Keeping
Customer
Relationship
Measurement
Programs Relevant:
North American Conference
on Customer Management
October, 2007
©2007 Burke Incorporated. All rights reserved.
Using Your
Resources Wisely
Why Do We Care?
Developing, implementing, and maintaining customer-focused
measurement programs have become essential business practices.
Consumers in both B2B and B2C settings are increasingly intolerant of
products and services that do not meet their expectations.
An organization with declining customer retention rates is a company in
trouble, and measurement programs enable business managers to anticipate
downturns in customer loyalty.
©2007 Burke Incorporated. All rights reserved.
In highly fragmented industries, customers have MANY competitive
alternatives, so companies must never stop responding to evolving customer
needs.
Accordingly, substantial corporate resources are devoted to
customer loyalty measurement programs.
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Why Do We Care?
Customer Loyalty Survey Research Expenditures (millions)
(F)
$743
2007
$658
2006
$606
2005
$548
2004
$478
2003
$452
©2007 Burke Incorporated. All rights reserved.
2002
2001
$427
2000
$425
$378
1999
$0
$100 $200 $300 $400 $500 $600 $700 $800
Source: Inside Research, Volume 18, Number 3, March 2007
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What Will You Take Away from This Session?
Ten best practices that enable organizations to keep customer
relationship measurement program relevant.
Four pillars of these best practices include:
Scope
Measure
Integrate
©2007 Burke Incorporated. All rights reserved.
Act
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©2007 Burke Incorporated. All rights reserved.
Burke’s Framework
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First Phase: Scope
Best Practice #1: Connect the architecture of measurement
programs to current business strategies of the company.
Programs structured without consideration of business strategy and market
conditions will not help reduce the risk associated with investment decisions.
Strategic and tactical planning cycles
Newer market segments to grow
Possible acquisition targets
Branding initiatives
Employee recruiting, training, and reward systems.
©2007 Burke Incorporated. All rights reserved.
While intuitive, this practice can be quite difficult for research and quality
departments to implement.
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Scope
Best Practice #2: Invest in early discovery or blueprinting activities
to set the stage for the program’s success.
Key objectives of Blueprinting:
Increase in the strategic relevance of structured customer feedback
Managerial buy-in early in the design or redesign process
Removal (or at least reduction) of organizational silos, aiding in design/redesign of
a comprehensive, customer experience measurement and management system
Creation of the foundation for statistical linkage of employee and operational
measures to customer attitudes/behaviors, and to financial results
©2007 Burke Incorporated. All rights reserved.
Blueprinting sessions can also be used to identify gaps between what internal
clients want and what the program currently produces.
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Scope
Operations
Employees
Company
Customers
Financials
Price
Corporate
Entities
Manager/
Supervisor
Value
Proposition
The Job
Daily
Interaction
Associate
Compensation
and Benefits
Stock Price
Operating
Income
Profit
Process
Career
Development
Business
Process
Measures
Costs
Employee
Engagement
Partnership
Sales Reps
Teamwork
©2007 Burke Incorporated. All rights reserved.
Customer
Support
Customer
Relationship
Fees
Brand
Promise
Turnover
Issues
Individual
Characteristics
Customer
Loyalty
Revenue
Growth
Loyalty To
Competitors
Human Touch
Tenure
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Scope
Best Practice #3: Perform a thorough Voice of the Customer (VOC)
Architecture Assessment.
VOC Architecture Assessment is necessary because organizations often lack
an integrated customer survey measurement program
Rare is the organization that has no history in the VOC arena.
Many companies are on third- or fourth-generation programs.
Measurement “flavor of the day” sometimes limits comparability across organizational
units.
Business units within organizations often have different silos, different approaches,
different owners with different budgets, and sometimes (often?) lots of politics.
Measurement frequency
©2007 Burke Incorporated. All rights reserved.
Sample frames
Event-triggered versus relational perspectives
Scaling
Form of communication
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Scope
Best Practice #4: Perform Linkage Assessment to determine an
organization’s readiness for aligning survey and non-survey data
sources used by business managers.
