How to Conduct Customer Loyalty Research: An Introduction

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Posted Aug 14, 2018

Quality control and management was once limited to conforming to internal company standards and specifications. If the product was built according to plan and worked as intended, it was ready to be shipped to the customer. Today, organizations recognize that the customer, not the manufacturer, has the final say on whether or not a product’s quality satisfies expectations. Modern quality management efforts must be directed by the “voice of the consumer”, meaning organizations must understand their target customers’ needs and expectations, undergo continuous quality planning and improvement efforts, and keep the lines of company-consumer communication open at all times.

A key element to successfully managing these efforts includes Customer Loyalty Research. Research can provide a report card that measures performance levels in a quantifiable way, prioritize and properly interpret results, identify ways to encourage complaints, locate the source(s) of quality issues, and assist with quality-related employee issues by measuring employee satisfaction and morale and identifying training needs. Understanding how to conduct Customer Loyalty Research will set you up for more productive customer-focused quality management efforts.

What to Measure

You may need to kick off your Customer Loyalty Research with preliminary qualitative research to learn how your customers’ overall impressions with your product are formed. Some questions you may want to understand include: are overall impressions driven by elements related to pre-purchase research, in-store availability, post-purchase experiences, or a combination? Which customer needs are most important: reliability or ease of use (which are elements of the product itself), or, maybe, store associate knowledge or store availability (which are elements of sales and distribution)? Once your preliminary research identifies the drivers, you will follow up with quantitative research that asks respondents about their satisfaction with each key driver. Your research should measure the following:

  • Overall evaluation – including satisfaction, likelihood to repurchase and recommend
  • Process assessment – satisfaction of specific experiences measured by subtracting expectations (what customers expected to get) from performance (what customers think they got)
  • Experiences with problems – what each incident was and how it was resolved
  • Comparative assessment – an optional assessment measuring your performance vs. the market leader and other competitors, and/or your performance over time
  • Customer characteristics – such as demographics, product usage, and other descriptors

Types of Customer Satisfaction Surveys

Post-transaction surveys are usually administered within a few days of the customer interacting with the product or service. Their goal is to determine the quality of specific experiences with the product/service and identify any areas of improvement that can be made to employee training and service (for example: a specific stay at a hotel, the process of booking a vacation, experience with acquiring a mortgage loan, or service help received while investigating a credit card bill).

Ongoing relationship monitoring surveys, on the other hand, are distributed to a random sample of the organization’s customers and ask about the general quality of its products or services; they are not triggered by a specific transaction. The objective is to identify general problems and problems in the company-customer relationship that could allow competitors to move in (for example: cable and internet provider measuring satisfaction/loyalty, HVAC contractor measuring satisfaction of its services to various customer types).

Survey Structure

Regardless of the type of survey utilized, overall questionnaire structures are similar. General questions about overall product evaluations should be asked before more specific questions concerning process assessment. The overall product evaluations are most important, so it is key to collect these report card measures first. These top-of-mind evaluations of satisfaction are based on a summary recollection of past experiences with the product (as opposed to specifically detailed assessments of individual purchases), and as a result, are most likely to reflect the organization’s actual image in the competitive landscape.

If instead you were to ask respondents to remember specific incidences first, they may be reminded of poor experiences that they otherwise forgot due to lack of importance and, therefore, may not have considered when providing an overall satisfaction response. But now, they may falsely amplify the significance of these bad experiences when providing their overall rating because they are looking to provide an overall satisfaction score that is a consistent average of all their experiences, regardless of the importance of each experience (i.e., they may have had a few poor experiences, but overall they weren’t significant enough to warrant an official complaint or prevent them from being a returning customer, but while answering your survey, they inflate the importance of these bad experiences when providing an overall score). As the survey progresses in length, you should be asking increasingly more specific questions, closing with demographic related questions and other profiling descriptors.

Who to Survey

Depending on your objectives, you have several sources of potential respondents. Surveying current customers will provide you with your principal population of interest, as they are the final judges of current quality and satisfaction. Surveying former customers will reveal sources of dissatisfaction and possibly competitive intelligence. Surveying customers of your competitors will be your main source of competitive intelligence, in addition to being necessary for competitive benchmarking and tracking multiple brand usage patterns. You can also survey internal employees who are the key customer contacts, as well as management and support staff.

Analytical Considerations

One of the key objectives of Customer Loyalty Research is understanding the amount of importance, or influence, that customers’ satisfaction with a particular element of the product has on their overall evaluation of the product. It would be too time consuming for respondents to answer a series of questions on each individual experience they’ve had with each element of the product, but we can measure the impact of each element by examining patterns in satisfaction scores and deriving importance. To do this, you will look for correlations in the data. For example, your survey measured overall satisfaction, plus the various elements of product satisfaction and service satisfaction, and you want to understand if product or service satisfaction had the greater impact on overall satisfaction. If product has scores that are more consistent with the overall satisfaction scores (i.e., the same respondent provides similarly high product satisfaction and overall satisfaction scores, but service scores are very different from overall satisfaction scores), you can derive that product satisfaction had more relative importance in overall satisfaction.

Another key analytical consideration concerns customer complaints. While it is important for your customer service team to clearly record sources of and resolutions to dissatisfaction –  as they can provide important feedback to opportunity areas of improvement – the data can only be treated as qualitative. Because most customers don’t complain, the complaints received aren’t an accurate representation of the actual number and extent of problems, but they should still be referenced when designing quantitative customer satisfaction tracking surveys.  Some common rules of thumb are: for every complaint received, there are 20 other customers with a similar, but unreported, complaint; in manufacturing industries, seven out of 10 problems aren’t reported; and in service, nine out of 10 problems aren’t reported.

Looking Ahead (The Takeaway)

It is not guaranteed that understanding and improving satisfaction alone will result in long-term loyalty. Both you and your competitors will be conducting customer research to improve product and service offerings, so it’s likely your customers may be loyal to several brands. Therefore, it’s important to also understand the “size of the prize”, or the percent of purchases in the total category that are from your brand, which may be a better indicator of loyalty over time. You can also consider modifying your questionnaire by specifying the industry/category in the questions, in addition to asking about earned loyalty and preferred company/retailer.

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