Innovation

Tradition can be a constraint. When working in industry many years ago, I worked for a company that had been in business for 125 years. Needless to say, the company was loaded with "tradition." The favorite response to any desire to improve the business performance was "but we've always done it that way." I would walk down the brick-lined halls and I could feel the walls quietly saying "we've always done it that way." In many ways industry has become filled with tradition in the ways that we measure customer satisfaction and loyalty. Different measures of satisfaction and loyalty arise and become popular only to fall into the abyss of time when another measure is announced. As Yogi Berra said, it is deja vu all over again. We have been using mail surveys, phone surveys and most recently Internet surveys to gather customer information. The response rate seems to relate to the importance of the product or service to the customer. Surveys at McDonald's will not get the same response as surveys on cat-scan equipment at the hospital. Usually the survey response for the retail industry (such as McDonalds) falls far behind the response rate of B2B.

Well, a small company in Windsor, Ontario, Canada has developed an innovative method for dramatically increasing response rates for surveys. The company, Tellbob, Inc. collects instant customer feedback for retailers, businesses and institutions on web-based terminals (computer kiosks) and hand-held mobile units. The customers are instantly rewarded with either a coupon that can be used immediately or some other form of reward. The kiosk-based technology and mobile units with touch screen technology makes it easy for the customer to answer questions and submit comments before printing out a coupon.

The system gives immediate feedback on questions shortly after the point of sale. The obvious benefit is that the data is up-to-date without the time lapse that results when the customer answers a survey at some later point in time (filling out a response card or answering an Internet survey). A secondary, but no less important aspect is the survey can be modified quickly to capture customer trends or major problems before they get out-of-hand.

The preliminary results reported by one of Tellbob's customers, Marble Slab Creamery, indicated a redemption rate of 85%. Wow!!!

The bottom line is that the customer can give immediate feedback in an easy to use way and is instantly rewarded. This is definitely a step forward for the companies that deal directly with their customers face-to-face. I like it.

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.?

On-going Validation that Satisfaction Matters

Thee was a short blog by Kevin Thomson on Webtrends on June 2, 2010. The author pointed out that investing $100 in the S&P 10 years ago would be worth $81 today whereas that same investment in stocks from companies that scored well in the ACSI index would be worth $372.13 today.

This tracks very well against an article published in the Summer 2007 edition of The Business Renaissance Quarterly by Bleuel and Stanley titled "Customer Focus: One Key to Financial Success" that demonstrated similar results. The authors reviewed 12 industries that were represented in the ASCI index. The authors compared the best and the worst (in terms of their ASCI index) in each of the industries and found statistically significant differences (at the 5% level) for the following financial measures:
1. Cash Flow (16.4 versus 3.4)
2. Price Growth (59.7 versus 34.6)
3. Earnings Predictability (76 versus 51.8)
4. Beta as a measure of risk (0.95 versus 1.23)

In addition there was a statistically significant difference between the average ACSI scores for the best companies versus the worst companies.

The bottom line from both of these examples is that companies that have a strategy that includes a strong customer service component tend to have better financial performance than those that do not.