Developing a Customer Centric Research Program

Copyright © 2010 Business Over Broadway
Developing a Customer-
Centric Research Program
Applied Research Projects to Improve the Customer
Experience and Maximize Customer Loyalty
Bob E. Hayes, Ph.D.

• Uses of Customer Satisfaction Data
• Customer Feedback and Customer Surveys
• Goals of a Customer Research Program
• Data Analysis Approaches
• Applied Research
Overview

• Make business decisions
– Become a customer-centric organization
• Measure product and service quality
• Increase understanding of the customer relationship
– Understand predictors of and outcomes of customer
satisfaction and customer loyalty
• Compensate employees
• Maximize customer loyalty and financial performance
Uses of Customer Satisfaction Data

• Relationship Satisfaction Surveys
– Focused on overall relationship with the customer
– Delivery is not time-dependent (done at company discretion)
– Includes Business Attribute questions and Loyalty-based questions
• Typically have ratings of Satisfaction
• Transactional Satisfaction Surveys
– Focused on specific customer transaction
– Delivery is time-dependent on transaction occurrence
– Includes Business Attribute questions and Loyalty-based questions
• Typically have ratings of Satisfaction
• Both survey types can be used for a given
Account/Customer
Customer Feedback and Company
Surveys

• Improve the customer experience and maximize
customer loyalty
• Develop deeper understanding of the customer
relationship
• Enhance customer-centric culture
• Ensure business incorporates customer-centric metrics
• Maximize value of customer feedback program
Goals of a Customer Research Program

Data Analysis ApproachesBasicanalyses
 Descriptive statistics to summarize information across all customers; used
for benchmarking purposes
 t-tests to study important segment differences (e.g., Gender, Age,
Regions)
 correlational analysis to determine drivers of implementation success
Advancedanalyses
 Regression/Multiple regression analysis to develop predictive models of
customer loyalty
 ANOVA to understand group/segment differences (e.g., Customer size,
Region, Product type)
 Factor analysis to build summary metrics, and to understand the basic
structure of customers’ attitudes and to develop psychometrically sound
measures of customer satisfaction
 Structural Equation Modeling to develop statistical models of customer
satisfaction

1. Validating your customer feedback programs
2. Creating reliable, valid and useful business metrics
for executive dashboards
3. Quantifying the impact of customer loyalty on
business performance measures (e.g., revenue
growth, sales volume, defection rate)
4. Identifying business areas that significantly impact
customer loyalty
5. Evaluating the effectiveness of company-wide
programs
Applied Research Examples

6. Identifying the important elements of employee and
partner satisfaction that will improve customer
loyalty
7. Determining customer satisfaction and loyalty
criteria for incentive compensation programs
8. Building customer-centric operational metrics to
align employees
9. Benchmarking best practices across the company
10.Developing employee training programs that impact
the customer experience
Applied Research Examples

• Must be concerned about the quality of the data from
customer feedback systems
– Good measurement processes lead to good business
decisions
• Use of customer feedback systems helps organizations
make better customer-centric business decisions
– Compensating employees
– Allocating company resources
– Changing business processes
• Survey validation efforts are designed to provide an
objective assessment of the quality of the survey
program
– Ensure survey results reflect reliable, valid and useful
customer feedback
– Identifies areas needing improvement
1. Validate your customer feedback
program
– Benchmarking best practices
– Developing training programs

• Reliability reflects the degree to which
scores are free from random error
– Reliability deals with precision/
consistency
– Goal is to have a measurement system that
delivers reliable results
– Reliability varies from 0 (no reliability) to 1
(perfect reliability)
• Validity reflects the degree to which
scores are measuring what they are
designed to measure
– Validity deals with the meaning of the scores from the
measurement system
– Goal is to have a measurement system that delivers valid
results
1. Validate your customer feedback
program
ValidNot Valid
ReliableNotReliable

• Metrics summarize customer data for easy
consumption
– Do not overwhelm executives with minutia
– Details best suited for managers who need
operational-level data
• Metrics provide an accurate view of business
performance
– Metrics consolidate many pieces of information into
manageable size
• Metrics reflect summary of individual survey
questions that assess general areas
– Product attributes, Service attributes, Advocacy
Loyalty, Purchasing Loyalty, Perceived Value
2. Reliable, valid and useful business
metrics for executive dashboards

