A Different Measure for Loyalty

The Customer Contact Council of the Corporate Executive Board has conducted a study of more than 75,000 people who had interacted over the phone or through self-service channels such as the web, voice prompts, chat and email. A brief summary of their research was published in the Harvard Business Review issue of July-August, 2010.

Their research, which took about 3 years addressed the following questions:

1. How important is customer service to loyalty?
2. Which customer service activities increase loyalty and which don't?
3. Can companies increase loyalty without increasing service operating costs?

The research covered many industries from product industries to pure service industries. Responses came from North America, Europe, South Africa, Australia and New Zealand. The research was limited to non face-to-face interactions.

The researchers evaluated the predictive power of three metrics, namely, customer satisfaction (CSAT), Net Promoter Score (NPS), and the Customer Effort Score (CES).

They based their results on the following definition of customer loyalty:

the customer's intention to keep doing business with the company, increase the amount they spend, or spread positive word of mouth.

From this definition they found that CSAT was a poor predictor, NPS proved better than CSAT. CES outperformed both in customer service interactions.

CES is measured by asking a single question: How much effort did you personally have to put forth to handle your request?

Their results are:
1. Of the customers who reported low effort 94% expressed an intention to repurchase and 88% said they would increase their spending. Only 1% said they would speak negatively about the company.
2. Of the customers who reported high effort 81% reported an intention to spread negative word of mouth.

The bottom line is that this new metric appears to have merit. The statistics strongly suggest this has the ability to detect loyalty at the operational level. The next several blogs will provide further detail on this metric.