Linkage Assessment involves examining the financial, operational, employee,
and customer data available for linkage analysis.
Key process elements include:
Identify databases and other data streams that reflect enterprise blueprint
components
Determine data platforms, units of analysis, and time periods of data captured
©2007 Burke Incorporated. All rights reserved.
Establish degree of alignment across databases and survey (attitudinal)
measurement
Recommendations for improving data sources to enable comprehensive linkage
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©2007 Burke Incorporated. All rights reserved.
Next Phase: Measure
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Measure
Best Practice #5: With the Scoping Phase as the
foundation, develop a relevant measurement system.
The best measurement systems are developed by solid
research, in concert with champions of VOC within the
organization.
A critical decision during program design relates to the
measurement of overall customer loyalty.
Period 1
Period 2
Loyalty
Index
Share of Wallet
(0%-100%)
Burke recently extended the traditional Secure Customer Index®.
R&D spanning multiple industries and customer types.
©2007 Burke Incorporated. All rights reserved.
Longitudinal approach relating customers’ perceptions at one point in
time to their purchasing behavior in the future.
While the traditional three-item, classification approach has worked
well for a wide variety of industries and customer types, additional
predictive value and discrimination power was sought.
Burke’s enhanced approach derives from longitudinal, primary
research examining the relative importance of many dimensions of
loyalty on future and concurrent customer behaviors.
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Measure
©2007 Burke Incorporated. All rights reserved.
Traditional Secure Customer Index®
Secure
Customers
Most favorable rating on all three
SCI® scales
Favorable
Customers
Most favorable or second most favorable
rating on all three SCI® scales (but not secure)
Indifferent
Customers
All other combinations
At Risk
Customers
Most unfavorable or second most
unfavorable rating on any SCI® scale
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Measure
Using research and development findings, Burke extended its
Secure Customer Index® to satisfy a broad set of requirements for
practical and valid customer loyalty measurement:
Detecting degrees of customer loyalty
Parsimony
Ease of measurement migration ease
Multidimensionality
Linkage to customer outcomes
©2007 Burke Incorporated. All rights reserved.
Burke examined 26,197 different ways to create a loyalty index.
Sixteen loyalty dimensions
All possible three- through seven-item loyalty items were examined.
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Measure
Overall Satisfaction
Recommendation
Continuation as a Customer
Expected Change in Share of Business
Perceived value of products
Trustworthiness
Commitment to Customers
Earned Loyalty
Estimated Growth in Loyalty
©2007 Burke Incorporated. All rights reserved.
Quality
Proximity to Ideal
Price Given Quality
Quality Given Price
Price Competitiveness
Preference
Confidence in Problem Resolution
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Measure
The extended Secure Customer Index® is a
multidimensional measure of loyalty based on five
dimensions culled from a larger set.
Overall Satisfaction: What is your overall level of satisfaction
with (BRAND/CO.)?
Likelihood to Recommend: If you were asked to recommend a
(INDUSTRY) how likely would you be to recommend
(BRAND/CO.)?
Likelihood to Repurchase: How likely are you to continue
using (BRAND/CO.)?
©2007 Burke Incorporated. All rights reserved.
Earned Loyalty: (BRAND/CO.) has earned my loyalty
Preferred Company: I prefer (BRAND/CO.) to all other
providers
With customers’ responses to these five survey items,
the degree of customer loyalty for an individual or a
group of customers is constructed.
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Measure
Linkage to Future Share of Wallet*
All Industries
Overall
Satisfaction
100
Old Secure
Customer Index®
126
New Secure
Customer Index®
207
Business-to-Business
©2007 Burke Incorporated. All rights reserved.
Overall
Satisfaction
Old Secure
Customer Index®
New Secure
Customer Index®
Business-to-Consumer
Overall
Satisfaction
100
Old Secure
Customer Index®
189
290
100
114
New Secure
Customer Index®
187
*Correlations are indexed to the correlation between overall satisfaction and share of wallet for the particular graph.
