Many companies seem to think that customer satisfaction measures are predictive. Other companies see customer satisfaction measures are reflective. I believe that once the terms predicative and reflective are carefully examined, it will become clear which term is more appropriate for customer satisfaction.
The dictionary gives a brief definition of predictive as: "being able to tell in advance usually based on facts." The synonyms of predictive are "forecast" and "prophesy". When we ask customers to report their satisfaction with a product or service, we are gaining perceived knowledge about a specific event, in most cases. Of course, customers are also asked strategic questions that are not event specific. In either case we have a measure of the customer's perception of past experiences.
On the other hand, the dictionary defines reflective as: "Something which reflects, or redirects back to the source; e.g.Mirrors are reflective. Thinking back on the past; e.g. He always becomes reflective in preparation for the new year. Thus customer satisfaction is more nearly related to be reflective than predictive.
So, if customer satisfaction is more reflective than predictive, what value does it bring to a company. There are a number of ways that a customer satisfaction measurement provides value. The following list provides some of the value components:
1. It is a measure of how the organization has performed in the past.
2. It may indicate organizational problems that are present and may impact future performance in a negative way.
3. When it is positive it can become an internal motivator.
4. It provides an on-going interest in the customer at all levels of management.
5. It can guide be used as a component of resource allocation.
One of the major misuses or customer satisfaction is using the measure as a predictor of future performance of the organization. Customer satisfaction is often referred to, correctly in my opinion, as a rear view mirror perspective of the organization's performance. Some would ask whether or not it is appropriate to use customer satisfaction measurements for predictive purposes. The obvious answer is no.
The bottom line is that customer satisfaction is a valuable measure of an organization's performance with respect to the customer. It is an historic measure since it is only capable of measuring past events. As the investor's guide usually states "past performance is no guarantee of future performance." When used properly, a valid measure of customer satisfaction is an excellent diagnostic tool for the organization and can be used to optimize the use of limited resources. It can also breed loyalty in both customers and employees.
Saturday, June 13, 2009
Tuesday, May 19, 2009
Another Metric for Loyalty
Forrester, a marketing research company offers another metric for loyalty. It appears that Forrester has three elements which they use to define loyalty; namely
(1)reluctance to switch business from a company, (2)willingness to buy another product or more products from a company and (3)likelihood to recommend a company to a friend or colleague. These are good measures for loyalty and when combined make sense to use as a loyalty metric.
They offer what seems to be an obvious conclusion that there is a correlation between customer experience and loyalty. Another brilliant conclusion is that when companies want to increase sales they should focus on customers.
The real value of this blog is the reluctance to switch business metric. The three legged metric that has been used for many years consists of (1) overall satisfaction, (2) likelihood to recommend to a friend or colleague, and (3) willingness to buy again. Forrester appears to have substituted the reluctance to switch from a company in place of the overall satisfaction measure. Since the other two measures are ones that are familiar in the loyalty measure, the interest is in the reluctance to switch measurement.
One of the standard loyalty measures is to measure the percentage of customers that score "top box" for all three measures. By "top box" most people refer to the highest score on the scale as the "top box." Using a 5 point scale where 5 is the highest score, companies would measure the percentage of customers that scored all three questions with a five. I am presuming Forrester is soing something like this.
Some companies, in order to present high loyalty scores, will include the top two boxes. Thus the percentage of customers they would claim are loyal are those customers who scored them either a 4 or a 5 for all three loyalty questions.
Getting back to the loyalty question of reluctance to switch from a company offers both a positive aspect and a negative aspect for the metric. From the positive perspective a company/customer who is reluctant to switch is for all intents and purposes loyal by definition. The customer is saying that the products and/or services are such that he believes the value proposition offered by competitors is not sufficient to warrant the cost and energy to switch.
From the negative perspective this question may be deceiving by yielding a high score by the customer when, in fact, the customer feels locked into the product and/or service being offered and is only scoring high becasue he feels trapped. For example, a company may be using an obsolete product for a particular process and may be reluctant to switch to another product and/or company until a newer product has been deemed successful in the market. This has been true particularly in the software market with new revisions of software being offered. Companies are reluctant to switch until the newer software has been "debugged" by other customers in the market. An obvious example is the reluctance of companies to move to a new operating system for PCs.
The bottom line is that the use of the question reluctance to switch business from a company is novel. I believe it can be an excellent predictor of loyalty. It has the drawback that it can also be misleading if the customer/company feels trapped with the current product and/or service as noted above. It would be an excellent experiment to test the use of the these three metrics offered by Forrester against the more traditional three metric model which uses overall satisfaction in place of reluctance to switch.
