Over the past 30 years, customer loyalty measurment has progressed beyond satisfaction, performance, and loyalty to the monetizing impact of customer bonding and advocacy.

1. During the first of two recent customer
loyalty research webinars that we
conducted for clients and prospects
(October 21 and 28, 2008), one of the
close to 150 participants asked what we
believe is a critical question for utilizing
research, and applying insights, to
understand customer behavior:
“We find that customers who stay for a
long time (and are therefore considered
‘loyal’) are not necessarily satisfied.
We don’t know if, using Harris Interactive
Loyalty’s term, they are ‘committed’
or not. Do we need a new definition
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of customer loyalty?”
Making Loyalty Measurement Real:
Identifying Landmarks in Customer
Attitude and Behavior Interpretation, while
Creating Optimum Research Actionability
By: Michael Lowenstein, PhD CMC,
Sr. Vice President and Sr. Consultant,
Harris Interactive Stakeholder
Relationship Consulting
From our perspective, the clear and
straightforward answer, is no. In fact,
we believe that commitment (and the related
concept and research framework: Advocacy)
is the best way research can define and
anticipate actual customer behavior.

2. Commitment and advocacy explain the strength Stage One: Focus on Quality (Pre-1985)
of a brand or supplier’s customer franchise, Although, in one form or another, customer
enabling a company to confidently plan or modify research has been conducted for close to a
marketing, services, communication, and other century, and really began to see more active
important initiatives. In brief, results from usage after World War II, the first formal
commitment and advocacy research monetize, stage and period we can identify is the late
offering definitive, highly actionable guidance 1970’s, consistent with the worldwide focus
for companies on how to optimize loyalty behavior. on product and service quality. The emphasis
By examining how customer research has changed at this time was on the delivery of basic,
over the past few decades, we’ll identify how and mostly tangible and functional, elements of
why we’ve arrived at this conclusion. value such as meeting standards and other
foundation performance requirements. Many
In both of the webinars, we depicted research organizations still emphasize their total
approach evolution by a range of dates – or, more quality efforts, and it is not infrequent to find
accurately, a continuum of approaches – for how companies with active ‘Six Sigma’ initiatives.
researchers have looked at customer attitudes
and behavior over the years. As shown in the Research during this period began as an effort
chart below, this explanation of how customer to assess perceived quality; and it soon started
behavior measurement has evolved began in to morph into a connection with customer
the late 70’s and early 1980’s, with the focus satisfaction. Noted TQ consultants gave quotes
on total quality; and it has since gone through like “customer satisfaction is the key to quality”
two intermediate stages to reach the most and “high customer satisfaction is an indicator
contemporary understanding of the impact of perceived quality.” This perception remained
of customer relationships and experiences on virtually unchallenged until the early and mid-
marketplace behavior. 1990’s; however, customer satisfaction became
the dominant research tool for articulating, and
endeavoring to understand, customer behavior.
Evolution of the Loyalty/Quality/Satisfaction Movement
Stage Four
(Today)
Stage One Stage Two Stage Three Focus on
(Pre-1985) (1985-1993) (1994-2003) Relationships
Focus on Quality Focus on Satisfaction Focus on Competitors & Experience
{
{
{
{ Customer Relationship
- Creating customer
commitment through
experience as path to loyalty
Customer Loyalty and Value - Creating emotional
and rational connections
- Meeting critical needs with customers
Customer Satisfaction of targeted customers
- Attracting, retaining
Product Quality (TQM) - Providing what - Outperforming competitors and growing your targeted
customers want & profitable customers
- Delivering what - Creating new, unique benefits
we specified - Responding to - Turning loyal customers
customer complaints into advocates
- Meeting minimum
requirements
- Meeting standards

3. Stage Two: Focus on Customer of satisfaction to marketplace action. Christopher
Satisfaction (mid-1980’s to mid-1990’s) Fay of the Juran Institute, a noted TQ consulting
Returning to the attendee’s question about organization, wrote: “The tacit belief is that as a
satisfaction, and the finding that “customers customer grades a supplier with an increasingly
who stay for a long time (and are therefore higher satisfaction score, so should that customer
considered ‘loyal’) are not necessarily satisfied,” increase share of spending on that supplier, pay a
we will now focus on a) why satisfaction became price premium, refer new prospects, and so forth.
