "which measure should be put into place first?" There lies the chicken and egg dilemma.

Loyal customers sustain business. And loyal employees carry on the business of your organization and maintain loyal customers. In the service-profit chain, it is shown that positive customer behaviors will drive business financial success. But prior to that there must be high performing and loyal employees who will affect customers' loyalty. An organization needs to know both what customers require as well as how to deliver on those requirements.

Back to Top

 

Qualitative research certainly has its place in understanding customers (and prospects) and how well they are being served within the marketplace and by your organization, specifically. The Loyalty Research Center recommends that qualitative research play a critical part in your customer loyalty measurement program - both upfront to help design a complete and effective quantitative measurement tool as well as later in the process in order to clarify survey feedback.

However, qualitative methodologies cannot take the place of quantitative approaches. Qualitative techniques provide insights and fine-tune appropriate language and phrasing, identify special interest segments and needs, all of which can later be built into the quantitative program design and survey tools. But scientifically valid samples or a census of your customer population is the only way to reveal exact incidence of those needs and perceptions. Remember, a focus group typically has 10 - 12 participants. Are you comfortable making important business decisions based on this very small number of customer voices?

Back to Top

 

It all depends!!! But it's true...it depends on a lot of factors including data collection method selected, number of customers, organizational hierarchy and implications for how results will be split out - by geography, product division, customer volume, number of stores/locations etc. - frequency of data collection and reporting, number of presentations, need for follow-up consultation for information deployment, and the like. Contact us for more information.

Back to Top

 

It's been shown that organizations that obtain and respond to customer feedback effectively are more likely to retain and grow customer accounts and realize greater financial success than those who do not. Customer feedback is critical as organizations understand and adapt to the ever changing marketplace. With information this important, many organizations may not have the time, resources, or the opportunity to experiment in areas outside their own expertise. And there may not be a second chance. Those companies that specialize in customer loyalty measurement and management bring a level of expertise that is not likely to be found within organizations. Customer loyalty measurement is a specialized field of research. It is more than simply asking your customers a few questions and tallying up the results. It is based on the science of how different aspects of your relationship with your customers fit together to drive their ultimate loyalty to you.

Every contact with your customer, including that of obtaining their feedback, must be right - conducted professionally and within an atmosphere of objectivity. Customers provide more open and candid responses about your performance when they know the information is being collected by a third party. Analyzing those responses requires applying statistical techniques in ways that are often unique to the nature of customer feedback.

As for using the information, experts can provide examples of best practices to show how others from within or outside your industry have been successful in applying results to organizational change initiatives. Comparative data are often available from across industries to help you understand where you stand and what levels of improvement can be expected. And perhaps most importantly of all, measurement program design, objectivity of feedback as well as the interpretation and presentation of results are perceived to be far more credible internally when a third party is involved. The word of outside experts carries more weight with employees and management - especially when results are weak - thereby helping the organization better accept what customers are saying and take action.

Back to Top

 

One sure way of engaging all customers and not just those who want to complain, is to make all customers feel that it is to their benefit to provide input. And that can be done in the proper upfront communication with all your customers about the upcoming survey and its purpose. Positioning this effort as a way of doing business better is sure to interest customers across the board, especially B to B.

In addition, one of the benefits of using an outside firm specializing in customer research is the credibility and objectivity that is brought to the table. Because it is an outside firm, customers view it to be more objective. They are therefore, more likely to respond and respond candidly without fear of retribution, for example, from a defensive account manager or the possibility of negative comments used inappropriately against the employee. With objectivity comes the understanding that discretion will be used... a message with far greater acceptance when coming from an expert that's outside your firm.

Back to Top

 

What better way to communicate the importance of the customer to your employees than by building in expectations around the customer into individual job descriptions. It is then a natural next step to incorporate those expectations into each employee's performance plan and review process. Appropriate standards should be set in each performance area for each separate role which will help the organization meet its overall goals for customer focus.

Back to Top

 

Increasingly, companies are incorporating customer feedback−typically 1−2 metrics − into their management incentive plans. The customer metric may represent anywhere from 10% -50% of the entire incentive package for any one manager. That actual percentage varies considerably, from company to company, and should be set on the basis of reason, given the organization's goals, available resources, current performance, and capabilities to focus on customers.

To encourage customer focus throughout an organization, the Loyalty Research Center also recommends having a measure of performance - from the customers' points of view - at non-managerial levels as well. Rather than an overall, company-wide metric, at this level it is highly encouraged that companies use measures that are within the department, work unit or individual's control. Incorporating customer input into incentive plans is a significant step and one that must be carried out with consideration of the organization, its culture, and current systems. It is also important that an organization interested in doing this, consults with an outside expert who can advise them on appropriate sampling, precision levels, and interpretation of results. For instance, a common approach is to set standards for improvement levels and provide incentives on the basis of the change in metric. But, interpretation of what truly constitutes an 'improvement' is where organizations often ignore statistical accuracy, thereby jeopardizing the integrity of the metrics as well as entire program credibility. There can also be legal ramifications.

Back to Top