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Measure
While the SCI® performs well across all a wide variety of industries
and customer types, customized indices can, in some cases,
provide superior fit with customer behavior measures vis-à-vis
standardized indices.
Linkage analysis can provide guidance on how, exactly, to
customize a loyalty index.
©2007 Burke Incorporated. All rights reserved.
Ideally, such analyses would be performed after having two survey
measurement waves.
However, such analysis could be done cross-sectionally.
For such customization, several additional candidate loyalty items should be
included in survey.
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Measure
Additional best practices in VOC measurement include the following:
Make decisions about measurement frequency based on the nature of the
information being measured and the speed with which information users can
use findings to make decisions.
Choose sample sizes that ensure appropriate precision levels.
Use statistical significance testing appropriately.
©2007 Burke Incorporated. All rights reserved.
Weigh the value of changes to sample frame, survey item wording, scaling,
etc., against the loss of comparability to previous measurement waves.
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©2007 Burke Incorporated. All rights reserved.
Phase Three: Integrate
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Integrate
Best Practice #6: Leverage Linkage Analysis to connect customer
loyalty to is precursors and outcomes.
“Downstream” linkage analysis identifies…
Customer experiences with the largest impact on product and service offerings
and ultimately revenue
Ideal resource allocation to improve customer experiences and thereby drive
business success
“Upstream” linkage analysis establishes…
Whether operational standards are aligned with customer requirements
©2007 Burke Incorporated. All rights reserved.
Employee drivers of customer satisfaction and dissatisfaction
While Linkage Analysis can be done in a very simple fashion, some of the
most sophisticated modeling and simulation tools can be applied to show the
impact of specific performance improvements on revenue and profit.
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Integrate
Sales Reps and
Ease of Ordering
Downstream Linkage Analysis
Relative Strength of linkage
Company
Reputation
Order
Delivery
©2007 Burke Incorporated. All rights reserved.
Client Product
Meets Needs
High
Medium
Low
Value
Likelihood to
Recommend and
Repurchase
Revenue
Satisfaction
Support and
Relationship
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Integrate
Best Practice #7: Develop decision support systems to evaluate the
ROI associated with different improvement strategies.
Decisions support systems involve a variety of inputs.
Potential areas for investment, derived from measurement
Costs of improvement programs
Estimated pay-out times
©2007 Burke Incorporated. All rights reserved.
Cost of capital
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Integrate
FISCAL®
Key Customer Retention Drivers Are:
“Technical knowledge of service reps
”
“Has a full range of products and services
”
“Is a customer oriented company
”
“Customer reps are available when needed
”
“Employees show personal empathy for customers
”
How many strategies do you want to simulate in this session?
3
©2007 Burke Incorporated. All rights reserved.
Enter a label for each strategy:
Strategy 1
Revamp Product Training Program
Strategy 2
Increase Service Rep Staff By 25%
Strategy 3
Friendliness Training For Service Reps
Done With
Strategy Labels
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Integrate
FISCAL®
Enter dollar investment and timing information about this strategy
Strategy 1
Revamp Product Training Program
Dollars
Required?
©2007 Burke Incorporated. All rights reserved.
Total “life of project” dollar investment required
$2,000,000
Year
1
Year
2
Year
3
Enter estimated three year“spread” of investment
in % terms for each year (must = 100%)
60%
30%
10%
What cost of capital is in effect for this project?
7%
Done With
Investment Info
For Strategy # 1
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Integrate
FISCAL®
Select targeted customer perceptions and level of impact
as a result of this strategy:
Strategy 1
Revamp Product Training Program
Expected Rating
Impacted? Point Change
Has a full range of products and services
Technical knowledge of service reps
.5
Is a customer oriented company
Service reps being available when needed
©2007 Burke Incorporated. All rights reserved.