so popular and ingrained as a surrogate for In point of fact, this assumed correlation between
customer behavior and b) why satisfaction has what customers say and what they do has been
become almost irrelevant, as a key or sole metric, disproved in the vast majority of business studies.”
in the contemporary understanding of loyalty. Although, to give the concept of customer satisfac-
tion fair reporting, it has been well-proven that
One major factor behind the growth of customer transactional and longer-term experience dissat-
satisfaction was its inclusion in well-recognized isfaction can lead to customer risk and defection.
measurement systems for corporate performance, Trying to optimize customer satisfaction, however,
such as the Malcolm Baldrige National Quality doesn’t have the opposite effect on actual behavior.
Award in the U.S., initiated in 1987. The need
to capture ‘voice of the customer’ data was (and Peter Drucker has been quoted as saying:
continues to be) a core element of Total Quality To satisfy the customer is the mission and
Management. Known as VOC, gathering the purpose of every business. But, is it really
customer’s voice meant putting in place a core the right goal; one that, if achieved, will drive
metric to evaluate essential needs and wants. behavior? In other words, does satisfaction
Writing in a 1991 Harvard Business Review monetize? And, if so, does this occur on a
article, Professor David Garvin observed: reliable, regular, and predictable basis? As
“The Baldrige Award not only codifies the marketers and customer experience managers,
principles of quality management in clear and we want and need only the most actionable
accessible language, it goes further: It provides and real-world tools and techniques for
companies with a comprehensive framework identifying and measuring how customers
for assessing their progress toward the new behave. In the following paragraphs, we’ll briefly
paradigm of management and such commonly demystify customer satisfaction – identifying
acknowledged goals as customer satisfaction why, per the webinar attendee’s question,
and increased employee involvement.” satisfaction, longevity, and true loyalty represent
different constructs. Then, we will offer more
TQM expert Noriaki Kano, reflecting on contemporary and action-centric methods of
the prevailing views of business at the time, determining what truly leverages loyalty behavior.
defined his concept of building customer
satisfaction into measurement systems: First, here’s a short history lesson addressing
“Total Quality Management is exercised the myth of customer satisfaction. For a long
under the philosophy that the best way for a time, it had been assumed that satisfaction
corporation to expand sales and make a profit and loyalty research were identical, or at
is to provide its customers with satisfaction least very similar, methods for understanding
through its products and services.” So, while customer behavior. Fifteen years ago, Fred
there was some concern about the real Reichheld reported in a HBR article that:
relationship between quality initiatives and their “While it may seem intuitive that increasing
impact on customer behavior, during this period customer satisfaction will increase retention
almost no one was questioning the quality- and therefore profits, the facts are contrary.
satisfaction-business performance linkage. Between 65% and 85% of customers who defect
say they were satisfied or very satisfied with their
But…does satisfaction, as a method of explaining former supplier. In the auto industry, satisfaction
customer actions, really satisfy? One of the prin- scores average 85% to 95%, while repurchase
cipal challenges with satisfaction as a key or sole rates average 40%.” Reichheld later performed
research metric is that it is about customer at- a statistical analysis of the satisfaction score
titude rather than customer behavior, or intended annual change for 300 major companies and
behavior. During the late 1980’s and early 1990’s, compared those findings with the sales annual
studies began to emerge questioning the results growth change for those same companies and
orientation of TQM programs, and the connection found no correlation (R2 of 0.00, for the quant

4. mavens) between the two sets of results. While customer retention has certainly proven
to be more actionable than satisfaction (in
Here is an example of support for this finding part, because it measures behavior rather than
from our own work: We asked current active attitude), it still has some basic, fundamental
customers (those making 10 or more purchases weaknesses. The customer may continue, for
a year) of a major b2b products company to give instance, purchasing from the supplier (even
service quality and product quality ratings on a for a long period of time); but this, alone, tells
five point scale of satisfaction. At the same time, us nothing about the level or frequency of
we asked the identical questions to formerly purchase, or the motivations for this activity.