• Executives want a picture of the health of their
company without sifting through 50 questions
• Consolidate 50 questions into fewer metrics that
are reliable, valid, and useful
– Factor analysis is used to assist in creation of metrics
• Metrics could reflect Loyalty Indices, and
Satisfaction Indices (Product/Service)
2. Reliable, valid and useful business
metrics for executive dashboards
Metric 1
Aggregate
questions:
Q1
Q2
Q27
Q33
Q34
Q3
Q4
Q29
Q30
Q6
Metric 2
Aggregate
questions:
Q28
Q40
Q48
Q49
Q31
Q32
Q7
Q8
Q9
Q10
Metric 3
Aggregate
questions:
Q11
Q16
Q20
Q21
Q12
Q39
Q5
Q41
Q22
Q23
Metric 4
Aggregate
questions:
Q24
Q25
Q17
Q18
Q19
Q44
Q45
Q13
Q26
Q35
Metric 5
Aggregate
questions:
Q36
Q37
Q38
Q42
Q43
Q14
Q15
Q46
Q47
Q50

• If I improve customer satisfaction/loyalty scores
by X%, what is the corresponding increase in
revenue?
• Business linkage analysis combines customer
feedback data with important business outcomes
– Revenue
– Sales
– License renewal rates
– Purchasing behavior
• Determine statistical relationships between
customer satisfaction/loyalty and business
outcomes
3. The impact of customer loyalty/
satisfaction on business metrics

• Customers who reported higher levels of customer
loyalty1 purchased significantly more products 2007
than customers who reported lower levels of customer
loyalty
3. The impact of customer loyalty/
satisfaction on business metrics
0%
10%
20%
30%
40%
50%
60%
Customers Reporting
Disloyalty
Customers Reporting
Loyalty
Customers Reporting
Extreme Loyalty
PercentofCurrentCustomersPurchasing
AdditionalProductsin2007
1 Customer loyalty scores are based on the results of Customer Survey. Customer Satisfaction Survey for customers who made their
first purchase from Company in 2006. Correlation between Customer Loyalty and repurchase (N = 322) was r = .13, p < .05.
55%
increase

• Loyalty Index is computed from key loyalty questions
• Regression (Correlational) used to quantify the degree to
which business attributes
directly impact loyalty
• Uses
– Measure the “derived
importance” or “impact” of
each attribute on loyalty
– To increase customer loyalty,
allocate resources to areas
that have a large impact
on loyalty AND have low
“performance”
4. Identify business areas that impact
customer loyalty
Driver Analysis - Advocacy Loyalty
0.45
0.50
0.55
0.60
0.65
0.70
3.5 3.6 3.7 3.8 3.9 4.0 4.1 4.2
Performance
Impact
Technical support
excellent
Tech support reps
timely response
PC has features I want
PC reliable
Tech support
reps knowledgeable Tech support reps courteous
Tech support reps
understand needs
Tech support
reps available

• Longitudinal design used to study the impact of
company-wide program on customer satisfaction
5. Evaluate the effectiveness of
company-wide programs
Customer
Survey
September
2007
January
2008
Customer
Survey
Program
Implementation
Oct. 2007
July
2007
November
2007
March
2008
 Group 1: (Did not
receive program)
Pre-Program Post-Program
 Group 2: (Did
receive program)
Timeline
H2 2007 H1 2008
 Two groups compared

• Customers who received program in H2 2007 were
significantly more satisfied with the product after the
program compared to customers who did receive the
program
• Customers who received the program in H2 2007 were
significantly more loyal after receiving the program
compared to customers who did not receive the program
5. Evaluate the effectiveness of
company-wide programs
H1 2007 H1 2008
Satisfactionwith
BusinessAttribute
Did not receive program
Received program
H1 2007 H1 2008
CustomerLoyalty
Did not receive program
Received Program
4%
difference
7%
difference

• Need to understand the company ecosystem
– Employee and Partner
variables impact customer
satisfaction/loyalty
• Business linkage
analysis identifies
where improvements
in partner and
employee relationship
are needed
• A complete CRM solution
includes an understanding of partner relationship
management and employee relationship management
6. Employee and partner satisfaction
impact customer loyalty

