Wednesday, June 9, 2010

Measurements Raise More Questions Than Answers

As we read some of the publications that are found on the web some of the information raises interesting questions. This may be one of the most boring blogs written for The Customer Institute. I am basing my concern on a chart that had some very interesting and, in my opinion, some worthwhile information. The chart was titled "The Impact of Problem Resolution on Loyalty." The chart showed information taken from five different industries and noted how the "loyalty" changed depending whether problems left the customer satisfied, mollified or dissatisfied. It also added the score if there was no problem. The group of customers that had no problem recorded the highest level of loyalty.

I actually liked this chart and the reason I am using it as an example is that it is a great example of making a very important point but then gets lost when the scales on the axes don't follow the content of the chart. The concern I have with this particular chart is that the scale used on the y-axis of the chart is labeled "Repurchase Intention." WOW!

How do you get from measures of loyalty to repurchase intention? While it is easy to say there is some relationship between loyalty and retention, it requires a GIANT leap of faith to then put it into a chart that does not indicate loyalty on the y-axis. Some of the questions that come to mind are:

1. Is the relationship between loyalty and repurchase intention synonymous? If yes, then it is ok.
2. If they are not synonymous is there a linear relationship between the two terms?
3. If there is a known linear relationship between these two variables, I have yet to see the data and research to support it.

The bottom line is that we must always pay attention to the charts that always seem so compelling. There is no guarantee that the charts represent the information correctly. I have witnessed past transgressions that included showing a linear relationship between customer satisfaction and loyalty. While the scatter plot of the data implied a linear relationship, the r-square for the linear relationship was so low that the assumption that a linear relationship existed took a lot of courage to swallow.

We need some carefully designed experiments to demonstrate the relationships between these terms that we live with every day. What is the relationship between satisfaction, loyalty, repurchase, etc.?


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