Tuesday, October 27, 2009

Multiplicative versus Additive Customers

There was an interesting note in the October 22nd edition of the Philippine Daily Inquirer entitled "Customer complaints, dissatisfaction." While the article was aimed at showing that a focus on customer complaints and dissatisfiers is an excellent way to improve customer loyalty, the intriguing concept that was included in the article was that of multiplicative customers versus additive customers. Once the terms are defined, they are obvious and, I think, many of us wonder why we haven't considered customers this way before.

A multiplicative customer is usually highly demanding and who what to be satisfied for all of his/her expectations. You get a failing grade if any one of the expectations is not met. The final score is zero since the multiplicative customer "multiplies" all satisfaction scores together. A similar scenario is when the customer scores all aspects zero because one of the expectations were not met. This is often referred to as the "halo effect." In any case, customers will give extremely low scores when one or more of their expectations are not met and thus they "punish the company by giving an extremely low overall score. Thus, even though other scores on the survey are reasonable, one expectation not satisfied leads to a zero on the overall satisfaction score.

On the other hand there is the additive customer, most easily characterized as forgiving customer seems to have the ability to segment his/her response so that the final score may be averaged down due to one or more low scores but each of the other scores are considered when deciding the final score. For the additive customer, the final satisfaction score will probably represent some average of the individual question scores. In other words, this type of customer adds the scores to get a perspective whereas the multiplicative customer multiplies each score to get a measure for the overall score.

The bottom line is that everyone who is measuring customer satisfaction or customer loyalty should be aware of these two types of customers. The challenge is to figure out how to convert the multiplicative customers to additive customers. When the market is as competitive as it is these days the number of multiplicative customers seems to be increasing.

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