active frequent buyers who hadn’t purchased
anything from this company in the past year: In the early and mid-1990’s, there was a series
of articles, and later a book, which keyed on an
upgraded approach to understanding customer
needs and the features, benefits and solutions
Excellent Quality companies could provide – which, ideally, were
Satisfaction Ratings better than those offered by competitors. The
(5 on a five point scale of satisfaction) focus was on creating customer loyalty and
value, essentially defined as creating barriers
Quality Quality
of Service of Products to exit from the current, preferred supplier.
Active Buyers One of the related approaches and set of
(10-15+ purchases 88% 79% measures during this era was customer value
in past year)
analysis, or CVA. CVA, which was an outgrowth
Inactive of customer satisfaction measurements associated
Buyers 84% 76% with the Baldrige Award, essentially looked at
(Formerly active,
not past year) where competitors were perceived on a price
and performance continuum. Thus, it always
considered rational performance, constructed
around price, as the sole determinant of what
As is easily discernable, their scores were customers want, where (competitive) suppliers
almost identical. Clearly, the client involved were performing well or where they were
in the study would have gotten little or no not, what product or service improvements to
direction from this data if satisfaction were make, and even how to shape communications
the principal or only basis for success or as the means to define customer value.
failure – as related to a customer’s life cycle
with the company. If customers who were at As customer researchers have continued to
risk, or discontinued purchasing as in our evolve their own learning around both the
example, were as satisfied with the client’s rational (tangible and functional) and emotional
products and services as those still buying, (principally relationships, built around
there must have been other underlying drivers touchpoint contact, brand perception, and
at work for risk and defection behavior. trust) elements of customer experience and
value, more limited and insular approaches
Stage Three: Focus on Competitive such as CVA, have declined in application.
Set, Customer Loyalty and Value
(mid-1990’s to mid-2000’s) Stage Four: Focus on Customer
In moving beyond customer satisfaction, Experience, Commitment
companies began to focus on somewhat more and Advocacy (Now)
robust and advanced measures of performance. We believe that the most actionable ‘code’
The first of these was customer retention. for understanding committed customer behavior,
The webinar attendee’s question stated that, in at any life stage, is quite straightforward.
her company, management judged customers It consists of defining the emotional and
who remained with them for a considerable rational elements and bonds which make up a
period of time to be ‘loyal.’ supplier’s value proposition – the sum of each
customer’s set of experiences, and perceived
benefits associated, with the supplier’s products

5. or services. The emotional elements are based These supermarket customer results show
on trust, a customer’s sense of personal that the shoppers with high commitment
assurance in purchasing and gaining benefit spend almost five times more per month
from using a company’s products or support. compared to those with low commitment.
Service experiences, for instance, play a big Clearly, this metric of customer behavior meets
role here. Rational, or tangible, elements are a critical action standard – it monetizes.
those things that we associate with cost and
functionality: Original price, cost to maintain, Advocacy, which we define as the active
accuracy, completeness, reliability, and the like. expression of commitment, is seen in such
For us, rational performance is satisfaction. attitudes and actions as strong, frequently
personalized brand favorability, but most
The conceptual framework of our commitment particularly in positive, frequent, and voluntary
behavior model is that these emotional and informal (or word-of-mouth) communications
rational bonds are the foundation of customer on behalf of the preferred supplier. Similar to
relationships and value perception. As commitment, level of advocacy also monetizes,
so, the model can help identify the relative with true advocates giving significantly higher
impact of each relationship driver on spend share to their preferred brand compared
commitment: Corporate image and equity, to those customers who are less enthusiastic,
policies and procedures regarding customer neutral, disaffected or outright negative.