I find this model to be very exciting. Until we have an industry standard model that everyone uses, we need to keep looking for the gold tablet of loyalty metrics and the best way to find it is to keep trying new models.
(1)reluctance to switch business from a company, (2)willingness to buy another product or more products from a company and (3)likelihood to recommend a company to a friend or colleague. These are good measures for loyalty and when combined make sense to use as a loyalty metric.
They offer what seems to be an obvious conclusion that there is a correlation between customer experience and loyalty. Another brilliant conclusion is that when companies want to increase sales they should focus on customers.
The real value of this blog is the reluctance to switch business metric. The three legged metric that has been used for many years consists of (1) overall satisfaction, (2) likelihood to recommend to a friend or colleague, and (3) willingness to buy again. Forrester appears to have substituted the reluctance to switch from a company in place of the overall satisfaction measure. Since the other two measures are ones that are familiar in the loyalty measure, the interest is in the reluctance to switch measurement.
One of the standard loyalty measures is to measure the percentage of customers that score "top box" for all three measures. By "top box" most people refer to the highest score on the scale as the "top box." Using a 5 point scale where 5 is the highest score, companies would measure the percentage of customers that scored all three questions with a five. I am presuming Forrester is soing something like this.
Some companies, in order to present high loyalty scores, will include the top two boxes. Thus the percentage of customers they would claim are loyal are those customers who scored them either a 4 or a 5 for all three loyalty questions.
Getting back to the loyalty question of reluctance to switch from a company offers both a positive aspect and a negative aspect for the metric. From the positive perspective a company/customer who is reluctant to switch is for all intents and purposes loyal by definition. The customer is saying that the products and/or services are such that he believes the value proposition offered by competitors is not sufficient to warrant the cost and energy to switch.
From the negative perspective this question may be deceiving by yielding a high score by the customer when, in fact, the customer feels locked into the product and/or service being offered and is only scoring high becasue he feels trapped. For example, a company may be using an obsolete product for a particular process and may be reluctant to switch to another product and/or company until a newer product has been deemed successful in the market. This has been true particularly in the software market with new revisions of software being offered. Companies are reluctant to switch until the newer software has been "debugged" by other customers in the market. An obvious example is the reluctance of companies to move to a new operating system for PCs.
The bottom line is that the use of the question reluctance to switch business from a company is novel. I believe it can be an excellent predictor of loyalty. It has the drawback that it can also be misleading if the customer/company feels trapped with the current product and/or service as noted above. It would be an excellent experiment to test the use of the these three metrics offered by Forrester against the more traditional three metric model which uses overall satisfaction in place of reluctance to switch.
I find this model to be very exciting. Until we have an industry standard model that everyone uses, we need to keep looking for the gold tablet of loyalty metrics and the best way to find it is to keep trying new models.
Saturday, May 16, 2009
Is It a Cultural Phenomenon?
The States in the Middle East did not fare well in their first customer satisfaction survey. The survey was performed by Grass Roots, an independent survey organization. The survey used mystery shoppers who made 350 visits over a two month period into outlets in four industry sectors; namely, automotive, fast food and coffee shops, banking and mobile phone products. These industry sectors were chosen because of their fast growth and increasingly competitive nature. The survey was performed in Bahrain, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates.
Some of the major findings include:
1. Approximately one in four customers are unwilling to repeat (23%) or recommend a visit (27%) to the outlet based on the service they received.
2. 83% of the staff was judged helpful.
3. Staff appear to be short on knowledge (40% of staff did not recommend or guide customers to a relevant product).
4. 34% of staff did not ask any questions to establish details about what the customer needed.
5. 41% of staff did not check that the customer had what they wanted or needed.
6. 94% of shoppers reported a clean and tidy environment.
7. 71% were served within 3 minutes.
The average satisfaction score was 69%. However, the States had very different scores. The United Arab Emirates had the highest average score at 78% and Qatar was last with an average score of 65%. Some of the specifics for each state are:
1. Qatar scored lowest and had cluttered outlets and poor product knowledge.
2. Saudi Arabia had low scores on interaction with customers.
3. Kuwait had the lowest score with respect to customers returning (66%)
4. Bahrain had the highest score with respect to customers returning (82%).
Mark Spicer, Operations Director of Grass Roots noted that "our report reveals that Gulf customers have come to expect a lower level of service." He went on to say "with nearly one third of shoppers saying they would not return to or recommend the outlet, the implications in terms of lost sales opportunities are alarming, especially at this time when a massive increase in retail outlets has coincided with an economic downturn. Gulf retailers need to invest in understanding the current needs of their customers and to train and engage staff to create a smarter workforce or else they will continue losing the war for repeat customers."
