Oct
4

Article Synopsis: How to Link Customer Loyalty to Profits

Quirks July 2014
How to Link Customer Loyalty to Profits
By Michaela Mora

“Can’t get no (customer loyalty insights) satisfaction?”  Don’t just listen to the Rolling Stones; take the advice of Michaela Mora. In this article she discusses how two key elements in customer research, customer satisfaction and likelihood to recommend, must be analyzed along with data on customers’ actions in order to link these two elements to loyalty.  All too often, Mora observes, clients look for indicators that directly contribute to company profits, therefore rushing to conclusions.

The author cautions that customer satisfaction does not lead directly to motivation to purchase. Often, “…first-time purchases are filled with expectations and the product’s ability to meet them will have an impact on satisfaction but not always on repeat purchases.”  Additionally, dissatisfied customers may continue to still buy a product for a variety of reasons, including contractual obligations (subscriptions); lack of available alternatives; lack of drive to research other products; or price. Alternatively, satisfied customers may discontinue purchasing products for a variety of factors.  Thus, we know that satisfaction is not the only predictor of future purchasing.

Another hot topic in customer research is NPS (Net Promoter Score), based on self-reported likelihood to recommend as a measure of loyalty. However, as the author points out, respondents may give high recommendation scores at the same time they give low satisfaction scores, as satisfaction and recommendations are often driven by different factors. And haven’t we all seen cases where we may be satisfied with a product but not willing to recommend it—perhaps because it is from a category that is too personal, or because we don’t want to share an “inside” tip? As Mora says, NPS scores alone may be an oversimplification in some cases.

Further, Mora points out that it is easy to make erroneous connections between customer satisfaction, customer loyalty, and profitability: “To make loyalty an actionable concept and link it to profits, companies should take into account the value contributed by customers… Repeat customers driven by deals and discounts are unlikely to be profitable and are far from being loyal.”

 

This synopsis was written by Lynn Croft, independent marketing and market research consultant. With 15 years of experience at companies such as Genzyme, Bayer Corporation, Shire, and Eli Lilly, Lynn has expertise in market research, market analysis regarding product launches, pricing and lifecycle management. 

 

Jul
0

Article Synopsis: The High Price of Customer Satisfaction

MIT Sloan Management Review

March 18, 2014   Magazine: Spring 2014

Timothy Keiningham, Sunil Gupta, Lerzan Aksoy and Alexander Buoye

Highly satisfied customers = revenue dollars. Or do they?  Some data has shown that the relationship between customer satisfaction and customer spending behavior is surprisingly weak. 1 In this article, the authors share their analysis of the relationship between satisfaction and business outcomes, gathering data from more than 100,000 consumers covering more than 300 brands.   This data came from two sources, the American Satisfaction Index data (2000-2009) which are measures of stock returns, appended with market shares of these companies, and consumer satisfaction ratings and customer spending levels across 315 brands.2

This analysis revealed three critical issues that have an impact on correlating customer satisfaction to positive business outcomes.  1) There is a downside to continually devoting resources to raise customer satisfaction levels; 2) High satisfaction is a strong negative predictor of future market share; 3) Knowing a customer’s satisfaction level tells you almost nothing about how customer spending will be divided among the different brands used.

The authors share strategies to align customer satisfaction and profitability that companies should understand and implement as follows:

“Value to the Company vs. Value to the Customer—research and analyze your customers’ satisfaction levels with your product to the product’s profitability.”

“Market Share vs. Customer Satisfaction—begin with an analysis of customers’ satisfaction levels with not only your company but also with your competitors, as well as your and your competitors’ market shares.”

“Satisfaction and Customer Advantage—what really matters is whether or not your customer satisfaction rating is higher for your brand than for competing brands that a customer also uses.”

The authors conclude that increasing satisfaction levels can be a component of a company’s strategy, but perspective is needed.  In fact, a company may need to accept lower satisfaction scores from a smaller group of customers, in order to increase market share within a larger less homogenous group.  For researchers conducting customer satisfaction research, this context provides some fresh inspiration about how to weave conventional satisfaction research with additional data sources.

References

1 J. Hofmeyr, V. Goodall, M. Bongers and P. Holtzman, “A New Measure of Brand Attitudinal Equity Based on the Zipf Distribution,” International Journal of Market Research 50, no. 2 (2008): 181-202; and A.W. Mägi, “Share of Wallet in Retailing: The Effects of Customer Satisfaction, Loyalty Cards and Shopper Characteristics,” Journal of Retailing 79, no. 2 (2003): 97-106.

