Customer Experience & Data Analytics Take Center Stage

Improving customer experience has been reported as one of the top priorities for businesses in 2012. Some companies are even adding a new C-level position to their rosters, Chief Customer Officer (CCO).

Data Analytics

A big driver of this focus on customer experience can be attributed to the gold mine of information gleaned from data analytics. There is so much information available about consumers’ likes and dislikes that companies can analyze the data to build a better experience.

While all this information is great, companies must be cautious in how they extract and use the data. If companies extract only the information which validates their decision making, the customer takes a backseat and all the progress from this data analytics will be lost.

Customer Needs

The bottom line is that the customer should always be the top priority for the business. Yes, businesses should be making solid, innovative products. However, if the customer isn’t interested in buying the product, then the product will have no audience. Before you consider launching a new product, you should listen to what your customers are saying and identify their needs.

Brand Experience

In addition to offering solutions to customer needs, it’s important to ensure the customer has a great experience with the brand. If the customer, again and again, has a bad experience in your store, or with your product, or with your sales force, you can bet that your product will have limited reach. The customer experience should be top-of-mind from production to manufacturing, and from distribution to sales & support-it is paramount in cementing a good relationship between the consumer and your brand.

3 Ways to Measure Customer Loyalty

Customer loyalty is a tricky sentiment to track.  It is difficult to measure customer loyalty because proof of loyalty, the state of being loyal, is most often shown after an action occurred that indicates a person’s loyalty.  However, past action often indicates but doesn’t guarantee future loyalty.

So how do you measure something that hasn’t happened yet?  You can look for patterns when analyzing responses to survey questions designed to measure specific indicators that, when taken in context by the analyst, have varying degrees of certainty as to future action.  Bob Hayes, author of Measuring Customer Satisfaction and Loyalty, breaks it down into 3 measurements: Retention, Advocacy and Purchasing.

Retention as an Indication of Loyalty

Retention is a reflection of a customer’s willingness to remain with a particular company’s service or products and is useful to measure customer loyalty.  Questions designed to determine loyalty are often based on the “How likely are you…” model to predicate future behavior.  Among wireless or other service provider companies, Retention is most often asked by the question, “How likely are you to switch?”  This question is an indication of the relationship the customer has with the company and may be an indicator of overall satisfaction. Although, the smart analyst should be aware that the question alone, without corroborating evidence, may be an indication of a deeper dissatisfaction with the competition rather than satisfaction with their current company.

This least of all evils attitude is often found in service industries such as cable/internet providers, wireless companies and banking.  To be helpful, retention questions should be supported by an investigation of the second measure, Advocacy.

Measure Customer Loyalty by Measuring  Advocacy

“How likely are you to recommend…?”  or How likely are you to purchase other products from us?” and ” How satisfied are you with…?” are typical advocacy questions.  They are related to retention because the assumption is that a customer that is a cheerleader for or satisfied with your organization is likely to remain with you.  They relate to the customer’s perception of the company’s image that they are doing something right.  Determining what that “right” something is requires additional investigation.  It may be related to a single experience or simply to an overall – but general – impression.

There is overlap between Advocacy and Retention but they are distinctly different.  Advocacy requires less action on the part of the customer, because to advocate does not mean purchasing.   Whereas Retention requires the costumer to engage with your company through the basic transaction of making an additional purchase (or renewing a service) which in itself is a strong indication of customer satisfaction.

However, the strongest indication of customer satisfaction is related to Purchasing.

(RE)Purchasing is a strong Customer Satisfaction Indicator

Purchasing questions like, “How likely are you to (continue)(increase)(purchase different) products from X Company?” are the best indicators of growth through customer loyalty.  They seek to determine if the amount spent per existing customer will increase or decrease based on additional purchases within or across product lines.  It is distinguished from the retention question of how likely are you to switch because a switching question may me a repeat of the same revenue (0 growth) rather than an increase in spending (positive growth)

Use All 3 To Measure Customer Loyalty

All three customer satisfaction indicators are closely related in that they measure costumer intent.  negative responses to these types of questions usually indicate a loss of that customer.  Either they will re-up, purchase additional products or feel good about your company/product/services — or they won’t or don’t.  It is fairly straight forward to develop relevant survey questions to receive the data.

What becomes difficult is providing the context for analyzing the survey data into a meaningful construct that can be used by decision makers.  That is the job of the analyst to rely on his or her experience, knowledge and expertise to put the data into perspective.

