Saturday, September 29, 2007

Product Impact on Customer Loyalty

Yesterday I noted that relationship was one of the three components of customer loyalty and referred to a survey which showed the impact of customer service in terms of advise and knowledge provided by employees without giving the shopper a bad experience. The statistics, based on the 12,000 shopper survey, was dramatic (95% of the shoppers indicated the sales associates are very/somewhat important). See yesterday's blog for more detail.

I am following this study with results from two other studies. These two studies were performed by JD Power and Ispos, both of whom surveyed the digital camera market and each examined usage and customer satisfaction. The study was completed during the spring of this year (2007). Ispos indicated a sample of more than 1000. JD Power did not indicate the sample size but a fairly large sample would be expected. The findings are noted below:
1. 70% of internet households own a digital camera.
2. 61% own a photo printer.
3. Nearly 24% of the respondents chose Canon as the most frequently named brand according to the Ispos survey. JD Power also indicated that Canon led the list as best manufacturer.
4. A 10-point improvement in overall satisfaction can lead to a 1-percentage point improvement in brand loyalty (particularly within the point and shoot, premium point and shoot and ultra slim segments of the market) according to JD Power.
5. The variables used to score the cameras included picture quality, performance, operation and appearance and styling.
6. JD Power also found that 36% of all camera owners report that positive recommendations from friends and family played a strong role in their purchase decision.

These studies tend to support the notion that loyalty has a strong product component. In this case, I have made a leap-of-faith by assuming brand loyalty and product loyalty in this market are relatively synonymous. With this assumption, the results fall neatly into my previously described 3 parameter model for customer loyalty; namely, product, process, and relationship are the three base ingredients to customer loyalty.

Friday, September 28, 2007

More Support for a Three Parameter Loyalty Model

I continue to look for support for a three parameter loyalty model. The three parameters are product, process and relationship. I continue to discount all award programs as contributors to loyalty. My reason for not including these programs is that they do not breed loyalty. Awards offer customers encouragement for buying their product or service but are only as good as the award and does not carry any persistence. The value of the award is only as sustainable as the market allows. As soon as a competitor provides a "better deal", there is no longer any reason to remain "loyal".

Now, the good news. A recent study conducted by M/A/R/C(R) Research and National In-Store found over 16% of consumers said they would stop visiting a store all together as a result of a bad customer experience. The next significant statistic is over 95% of consumers indicate sales associates are very/somewhat important with about 66% indicating they are very important. An interesting quote in the study is "while product and price may bring customers in the door, executing expected level of customer service keeps them from walking out and into a competitor's store".

This study included responses to an online survey from over 12,000 shoppers and in-store audits of almost 4,000 office supply and consumer electronics stores.

The bottom line is that award programs and discounts can bring customers in, but they are NOT a component of loyalty! Loyalty comes from a product that is so attractive, that other products do not compare in the eyes of the customer. Loyalty can also come from a service that is unmatched. And FINALLY, loyalty comes from building a lasting relationship with the customer.

Thursday, September 20, 2007

Big Statistics on Customer Satisfaction

I recently completed a study of customer satisfaction using 350,000 survey responses from around the world. I used the data from 10 companies that used a phone survey (translated into the local language. The surveys covered field service, help desk and depot service for technology equipment.

One finding was that countries in North and South America and Asian countries scored higher in cusotmer satisfaction than European countries. I have spoken with some people I consider knowldgeable about technical service and global business about my findings. Much to my surprise, without exception they all nodded affirmatively that the results matched their expectations.

The purpose of the study was to examine customer satisfaction from a cultural perspective and detect differences in satisfaction. The diffrences I found were mostly in Europe and, in general, the satisfaction levels in Europe were lower than other areas of the world. One comment was that the Europeans do not regard service at the same level of importance as those in other areas of the world.

With this amount of data, there will be further investigations into the differences around the world. One of the projects I expect to investigate is to detect the differences, if any, between companies who out-source help desk activities and those that keep the help desk in house. Of course, a country-by-country examination is also an interesting project.

Monday, September 17, 2007


RightNow Technologies has recently sponsored a survey that was performed by Harris Interactive and which provides some interesting statistics. The source I used did not discuss the methodology of the survey but did note they sampled 2,000 adults. Some of the more interesting findings are:
1. 80% of the respondents vowed never to buy from the same company after a negative experience. This value is up from 68% that was noted in a 2006 survey.
2. About 28% said they cursed as they wrangled with the customer reps during their phone call.
3. About 19% admitted shouting at the customer rep.
4. Harris Interactive provided some further detail by area of the country.
4a. Northeastern customers are unlikely to get emotional - they just take their wallet to another company.
4b. Midwestern customers are most likely to swear (34%).
4c. Southern customers are least likely to swear but 12% fantasized about picketing or defacing the company's headquarters.
4d. Western customers are more likely that the average customer to turn to the web and vent on a blog. 83% said they would never do business again with the offending company.

These statistics are not unreasonable. The customer today is much more sophisticated and more demanding. It is showing up more and more in the research. The companies that maintain a strong customer focus will outperform financially those companies that do not have a customer focus. I demonstrated this effect that improved financial performance coincides with a customer focus with a colleague in a recent article "Customer Focus: One key to Financial Success."