This is an interesting survey. I would like to know the profile of the mystery shoppers. I am sure there is some research that would show that shoppers from the Middle East have different reasons for scoring high on a satisfaction survey than shoppers from Europe, Asia and America. I would hope that Grass Roots had a blend of mystery shoppers that were stratified proportionately for the outlets they surveyed. As we see more and more surveys from around the world we will need to develop some cultural adjustment factors to account for the many cultural differences. I am not aware of such cultural factors but would appreciate guidance to a reputable source.
The bottom line is that we should beware of applying satisfaction scales from one culture on to another and drawing conclusions. Scores may not be as meaningful if cultures have different values and traditions.
Some of the major findings include:
1. Approximately one in four customers are unwilling to repeat (23%) or recommend a visit (27%) to the outlet based on the service they received.
2. 83% of the staff was judged helpful.
3. Staff appear to be short on knowledge (40% of staff did not recommend or guide customers to a relevant product).
4. 34% of staff did not ask any questions to establish details about what the customer needed.
5. 41% of staff did not check that the customer had what they wanted or needed.
6. 94% of shoppers reported a clean and tidy environment.
7. 71% were served within 3 minutes.
The average satisfaction score was 69%. However, the States had very different scores. The United Arab Emirates had the highest average score at 78% and Qatar was last with an average score of 65%. Some of the specifics for each state are:
1. Qatar scored lowest and had cluttered outlets and poor product knowledge.
2. Saudi Arabia had low scores on interaction with customers.
3. Kuwait had the lowest score with respect to customers returning (66%)
4. Bahrain had the highest score with respect to customers returning (82%).
Mark Spicer, Operations Director of Grass Roots noted that "our report reveals that Gulf customers have come to expect a lower level of service." He went on to say "with nearly one third of shoppers saying they would not return to or recommend the outlet, the implications in terms of lost sales opportunities are alarming, especially at this time when a massive increase in retail outlets has coincided with an economic downturn. Gulf retailers need to invest in understanding the current needs of their customers and to train and engage staff to create a smarter workforce or else they will continue losing the war for repeat customers."
This is an interesting survey. I would like to know the profile of the mystery shoppers. I am sure there is some research that would show that shoppers from the Middle East have different reasons for scoring high on a satisfaction survey than shoppers from Europe, Asia and America. I would hope that Grass Roots had a blend of mystery shoppers that were stratified proportionately for the outlets they surveyed. As we see more and more surveys from around the world we will need to develop some cultural adjustment factors to account for the many cultural differences. I am not aware of such cultural factors but would appreciate guidance to a reputable source.
The bottom line is that we should beware of applying satisfaction scales from one culture on to another and drawing conclusions. Scores may not be as meaningful if cultures have different values and traditions.
Friday, May 15, 2009
Patient Satisfaction Is Different
The Health Ministry of Singapore commissions a survey of hospital patients every year. During the months of September through December, 2008 9,300 patients were surveyed. This was the first time the survey results showed a decline since the survey became an annual affair in 2005. The average satisfaction level was 69 percent in 2005, the first year of the survey. The average has been increasing every year until last year. The average satisfaction dropped from 76 percent to 74 percent in 2008. The 74 percent represents the percent of patients who scored the hospitals as either excellent or good.
The drop in satisfaction was attributed to the public mood at a time of economic recession according to the ministry. There were six hospitals in the survey and four of them showed a decline while two increased their score from last year.
The reason I have included this very short note is that Alexandra Hospital scored 83 percent and has been ranked first since 2004 when the survey was done with a different method. The key to the success of Alexandra Hospital is the hospital makes a point to hire people who care about patents as human beings and then constantly reminds them to treat patients like family - according to CEO Liak Teng Lit.
The bottom line is that patient satisfaction is very different than customer satisfaction. Remember patients are either in pain, in grief, emotionally distraught. The normal satisfiers are VERY different in a hospital environment. This is an example that supports this notion very clearly.
The drop in satisfaction was attributed to the public mood at a time of economic recession according to the ministry. There were six hospitals in the survey and four of them showed a decline while two increased their score from last year.