Employees show personal empathy for customers
Done With
Impact Info
For Strategy # 1
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Integrate
FISCAL®
Enter impact timing information about this strategy:
Strategy 1
Revamp Product Training Program
Enter estimated three year“spread” of impact on
customer perceptions in % terms for each year (must = 100%)
for each attribute targeted by this strategy
©2007 Burke Incorporated. All rights reserved.
Technical knowledge of service reps
Year
1
Year
2
Year
3
20%
50%
30%
Done With
Impact Timing
For Strategy # 1
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Integrate
FISCAL®
NPV Summary
Revamp
Product Training
$3,034
Friendliness
Training
$2,001
©2007 Burke Incorporated. All rights reserved.
Increase
Service Rep
Staff 25%
$762
$0
$500
$1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000
NPV ($000)
Save Chart
Next
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©2007 Burke Incorporated. All rights reserved.
Phase Four: Act
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Act
Best Practice #8: Build on early buy-in from Blueprinting sessions
and other discovery activities to mobilize the organization to act
upon measurement results.
Comprehensive scoping, measurement, and integration initiatives cannot
move an organization toward its business objectives without using the
resultant insights to improve decision making.
Companies often struggle to formalize this last phase.
Energy and money spent on previous phases
The accountability associated with taking action
©2007 Burke Incorporated. All rights reserved.
Some executives tendency to act on “gut”
Burke developed, TRACTIONTM, a framework that ensures connection
between customer loyalty measurement and customer loyalty management.
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Act
TRACTION™: Turning Results Into Action
TRACTION™ ensures that management takes action to raise customer
loyalty, and consequently, profitability.
©2007 Burke Incorporated. All rights reserved.
TRACTION™ involves many of the same business managers involved in
Enterprise Blueprinting, further establishing customer centricity as a pillar of
organizational success.
Ensure
Understanding of
Critical
Improvement
Issues and
Connection to
Internal Processes
Identify Root
Causes for
Suboptimal
Performance
Among Process
Owners, Facilitate
Identification of
Improvement
Strategies and
Tactics
Identify Ways
to Eliminate or
Reduce Barriers to
Change
(Processes,
Organizational
Culture, etc.)
Document and
Present
Improvement
Strategies,
Including
Timelines for
Action and ReMeasurement
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Act
Best Practice #9: Build a problem recovery system to enhance
customer loyalty and to take advantage of customer problems
identified through survey research.
Customer At Risk
(as identified from
loyalty questions)
Alert email sent to
program office
Alert email routed to
business unit
Individual rep updates
Action Tracking
module in online
system
Individual rep follows
up with customer
©2007 Burke Incorporated. All rights reserved.
OR
Requested
Red Alert
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Act
Unfavorable
response to a
key question
Does customer
want to be
contacted?
No
Decline of follow
up offer noted in
data
• Follow up with customers builds
credibility.
• Follow through by customer-facing
departments ensures actionability.
Yes
Sale rep and
location manager
receive email
requesting follow up
Does sales rep
follow up & describe
in dashboard?
No
©2007 Burke Incorporated. All rights reserved.
Yes
Email describing follow up
is sent to location
manager
Does location
manager approve
follow up?
No
Yes
Quality manager
contacts customer; is
customer satisfied with
resolution?
No
Yes
Quality manager
updates dashboard to
indicate closure
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Act
Best Practice # 10: Establish communication mechanisms and
corporate goals to make the Voice of the Customer central to all the
organization’s activities.
Communication
Electronic newsletters
VOC Digital Dashboards on Intranets or Extranets; balanced scorecards
Incorporation of VOC measures to regular communications from top management
Explicit connection to any internal branding efforts
Goals
Corporate goals typically set through a combination of…
©2007 Burke Incorporated. All rights reserved.
Historical or normative data
Managerial judgment
VOC measures typically comprise one portion of a larger variable/performance
compensation system
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©2007 Burke Incorporated. All rights reserved.
Ensuring Program Relevance
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Jamie Baker-Prewitt, Ph.D.
Senior Vice President
Director of Decision Sciences
Burke, Inc.
jamie.baker-prewitt@burke.com
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