2 Some examples cited include: L. Aksoy, A. Buoye, P. Aksoy, B. Larivière and T. L. Keiningham, “A Cross-National Investigation of the Satisfaction and Loyalty Linkage for Mobile Telecommunications Services Across Eight Countries,” Journal of Interactive Marketing 27, no. 1 (February 2013): 74-82; Aksoy et al., “Long-Term Stock Market Valuation”; and others.

 

This synopsis was written by Lynn Croft, independent marketing and market research consultant. With 15 years of experience at companies such as Genzyme, Bayer Corporation, Shire, and Eli Lilly, Lynn has expertise in market research, market analysis regarding product launches, pricing and lifecycle management. 

 

[Are you planning your organization’s first customer satisfaction research? Or looking to refresh an existing program? Learn about goal setting, monitoring strategies, and common challenges in our 90-minute, live online Improving Customer Satisfaction class. MRA approved for 1.5 hours of PRC credit.]

 

May
0

Market Research & Lost Mojo: Article Synopsis

Andrew Reid, son of Market Research luminary Angus Reid, says Market Research has “lost its mojo.”

In a new article published in Entrepreneur Magazine, Reid states, “In the early 2000s, with the increased use of email, the internet, mobile phones and social media, many companies transformed their way of doing business, but market research companies did not.”  Reid himself is the President of Vision Critical, a well-known provider of market research software and services.

Reid makes some excellent points in a brutally honest way. He asks, “Why do some market researchers still use 15-minute surveys and deliver 60-page reports that companies, their clients, have trouble digesting?” Hard to hear, but so-so-true.  He advocates for short reports, infographics and the Pecha Kucha-style presentation.  I could not agree more: indeed, I think it would be amazing have a panel at one of the market research conferences where, say, 3 market researchers do Pecha Kucha presentations of research results—just so the audience can see that it can be done (warning: it takes more time to prepare this style presentation than to prepare a standard 45 minute one. Really).

So while I applaud his boldness, one of his points about the lost mojo is only partially correct. He says we missed the technology boat in the early 2000’s, stating, “(market researchers) should have worked with early tech adopters to gain insight. And market research companies could have launched products in beta and made some risky decisions. Yet, all they did was undertake the same paper-and-pen surveys.” Intentional hyperbole? Probably. But still factually incorrect. SurveyMonkey was founded in 1999, and they report completing 2 million survey responses a day. And even if SurveyMonkey is the 800 pound gorilla in online survey research, it is still one of more than 50 such companies. Online surveys took off years ago. That is not the issue.

The issue wasn’t technology, it’s what we as researchers did with it. We took the fabulous new technology and applied it to tired old methodologies.

Market researchers remained overly-focused on surveys and focus groups—no matter if done online, or other modes. In fact, as an industry, to this day we allow our profession to be defined by these two methods. Markets research should be defined by our deliverables, not our methods. Our deliverables are discovering and measuring customer attitudes and behaviors. Our methods are surveys (whether paper, online, phone, etc.), focus groups (in-person or online), and these days at least ten other options.  Yet we continue to be perceived as “surveys and focus groups.” Ask even a group of market researchers what comes to mind first when they think of the phrase “market research”, and most will say “surveys” or “focus groups.” I know, I have asked this question at public speaking venues.

So kudos to Reid for A) getting an article about market research in a business magazine and for B) being bold in his assessments. But if we really want to get market research’s mojo back, we have to make sure we are offering more than surveys and focus groups.

Read Reid’s article here.

Written by Kathryn Korostoff
KKorostofff@ResearchRockstar.com

 

Jan
0

Best Market Research Articles of 2013: Third in a Series of 10

[Research Rockstar interns have written synopses of 2013’s best market research articles, as selected by Kathryn Korostoff. This is the third in our series. This synopsis was written by Research Rockstar intern, Audra Kohler.]

Article: Are you thinking what I’m thinking?

Originally published in: research.