transactions, service delivery levels and
breadth of coverage, product performance Advocacy not only brings into play WOM,
(quality-based elements such as accuracy, customer-generated media, and peer-to-peer
reliability, completeness, timeliness, etc.) and interaction (social media, wikis, and blogs being
costs, both actual and relative to competition. the new language of this trend) as marketing
The sum of these components relates back to strategies, it also incorporates ‘viral’ approaches
trust and satisfaction conditions, leading to to push and pull marketing. Viral marketing
commitment on a rational and emotional basis. is a recent addition to the arsenal of behavior-
based techniques companies are using to drive
Commitment has been found to have a critical interest and activity; and it is actually not a
and direct correlation with customer marketplace marketing term at all, but one invented by
actions. Stated in simplest terms, commitment venture capitalists in the late ‘90’s to describe
monetizes. In virtually every industry and the success of Hotmail. It depends on social
in virtually every geographic location, level of networks and media to facilitate and encourage
commitment correlates with key metrics such people to pass along messages. Viral and neural
as purchase intent, recommendation likelihood, approaches have now become essential tools for
visit frequency, brand preference; and, as seen many b2b and b2c companies in their efforts
in the example below, actual share of wallet. to create awareness, favorability, a narrowed
consideration set, and customer referrals.
Though word-of-mouth marketing is still
{ }
rather embryonic, researchers are relying on new
techniques, such as advocacy measurement, to
Committed Shoppers Spend More Per Month! gauge the impact WOM creates on decision making.
$500
$ Spent per Month
$465
$400 $411
$300 $308
$285
$256
$200 $208
$153
$100 $111
$0
<10 10-<20 20-<40 40-<50 50-<60 60-<70 70-90 <90
Committed Score
Note: Results are based on average amount spent per month by Retail
Chain banner primary and secondary shoppers in each commitment level.

6. Like commitment, advocacy strongly monetizes: Where Harris Interactive Loyalty Nets Out
Results are highly correlated with actual wallet In his book, Out of the Crisis, total quality guru
share, and related, customer behavior. We are W. Edwards Deming wrote: “It will not suffice to
not measuring word-of-mouth, per se, but are have customers that are merely satisfied.
identifying customers who demonstrate this An unhappy customer will switch. Unfortunately,
behavior, in both positive and negative ways. a satisfied customer may also switch, on the
We have even developed a multivariate approach, theory that he could not lose much, and might
which we identify as ‘Swing Voter’ Analysis, gain. Profit in business comes from repeat
for identifying how to drive advocacy behavior: customers, customers that boast about your
product and service, and that bring friends
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with them.”
Advocacy Swing Voter Analysis Although we believe – with extensive research
documentation to support our assertion – that
commitment and advocacy are the best means
to understanding customer behavior, we also
What turns uncommitted What turns committed
customers into saboteurs? customers into advocates? recognize that many companies have legacy
customer measurements and systems in place.
As stated earlier, level of commitment correlates
highly with key metrics such as purchase intent,
{ }{ } { }{ }
Rationally or
recommendation likelihood, visit frequency, brand
Saboteur Uncommitted Emotionally
Committed
Non-Advocates
Committed
Advocates preference, and actual share of wallet – driven
Connected
by emotional and rational value as perceived by
customers. Advocacy also correlates with these
metrics by identifying which customer behaviors
Swing Voters
- Committed are coming from positive and negative word-
Non-Advocates of-mouth. These newer, and more actionable,
- Uncommitted
Non-Saboteurs methods easily meld into earlier approaches for
evaluating customer attitudes and intentions.
Companies can confidently continue to use
traditional metrics, such as satisfaction level,
In brief, ‘Swing Voter’ Analysis enables us to
likelihood to continue purchasing, and likelihood
determine, and prioritize, which rational and
to recommend – as long as question elements
emotional relationship attributes drive both
also enable us to calculate commitment and
positive and negative advocacy behavior.
advocacy to a very granular level. Utilizing
comprehensive research programs and question
sets, the insights and actionability benefits
provided both inform these more antecedent
methods and offer clients clear pathways
to better marketing decisions and resource
allocation. This isn’t an academic conclusion,
but a very real-world, practical approach based
on extensive research. Again, commitment and
advocacy monetize at the highest and most
consistent level, answering the webinar attendee’s
question of what best defines customer loyalty.