The reason I have included this very short note is that Alexandra Hospital scored 83 percent and has been ranked first since 2004 when the survey was done with a different method. The key to the success of Alexandra Hospital is the hospital makes a point to hire people who care about patents as human beings and then constantly reminds them to treat patients like family - according to CEO Liak Teng Lit.
The bottom line is that patient satisfaction is very different than customer satisfaction. Remember patients are either in pain, in grief, emotionally distraught. The normal satisfiers are VERY different in a hospital environment. This is an example that supports this notion very clearly.
Thursday, May 7, 2009
Web Site Customer Satisfaction Can Help Nonprofits
The ACSI surveyed 2,000 respondents who visited nonprofit websites. The basic finding is startling! They found that visitors to nonprofit websites are more likely to donate money, volunteer time and recommend the nonprofit to others if they are satisfied with their online experience.
While the average score for the nonprofit websites was 73 on the study’s 100 point scale, it was below other online industries such as online banking with a score of 83, E-Retail at 74 and automotive websites at 78.
Some of the specific findings that have particular value include:
1. highly satisfied visitors are 49% more likely to donate money to the non profit, and
2. highly satisfied visitors are 38% more likely to volunteer when compared to dissatisfied online visitors.
3. Satisfied web visitors are 66% more likely to use the website in instead of a costlier channel as the primary resource – thus providing a less costly channel for information and donations instead of the more costly direct mail and call centers
The key to the website success is functionality followed by image and content. With poor functionality nearly one third of donors chose not to give. Some of the other concerns were security and error messages.
The study found that 83% of those who donated online in 2008 donated as much or more than 2007. Finally, people who donate online tend to donate more than those who use other channels.
The bottom line is that nonprofits need too know about the value of their web site and make use of this information. The US is a giving country and in these tough economic times, our nonprofits that work so hard in providing services that the government chooses not to support need to utilize all the tools available to them. This is a tool that many of them will not be aware of its potential and value.
While the average score for the nonprofit websites was 73 on the study’s 100 point scale, it was below other online industries such as online banking with a score of 83, E-Retail at 74 and automotive websites at 78.
Some of the specific findings that have particular value include:
1. highly satisfied visitors are 49% more likely to donate money to the non profit, and
2. highly satisfied visitors are 38% more likely to volunteer when compared to dissatisfied online visitors.
3. Satisfied web visitors are 66% more likely to use the website in instead of a costlier channel as the primary resource – thus providing a less costly channel for information and donations instead of the more costly direct mail and call centers
The key to the website success is functionality followed by image and content. With poor functionality nearly one third of donors chose not to give. Some of the other concerns were security and error messages.
The study found that 83% of those who donated online in 2008 donated as much or more than 2007. Finally, people who donate online tend to donate more than those who use other channels.
The bottom line is that nonprofits need too know about the value of their web site and make use of this information. The US is a giving country and in these tough economic times, our nonprofits that work so hard in providing services that the government chooses not to support need to utilize all the tools available to them. This is a tool that many of them will not be aware of its potential and value.
Wednesday, May 6, 2009
Singapore is Ranked #10
The international service ranking of Singapore is #10. However a recent study of 35,000 respondents disagree. The study was performed by Singapore Management University's Institute of Service Excellence found a drop in satisfaction in all eight sectors from finance to health care. The ranking began in 2005 when Singapore was ranked 17th by the World Economic Forum's global report. In 2006 the ranking fell to 26th and then rose to 15th in 2007 and 10th in 2008.
These rankings do not appear to be consistent with the university study which showed the following:
1. Tourism (hotels and accommodations) services was down 2.4 points from 71 out of 100.
2. Food and beverage sector was down 2.3 points to 65.4.
These results do not track the a separate survey by Singapore Retailers Association that uses a mystery shopper program and measures 155 retail companies. These results showed average scores increased to 73.61 from 70.87 as compared to the national customer satisfaction index which rated the retail sector at 68.2 out of 100, down 0.4 points.
The bottom line is that multiple measures cause confusion. Different questions, scales, and sample demographics often lead to finger pointing. I've seen multiple surveys used in companies for self defense. Even though these surveys were performed in the same time period, the other variables noted above are more important to control to keep a consistent measurement. Multiple surveys performed by different organizations with different objectives create more problems than the solve. Don't do it!
