Saturday, November 20, 2010

Loyalty versus Trust

Edelman is the world's leading independent Public relations firm (at least that is what they advertise). Of interest is their Edelman Trust Barometer. They have just released their 2010 Edelman Trust Barometer Survey results. They report that they sampled 4,875 informed participants in two age groups (25-34) and (35-64). In order to qualify for the survey each must be college-educated with a household income in the top quartile for their age in their country. They must also read or watch business/news media at least several times a week and follow public policy issues in the news at least several times a week. Each interview participates in a 25-minute telephone. The results published in the 2010 survey was based on interviews between September 29 and December 6, 2009. The measurement is based on a 9-point Likert-type scale for trust. The scale notes that 1 denotes the lowest trust and d9 represents the highest trust.

With this background, it appears that their measurement system appears to follow sound survey techniques. They have summarized some of the general results that maybe of interest, namely,
1. Global trust in business is up modestly for the year.
2. The gain may be due to a spiked increase in a handful of Western countries. The trust measurement increased 18 points to 54% for the United States.
3. Trust also remains high in Brazil, India and China who each have a trust measurement higher than 60%.
4. The quality of products and services ranks higher than financial returns. according to Mr. Edelman,"Trust is now an essential line of business to be developed and delivered.
5. There appears concern by the majority that there will be a return to business as usual by companies as the economy recovers.
6. Sweden, Canada and Germany remain the most trusted countries for global headquarters.
7. Trust in government appears to be stable. However, the trust in the US is up 16 points to 46% and in Russia trust has decreased by 10 points to 38%.
8. In 20 countries corporate or product advertising continues to be the least credible source of information at 17%.
9. Reports from industry analysts and articles in business magazines remain the most credible sources of information about a company. However, the trust in mainstream media is waning.

Mr. Edelman notes that "we're seeing a vastly different set of factors driving reputation that we did 10 years ago". This is consistent with measures of loyalty that appear to have very different factors driving loyalty with an individual company.

The bottom line is that we now have another measure by which we can assess a company's strength in the market. The next step will be to compare these measures of trust with financial performance as has already been done using the ACSI measurement.

To learn more about the Trust Barometer you can find Edelman on the web at

Friday, November 19, 2010

Customer Facts to Consider for Improved Loyalty

I am close to the edge of doing what offends me. I am tired of reading 5 ways to increase loyalty or 7 steps to improve customer satisfaction or 6 ways to avoid losing customers, etc. I am about to walk on the edge by noting some information that may help you improve your customer loyalty. I have taken these facts from a blog by Loyalty 360 titled "11 Key Customer Loyalty Trends for 2011". I will leave the blog alone except that within the blog there were some statistics that might provide some guidance for the new year.

Here are some statistics that, in my opinion, might have relevance to understanding customers:
1. Behavioral economists note that economic decision making is 70% emotional and 30%rational.
2. A 20009 Gallup survey found that those companies that are in the upper half of both customer and employee engagement get a 240% boost in bottom line results compared with those who are in the upper half of customer engagement or in the upper half of employee engagement who only get a 70% boost.
3. Customer engagement is the holy grail for loyalty initiatives because engagement yields loyalty, advocacy, trust and passion which are the components that directly impact the bottom line.
4. The 18 to 35 year-olds' are particularly responsive to social and green issues. 85% say they would switch brands because of such marketing and 73% said they would try a new brand.
5. The National Restaurant Association found that 84% of those members who responded plan to invest more in their loyalty initiatives in the future because of the proven ability to drive business growth.
6. A surprise finding is that traditional incentive marketing does not drive consumer participation as much as achieved by gaming. The statistics are that 200 million people play games on Facebook every month and 24 games have more than 10 million users per month. The point is that a good game can impact consumer participation and may help build a lasting relationship and/or brand loyalty.

While there is no BIG message in this blog, it does provide some insight about customers. The bottom line here is that customers continue to change and are becoming more connected using social media. Companies must be prepared to adjust their strategies to meet the changing face of the customer.

Friday, November 12, 2010

Is the Impact of the Internet on Loyalty Positive or Negative

Forrester Research has completed a study in the UK that suggests the Internet has created a platform that is having a negative effect on customer loyalty. A summary of the research was reported in in their 11/10/2010 issue. Some of the statistics that were derived from a survey of 500 shoppers in the UK are:
1. 60% of UK shoppers have not decided on the brand they will purchase before buying a product online.
2. 86% of the shoppers use ratings and reviews for online purchases.
3. 44% go online before buying products in-store.
4. 42% use their mobile phone while shopping of whom 16% used their phone to compare prices with other stores.

The UK is a relatively mature market. The average UK shopper spends about $900 annually compared with $750 in the US.

Based on these statistics one might conclude that shopping has become more of a commodity and buyers are either price or value shopping. There is little, if any, loyalty in price or value shopping unless the shopper adds value for a particular store or company.

On the other side of the coin there is an interesting note in that describes how companies can use Facebook and Twitter to increase incoming traffic to a website. Here are the steps that are suggested:
1. Sign up to Facebook.
2. Make friends in Facebook by joining groups or communities that match your market niche.
3. Send a friend request to people in the community or social network.
4. Use your existing customer's contact email in your email account.
5. Start promoting your business on Facebook - but do it tactically. One way is to promote your website is to create Fan pages representing your business and add people there.
6. Update your Fan pages with the latest happenings in your business.
7. Use Tweets to get the same message out.
8. Let users post their message so that it will be visible for all buddies in the friend list.

The bottom line is that the Internet can be a friend or enemy. It can be a friend if you learn how to use it to attract customers. It becomes an enemy when you allow your business to become a commodity with all your competitors. You choose.

In this new world of instant communication, those who understand the Internet will have a distinct and superior advantage to those who do not.

Saturday, November 6, 2010

Who Cares About QBE?

I think many fall into the trap of naivete' when it comes to customer satisfaction surveys. The belief is that the customers are NOT influenced by the survey questions. In the normal course of purchasing and receiving products and services many people do not give much thought to their level of satisfaction, would they purchase again or would they recommend the product or service to a friend or colleague. It is not until the survey arrives (call/Internet or hard copy) that the customer begins to think a little deeper in order to answer the questions on the survey.

This phenomenon is referred to as QBE or "question behavior effects." In other words, the questions themselves induce responses which may cause customers to think more deeply about the answers and may even impact current or future behavior toward the company who sent the survey. This topic came up in a research article by Dholakia, Singhand Westbrook from Rice University titled "Understanding the Effects of Post-Service Experience Surveys on Delay and Acceleration of Customer Purchasing Behavior: Evidence from the Automotive Services Industry" and published in the Journal of Service Research Issue 13(4) pages 362-378.

One interesting outcome of the research was the difference noted in the quality evaluations when the customers are forewarned that they will soon receive a survey versus those who receive the survey with no forewarning. The customers who were forewarned reported lower evaluations and reduced their willingness to purchase and recommend the service. The authors suggest that this phenomenon is "negativity enhancement." What the authors are suggesting is that customers who are forewarned tend to focus primarily on negative aspects of their service experiences since they have the time to reflect on their event. Whereas those customers without the forewarning don't have the time to dwell on how they will respond and hence they are more likely to give a more balanced response.

The bottom line is the reminder that surveys are not simple. Yes, it is easy to write questions that may have simple flaws but even the best written surveys must be viewed with the perspective that there may be some customer behavior that will result from the questions themselves. I will have more to say about QBE in future blogs.

web visitor stats
OptiPlex 755 Desktops