Introduction to loyalty metrics
The Temkin Group is all about loyalty and loves to publish insightful information that is very important and easy to get your head around. They derive this information from what appears to be an endless stream of consumer surveys, and they present it in ways that are clear and timely.
In their February 23, 2017 post “Customer Experience Leads to Recommendations (Charts for 20 Industries),” the Temkin Group published two figures, the subject of this post. Their post also includes 20 charts, one per significant industry, which I will not discuss here. You can see them by following the previous link.
This figure shows the impact of Customer Experience (CX) on loyalty:
When discussing loyalty, the Temkin Group looks at four outcomes of being loyal; Likely to Repurchase, Recommend, Trust, and Forgive. Before discussing this further, I include this figure so you can understand the Temkin Group’s terminology:
The second figure includes the wording of the questions about each outcome, the scale used, and how they define “goodness.” They use the NPS 11-point scale for recommendations and think the top three boxes to be goodness. For repurchase, forgive, and trust, they use a 6-point scale, with anchors on each end, and consider the top two boxes as goodness. It doesn’t matter what you consider distinction in your program; it is only essential to be consistent with trending the data and getting meaningful results.
Interrupting the Data
I will focus on the Repurchase chart of the first figure to talk through how to think about this data, but everything I write is equally applicable to all four areas of loyalty.
The first point to note is that the chart does not tell us what percent of the respondent’s ratings fell in each of the five satisfaction categories (very poor, poor, okay, good, and excellent) but only the percentage of each type that satisfies the requirements defined in the second figure. We often see that the ratio of okay or good exceeds that of excellent. Also, it would help if you did not assume that each category’s rate is higher than any of the lower categories.
The second point is that the columns represent the percent of “likely” responses to repurchase, as defined in the second figure. This means that 86% of everyone who reported having an excellent interaction also rated a six or seven on the likely to repurchase question. At the other end of the CX scale, 13% of the people with a very poor experience were also likely to repurchase from the company.
willFor your internal improvement program, I always recommend focusing on the top box, the best choice, instead of considering the top two or three boxes as goodness. The conclusion is that the better the customer’s experience, the more likely they will demonstrate loyal behavior. I recommend this because the loyalty percentage would be less if the data was presented for just the top box (which generates the most significant loyalty)…why delude yourself? It would help if you always looked for the absolute truth and did not give yourself a false sense of security.
The data also leads us to two questions:
How come 14% of people having an excellent experience would not definitely repurchase?
How come 13% of people with a very poor experience would definitely repurchase?
Why would very satisfied customers not repurchase?
As you might expect, there are several possible reasons:
- They do not need another one. For example, you bought your youngest child a snowsuit and plan to relocate to the south before the next snow season.
- You are working for an organization that prohibits you from endorsing a product. This is very common in both the healthcare industry and in government.
- You purchased the product in an outlet and have no idea where to go to get it again in the future.
Why would very dissatisfied customers repurchase?
Again, several reasons:
- For example, most communities have a monopoly on home water delivery. The supplier has a real or virtual monopoly. Also, many families have only one cable provider. You may hate them but believe that something is better than nothing.
- Some communities have multiple cable providers, but the cost and hassle of switching mean that some customers are dissatisfied and yet will renew their contract when it comes up for renewal.
- People are loyal to medical professionals even though they run a terrible office. If you have a “painless” dentist who is never on schedule, you will very likely keep going back because the frustration of sitting in the waiting room is minor compared to the benefit of having a pain-free procedure.
The results and conclusion can easily be changed.
While these examples are real, they are not necessarily permanent. If a new dentist moves into your area and some of your friends try the new person and are amazed by their experience, you are highly likely to switch. I am sure you can construct similar reasons why people would switch for all the examples I just listed.
The point here is that none of us has customers for life. If we don’t consider our customers as being leased instead of owned, we are setting ourselves and our business up for a significant shock.
For example, the de Havilland Comet jet made its first commercial flight in 1952, and the Boeing 707 made its first commercial flight in 1957. The Comet never caught on, and Boeing thought it had cornered the market with the 707. But by 1972, the first Airbus A300 made its first flight, and now Boeing and Airbus equally share the commercial need for large jet transports. There are no customers for life.
Even if your product or service is better than your current competition, you are always vulnerable to being eclipsed by someone with a better product/service, or experience. The solution to both is continuous improvement with your products and services and how you engage with your customers.
Remember that business is a marathon, not a sprint.
About Middlesex Consulting
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