These rankings do not appear to be consistent with the university study which showed the following:
1. Tourism (hotels and accommodations) services was down 2.4 points from 71 out of 100.
2. Food and beverage sector was down 2.3 points to 65.4.
These results do not track the a separate survey by Singapore Retailers Association that uses a mystery shopper program and measures 155 retail companies. These results showed average scores increased to 73.61 from 70.87 as compared to the national customer satisfaction index which rated the retail sector at 68.2 out of 100, down 0.4 points.
The bottom line is that multiple measures cause confusion. Different questions, scales, and sample demographics often lead to finger pointing. I've seen multiple surveys used in companies for self defense. Even though these surveys were performed in the same time period, the other variables noted above are more important to control to keep a consistent measurement. Multiple surveys performed by different organizations with different objectives create more problems than the solve. Don't do it!
Wednesday, April 15, 2009
Happy Employees Do Not Make Satisfied Customers
There is some interesting research being done in the UK. Rosa Chun is a professor of business ethics and corporate social responsibility and Gary Davies is a professor of corporate reputation at Manchester Business School. They have been investigating the validity of the assertion that seems to stem from the 1994 Harvard Business Review article "Putting the Service-Profit Chain to Work" and the subsequent book by James L. Haskett that happy workers equal happy customers. The concept of happy employees equal happy customer has been a mantra of high profile executives such as Gordon Bethune, the former CEO of Continental Airlines and many other public, private, non-profit and governmental organizations.
These academics have created a survey of customers and staffs of 49 business units and 13 service organizations in the UK. The survey covers fields ranging from financial services to retailing.
They start out with the statement that they haven't seen any hard data that supports the idea that happy workers equal happy customers. In fact, their research failed to confirm that service businesses with more-contented staff also have more satisfied customers. They found a positive correlation between happy employees and happy customers in only one firm where the business units with employees with higher satisfaction also had happier customers. There were two firms in their sample that had negative correlation between happy employees and happy customers.
Perhaps one of the most startling outcomes of their study was the factors that apparently increased customer satisfaction seemed to decrease employee happiness. The researchers admit there is a great deal of evidence that there is a causal link between happy customers and higher profits but there are a great number of steps to reach happy employees equal happy customers (or loyal customers). It appears that using a happy employee in a service role is not enough to win customer loyalty.
The bottom line is this research is important and needs further verification because there are many companies that hold the belief that happy employees equals happy customers and that this new knowledge may well change their strategy of how to create satisfied and loyal customers. There are several areas that need further investigation; namely,
1. What is meant by happy and how is it measured? (These definitions may be answered in the full documentation of the research.)
2. Would either of the definitions of happy include the topic of compassion that was discussed in my blog from yesterday (April 14th)?
3. What is the satisfaction criteria that indicates a satisfied customer?
4. It is not clear how many actual employees and customers were included in the sample.
I look forward to further information about this very important relationship since there are so very many companies that are spending a great deal of their resources to create "happy employees" with the expectation that it will lead to satisfied customers and perhaps loyal customers.
These academics have created a survey of customers and staffs of 49 business units and 13 service organizations in the UK. The survey covers fields ranging from financial services to retailing.
They start out with the statement that they haven't seen any hard data that supports the idea that happy workers equal happy customers. In fact, their research failed to confirm that service businesses with more-contented staff also have more satisfied customers. They found a positive correlation between happy employees and happy customers in only one firm where the business units with employees with higher satisfaction also had happier customers. There were two firms in their sample that had negative correlation between happy employees and happy customers.
Perhaps one of the most startling outcomes of their study was the factors that apparently increased customer satisfaction seemed to decrease employee happiness. The researchers admit there is a great deal of evidence that there is a causal link between happy customers and higher profits but there are a great number of steps to reach happy employees equal happy customers (or loyal customers). It appears that using a happy employee in a service role is not enough to win customer loyalty.
The bottom line is this research is important and needs further verification because there are many companies that hold the belief that happy employees equals happy customers and that this new knowledge may well change their strategy of how to create satisfied and loyal customers. There are several areas that need further investigation; namely,
1. What is meant by happy and how is it measured? (These definitions may be answered in the full documentation of the research.)
2. Would either of the definitions of happy include the topic of compassion that was discussed in my blog from yesterday (April 14th)?
3. What is the satisfaction criteria that indicates a satisfied customer?
4. It is not clear how many actual employees and customers were included in the sample.
I look forward to further information about this very important relationship since there are so very many companies that are spending a great deal of their resources to create "happy employees" with the expectation that it will lead to satisfied customers and perhaps loyal customers.
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