• Employee groups with higher levels of satisfaction with the
Executive Staff have customers who report higher levels of
loyalty compared to employee groups with lower levels of
satisfaction1
6. Employee and partner satisfaction
impact customer loyalty
1 Employee group with more than one (1) customer respondent used for this analysis. Sample size = 75.
Correlation between Employee Satisfaction with Executive Staff and Customer Loyalty = .30, p < .05.
Employee Group w/
low satisfaction
Employee Group w/
high satisfaction
CustomerLoyalty
19%
increase

• Base incentive compensation on individual and team
measurements of customer satisfaction/loyalty
• General approach for every business unit
– Determine survey questions (loyalty and business attributes) that
measure that business unit’s performance
– Develop formula to combine question results into single score
– Standardized mapping of score to bonus payout %.
Example1:
7. Determine customer feedback criteria
for incentive compensation programs
0% of goal<7.0
50% of goal>=7.0 and < 7.5
75% of goal>= 7.5 and < 8.0
100% of goal>= 8.0
CLI PayoutCLI Criteria
0% of goal<7.0
50% of goal>=7.0 and < 7.5
75% of goal>= 7.5 and < 8.0
100% of goal>= 8.0
CLI PayoutCLI Criteria
0% of goal<6.0
50% of goal>=6.0 and < 7.0
75% of goal>= 7.0 and < 7.75
125% of goal>= 7.75 and < 8.5
CSI PayoutCSI Criteria
0% of goal<6.0
50% of goal>=6.0 and < 7.0
75% of goal>= 7.0 and < 7.75
125% of goal>= 7.75 and < 8.5
CSI PayoutCSI Criteria
1 CLI is the customer loyalty index and represents a measure of customer loyalty. CSI is the customer satisfaction index and
represents a measure of customer satisfaction for a specific group of employees that are responsible for that specific CSI.

• Need to identify/create operational metrics that are
statistically linked to customer satisfaction and loyalty
– Linkage analysis using customer feedback data and operational
data (e.g., turn-around time, call-handling data)
• Operational metrics become the leading indicators of
customer satisfaction and loyalty
• Customer-centric operational data used to manage the
business
– Performance feedback meetings
– Goal setting
– Incentive programs
8. Customer-centric operational metrics

• Understand different customer segments on key
variables1
– Geography (Region)
– Service levels
• Identify and implement best practices throughout
different customer groups
9. Benchmark best practices across the
company
– Product Releases
– Industry Verticals
1 Use Analysis of Variance (ANOVA) to determine if differences across different segments are real or are due to sampling error.
Region
North South East West
Customer Loyalty
Product Quality
Sales Quality
Service Quality
vulnerable warning exceptional

• Training programs are important to ensuring
employees have proper knowledge to help satisfy
customers
• Business linkage analysis combines customer
feedback data with important training variables and
outcomes
– Course content
– Training scores
• Customer-centric research allows you to identify both
the content and criteria necessary to ensuring
customers are satisfied
– What should be taught?
– What level of performance should be attained in training?
10.Develop employee training programs
that impact the customer experience

• Customer reps who pass more
training courses have customer
who are more satisfied
with their performance
– Increases in customer satisfaction
level off at 5 courses per quarter
• Customer reps who receive
higher scores on their
training receive higher
customer satisfaction scores
on their performance
10.Develop employee training programs
that impact the customer experience
Cust Reps with
low training
scores
Cust Reps with
medium
training scores
Cust Reps with
high training
scores
CustomerSatisfactionwith
CustomerRepresentative
Cust Reps with
fewer than 5
courses
Cust Reps with
5 courses
Cust Reps with
more than 5
courses
CustomerSatisfactionwith
CustomerRepresentative
4%
increase
7%
increase
4%
increase
33%
increase

• Longitudinal study to examine
customers throughout the
customer lifecycle
– Impact of sales phase on service
phase satisfaction
• Impact of Customer Satisfaction Measurement
Strategy on Product Satisfaction, Employee
Productivity, and Revenue
• Customer segmentation
Other Studies

For More Information
Bob E. Hayes, Ph.D.
Email: bob@businessoverbroadway.com
Web: www.businessoverbroadway.com
Blog: www.businessoverbroadway.blogspot.com
Twitter: www.twitter.com/bobehayes
Business Over Broadway
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