Establishing Deeper Connections with Customer Engagement

This article is the first in a three part series exploring the twin concepts of customer engagement and the engaged customer.  Some CEOs, especially in the SaaS arena describe an engaged customer and a non-engaged customer like describing the difference between a Van Gogh and overstock office art , “I don’t know much about art, but I do know what I like.”

What is an Engaged Customer?

An engaged customer is engaged by your company on two fronts: (i) before, up to, and including the point of sale and (ii) during the life cycle (use) of the product or service.  Recent research has shown that an engaged customer exhibits three specific traits that, if identified, promoted and supported within your organization, translates directly to a better bottom line.

Common Attributes of an Engaged Customer

Customer Loyalty

A hallmark of an engaged customer, loyalty is an essential trait for survivability in the current slower paced and more costly market place.  It costs less to maintain (for repeat business) a current customer than to identify, attract and convert a new one.  The slower pace refers to the lower rate of business transactions rather than the frenzied pace of product development.

Customer Interaction

Customer interaction refers to the customer’s relationship with your company.  Interactions occur on line and off line, before and after the sale.The type, quality and frequency of these interactions have a huge impact on maintaining an engaged customer.

Customer Feedback/Input

Providing a means for customers to provide feedback and input about your product or service creates a sense of involvement in the process of determining what the consumer wants.  If your average customer’s input has an identifiable impact on your product offering, they are more likely to buy the product or update once it is available.

The Point Is…

The methods of engagement vary but most commonly involve an interaction before there is a problem or complaint.  On line; product reviews, product ratings, surveys and live chat are recent customer engagement examples.  Check-in calls to customers, special events at retail outlets, unique purchasing opportunities and loyalty point programs are examples of off line engagement.

Regardless of the method, the goal of engagement is to create a deep connection with customers. Your customer’s involved relationship and emotional brand attachment are competitive advantages that are difficult for competitors to overcome.  This leads to the question, “How do you measure customer engagement?”  That is the topic of the 2nd article in this series.

Customer Retention Rate – What does it mean?

t is one of the most profitable methods for selling goods and services. Once a company has attracted a consumer to ‘buy’ and ‘try’, a satisfied customer is the best means to retain that business for the foreseeable future.

There are many reasons to keep customers satisfied; most importantly to earn their business again. All marketers know that it costs much less to convert an existing satisfied customer into a repeat sale than to ‘conquest’ a new sale from another brand. If you browse enough web sites, you will see that…

  • Acquiring new business can be 5 times more expensive than retaining customers.
  • Increasing customer retention by just 2% can translate into a 10% cost reduction
  • Some retailers indicate their top 15% of ‘loyal’ customers comprise 50% of their sales revenue.

Those are some valuable customers and the statistics speak to why a high customer retention rate is so important.  Substantial sums of money are spent on survey data and questionnaires because a Satisfied Customer = A Valuable Customer !

So, how likely is your company to retain customers in the future? Past and current behavior is the best predictor of future trends. It is of the utmost importance for marketing analysts, brand managers and advertisers to understand both the current retention rate and defection from the analysis of ownership and/or survey data. The Customer Retention rate is often referred to as Loyalty.  Loyalty is represented by the percent of current owners that repurchase the same brand. Those who don’t repurchase the same brand are defectors and they represent lost business.

Also of importance to brand health is the measurement of conquest. Instead of looking at the current owners and “where the business went” (retained or lost), a look at new customer’s behavior will supply a measurement of where the business came from, or where new sales were ‘conquested’ from a competitive brand. Conquest is also important when considering a brand’s customer retention rate.

The graph below shows overall brand health by plotting the brand customer retention rate (loyalty of current owners) against the conquest rate (new sales from a competitive brand).

  • Brand A is the healthiest of brands given its strength in customer retention of current owners while attracting new buyers from the competition.
  • Brand B is successful in attracting brand switchers, but needs to work on current owner’s satisfaction to ensure a higher customer retention rate.
  • Brand C is relying on customer retention, but is in danger of slipping into ‘Decline’ if a downward trend in loyalty occurs.
  • Brand D is the weakest relative to its competitors and needs to identify a strategy to move its position.

Where is your brand’s health in the customer retention and conquest relationship? Is your survey data capturing these elements? What does it look like in terms of specific demographics or geography?  How does it compare over time?

PAI would welcome the opportunity to demonstrate how PAI’s mTAB™ service would benefit your understanding of customer retention rates, defection and conquest.  Please visit the PAI website to schedule a no-obligation review of mTAB for an analysis of consumer behavior data.