These statistics also support my notion that dissatisfiers are much more important to manage than satisfiers. Customer surveys should focus on the dissatisfiers rather than the "feel good" satisfiers. Managing dissatisfiers is where the action is.

Thursday, September 6, 2007

Customer Loyalty Metrics by Accenture

I just read the latest issue of CRM magazine, September, 2007 and read a comment by Woody Driggs who is the global managing partner for the CRM serivce line at Accenture. If I read his column correctly, Accenture has a loyalty metric that has the following components:

1. Involvement with the Product or Service Category - this metric looks into how interested customers are with products and services. Apparently Accenture looks into the degree of involvement by customers with either the product or service or both.
2. Commitment to the Brand - this metric looks at the level of passion that customers have about the brands they buy. They are measuring the degree to which customers are willing to pay a premium for a brand. They also want to know if the customer is an advocate for a brand.
3. Likelihood to reevaluate - this metric measures how prone customers are to reevaluate their buying choices. Apparently they are trying to find the points at which customers are willing to switch.

I have simplified the definitions provided by Mr. Driggs and hope that in my simplification I have not distorted their meanings. If so, I apologize. These three components generally follow the three components of my loyalty model which are product, service and relationship. The component that they include that is not included in my model is brand loyalty.

This brings up an interesting dimension that needs to be evaluated further. The question I must answer is whether or not brand loyalty is just a composite of the three components in my loyalty model or is it really a new variable (component of loyalty). The question that comes to my mind is whether or not you can have brand loyalty without having product, service or relationship loyalty or is this a summary variable that is some function of some of them or all three. Is the brand loyalty variable an independent variable or does it have a high correlation to the three in my model and hence not really a separate variable?

Accenture believes this model will increase a company's ability to improve segmentation and improve their market focus and help them retain the most profitable customers. My previous blog demonstrates that a company with a customer focus will out perform those companies who do not have a customer focus. This suggests that Accenture will improve their client company's performance whether their model is correct or not.

More on the brand loyalty variable issue later.

Wednesday, September 5, 2007

Customer Satisfaction and Financial Success

I have seen a number of blogs that downplay the impact of customer satisfaction on the financial performance of the firm. I have just published (with my co-author) a refereed article that shows that there is a statistical relationship between companies with a customer focus and the financial performance of the company. The article is "Customer Focus: One Key to Financial Success". It is published in Volume 2, Issue 2 of the Business Renaissance Quarterly (Summer 2007), pages 41-49.

In the article we analyzed 30 companies in twelve industries and used the ACSI scores from the University of Michigan as the basis for their customer focus. We then tested the companies that had high ACSI scores against those who had low ACSI scores within each industry. All companies had to be listed in the Value Line Investment Survey and we used the financial data from the March 27, 2007 issue. We used 7 different financial measures including Beta, growth in sales, growth in cash flow, profit margin, price stability, price growth consistency, and earnings predictability. Four of the financial statistics were statistically significantly higher for those companies with high ACSI scores. The three that were not statistically significant had very large variances. There was no measure in which the worst companies had financial performance better than the best companies.

Saturday, September 1, 2007

CFiq versus NPS

It looks like the IBM Global Businesss Services group has developed a new measure for customer advocacy that may be intended to compete with NPS. the IBM measue has the acronym CFiq which stands for Customer Focused Insight Quotient. In fact, they have Trademanrked the CFiq acronym.

IBM has published two reports using this measure; one is for retail banking and the other is for the property and casualty industry. The three questions IBM appears to be using for the property and casualty industry are:
1. I would recommend my insurance agent/carrier to friends and family.
2. I would buy my next product from my agent/carrier.
3. If another insurance carrier offered me a competitive insurance product I would remain with my insurance agent/carrier.

For the retail banking study IBM apparently used the following questions:
1. I would recommend my bank to friends and family.
2. I would go to my bank first for future financial services needs.
3. I would stick with my bank if offered a competitively priced product.

The two sets of questions are suffiently similar to conclude that CFiq will probably apply to many industries.

Their analysis allocates customers into three groups; namely
1. advocates, those who have a high likelihood to recommend, high purchase intent and low switching intent
2. apathetics, those in the middle tier
3. antagonistic, those customers in the lowest tier who probably have characteristics opposite the advocates.

This metric appears to be well researched and according to their reports was created by surveying over 18,000 consumers across multiple industries.

IBM has characterized a customer focused enterprise (those that would be users of CFiq) with the following;
1. the company understands customer authority.
2. the company maintains a customer dialog.
3. the company integrates its functions to provide a consistent experience for their customers.
4. the company seeks solution experiences that address broader customer needs and desires.
5. the company focuses on a human performance approach that allow employees to better meet their personal and organizational objectives.
6. the company focuses on transforming its own organization to fullfill customer-centric strategies and objectives.

I believe IBM is making a statement that CFiq is to be preferred over NPS when they make the statement in their report "Unlike other satisfaction or advocacy measures, the CFiq goes beyond a single measure of satisfaction or a likelihood to recommend."

web visitor stats
OptiPlex 755 Desktops