July 30, 2013

Rob Egerton and Jeanette Kaye

Have you ever bought something because all of your friends had it?  While we may be loath to admit it, our actions are swayed by friends, groups, and the public. Perhaps even more so than what we realize.  Because of this reality, the authors of “Are you thinking what I’m thinking?” argue that market researchers need to go beyond the individual to truly understand consumer behaviors.  The authors state that two particular theories should be used more in research to explore the dynamics of influence.

Wisdom of Crowds for Market Research

The author’s first cited theory, wisdom of crowds, was the theme of a popular 2004 book of the same title by James Surowiecki.  The basic premise is that group decision-making or estimation is more accurate than individual decision making.  An example: a group would be more accurate at estimating the number of candy corn in a jar at your annual Halloween get-together, rather than each individual guesstimating separately.  Another researcher, Martin Boon, took this conclusion one step further.

This is where the meat and potatoes lie in this article.  Boon reworks this theory to predict elections.  Based on his research with actual election results, he concludes that averaging a randomly selected sample’s guesses is more accurate than traditional polling methods.  The use of the wisdom of crowd’s theory had two clear distinctions:

  • Individuals were not asked how they were going to vote.  The sample was asked how they thought others would vote.
  • Previous election results were provided to each respondent, which provided a useful context.

Overall, this method proved to be more accurate than traditional polling.

The Theory of Group Behavior for Market Research

In his book “I’ll have What She’s Having,” Mark Earls makes the claim that in determining decisions, the influence of other people is more significant than the actual individual decision maker.  But if you think about it, as market researchers, we are great at knowing the individual and their thought process.  Rarely do we research how individuals behave in a group and how they are influenced by that group.

According to Egerton and Kaye, “…recent behaviors to which we can all relate point to how individuals can be encouraged into actions not by their own assessment of what they should do next, but by the actions of those around them.”  In Earls’ book, he cites the London riots of 2012, laying flowers at traffic accidents or at significant events as examples of group dynamics.

A Powerful Combination for Market Research

By integrating lessons from these two powerful theories, the authors create key market research lessons:

  • Acknowledge.  Realize that there are limitations to looking at only an individual’s behavior.  Behavior of the individual is influenced by group dynamics, the authors argue.
  • Explore.  Although this is difficult, the authors encourage beginning to map out how others influence an individual.
  • Categorize.  Egerton and Kaye cite a TED talk by Dereck Sivers, which gave a high importance to breaking down the behavior of early adopters versus followers. This is one way to start categorizing consumer behaviors by group.

 

Nov
0

Best Market Research Articles of 2013: Second in a Series of 10

Rateocracy[Research Rockstar interns have written synopses of 2013’s best market research articles, as selected by Kathryn Korostoff. This is the second in our series. This synopsis was written by Research Rockstar intern Audra Kohler. Yes, technically this is a 2012 article, but we confess—we missed it until 2013!]

 

Rateocracy and its Impact on Market Research
RW Connect November 1, 2012
Robert Moran

Welcome to rateocracy, a world of public and nonstop rate-streams.  In this article, Robert Moran discusses the transition from traditional customer satisfaction as “proprietary and periodic” to the notion of rateocracy.

Think about eBay, Amazon, and Angie’s List—all public, continuous sources of ratings.  Moran cites a survey conducted by FTI Consulting which found that over 50% of respondents give a “great deal of consideration to online reviews from other consumers on sites…”  While such self-perception data is never perfect, it is safe to say that a high amount of people rely on ratings in order to help with purchase decisions.

The author describes three factors that will lead to an increase usage in rateocracy.  He describes an increase in the ratings culture, a “middleware” system, and the creation of an open and universal ratings system will drive society to rateocracy.

No matter how our society develops rateocracy, there are major implications for market research:

  • Rateocracy will speed the rate of the consumer feedback cycle.  This will happen both after an initial product launch and over the course of a product’s life cycle.
  • Quarterly tracking studies will become archaic.  On the other hand, the demand for analytics will skyrocket.
  • It will also increase demand on ad hoc research.  This is in part due to the increase in real-time information.
  • The focus will be on the “elite purchase influencers.”  This segment holds strong online reputations with the widest reach.  These market mavens are critical to any analytical study.
  • Platforms may change due to the increase in ratings.  Platforms such as eBay, Amazon and Angie’s List may offer a free level of analytics now, but continue to charge for advanced analytical tools.

Moran sums it up best, “rateocracy will accelerate the existing trends in market research toward tighter feedback loops, social media listening and big data.”

Buckle up.

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