Customer Satisfaction & Loyalty Measurement

What is it?

Most companies depend upon repeat business and ongoing revenues from their existing customer base for their survival. Not only is the existing customer base a key source of revenue; many new prospects will seek out the opinion of existing customers in order to help them decide whether or not to buy from you.

A loyal customer base that is happy to sing the praises of your business is essential for any business.

For this reason it makes sense to understand customer satisfaction and loyalty and to monitor this over time. In order to do this we can design customer satisfaction surveys that provide a detailed insight into how well or badly you are doing and, more importantly, what can best be done to move things forward.

Specific techniques we can deploy include:

  • Net Promoter Score
  • Performance Drivers & Key Drivers
  • KANO Analysis
  • Company Health Check

Net Promoter Score

A well-known tool often associated with customer loyalty measurement is the Net Promoter Score (NPS). The NPS developed by Fred Reichfeld in 2003 and has proven to be a popular business metric ever since. NPS aims to measure customer loyalty through a single simple question:

How likely are you to recommend our company/product/service to your friends and colleagues?

The scoring for this answer is based on a 0 to 10 scale (giving an 11 point scale, with a mid-point).

Reichfeld discovered that the answers to this question had a strong relationship with to future customer behaviour and, in particular, the difference between those customers scoring 9+ and the proportion scoring 6 or less often gave a strong indication of the health of a business and a good measure of customer loyalty (or the risk of switching to competitors).

Ever since NPS has served as a good base measure of satisfaction – raising early alarm bells in terms of the risk of customers switching to a competitor. However, whilst the NPS will highlight whether your brand is performing well or poorly, it will not, in and of itself, tell you why your brand is performing well or badly. For these reasons, people very often look at other measures alongside NPS in order to obtain a more detailed views of business performance.

Performance Drivers & Key Drivers

Understanding how well your brand is performing is important, but in and of itself it only takes you so far. However, if you additionally measure key aspects of your product/service offering in terms of their importance and also in terms of performance.

This approach adds an additional layer of information beyond NPS, enabling us to:

  • Identify which specific aspects of your product/service offering are performing well and which are performing poorly.
  • Highlight which aspects of the offering are seen as the most/least important from a customer’s point of view.

By correlating your brand’s performance in specific product/services criteria with an overall NPS score, it is possible to discover relationships that help to explain what is really driving excellent performance.

Your company/product may be doing well – but why? Is it the reliability of your products? Is it the quality of the products? Perhaps it is the service and support? Key driver analysis can interrogate a dataset to identify what specific aspects of your business performance have the greatest impact on overall customer loyalty and retention (both positive and negative).

KANO Analysis

In the late 1970s and early 1980s Professor Noriaki Kano and his colleagues laid the foundation for a new approach to modelling customer satisfaction.
Kano challenged the conventional belief that improving each attribute of an organisation’s product or service will lead to increased customer satisfaction. Kano believed that not all attributes of a product or service are equal in the eyes of the customer, and that some attributes create higher levels of customer loyalty than others.

Kano, identified four different types of attributes, each of which would have a very different impact on customer loyalty and retention. These were:

  1. Indifferent attributes = Aspects of the product/service that actually have limited or no impact on the customer’s experiences.
  2. Basic attributes = Get them wrong and customers are unhappy. But even if you deliver excellent service in these areas, this will not make customers delighted – it is simply no more than the minimum basic standard they expect.
  3. Core attributes = Get them wrong and customers are unhappy. Get them right and customers are pleased. These represent some of the core elements of a product or service that will always have a direct impact on customer satisfaction.
  4. Delighter attributes = Things customers do not necessarily expect to be included in the standard service. It they are absent, customers are not in any way unhappy. BUT, if they are delivered well, they are seen as “value-added” attributes that are the key to turning a happy customer into a delighted customer.

Kano developed a methodology which uses a particular form of questions to identify which aspects of a product and/or accompanying service options are of which type. This allows us to then see which attributes are having the most significant influence at present and which might have a bigger or lesser impact should performance improve or decline.

When used in combination with other techniques we can obtain a detailed level of insight in customer satisfaction and specifically pinpoint a plan of action to improve customer retention levels.

Company Health Check

A comprehensive investigation of customer satisfaction and loyalty can combine all of these techniques in one single all-encompassing survey.

In addition to monitoring NPS we can combine this will other high level metrics such as:

  • Overall satisfaction
  • Customer view of your reputation in the market
  • Loyalty (stated likelihood of repeat purchase/retention)

What’s the benefit of it?

  • Understanding what your customers think of the products/service you are supplying.
  • Understand your current strengths and weakness from the perspective of your customers.
  • Pick up on early warning signs of potential problems in the future
  • Identify why customers are switching to competitors and what can be done to stop it.
  • Discover how to increase the levels of repeat business.

When you might use it?

Many businesses undertake customer satisfaction surveys every year to continually monitor customer opinion and understand how their performance is changing in response to the past year’s events. One off surveys may also be of value in a number of circumstances, including:

  • If you are worried about customers switching to competitor offerings and you don’t know why.
  • If you are not getting as much repeat business from customers as you would like and you want to know what you can do to improve the situation.
  • You are looking for investment / new business partners and you want to demonstrate the strength of your business model to them.
  • If you just want to build closer relationships with your customers, running a customer survey shows you care.
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