Setting Targets for Measures of Customer Satisfaction .../media/Files/MaritzResearch/...Setting...

Setting Targets for Measures of Customer Satisfaction: Comparing Results Based on Benchmarking versus Linkage Analysis

Dr. D. Randall Brandt, VP Customer Experience & Loyalty

Maritz Research

Sharon Alberg, Director Marketing Science

Maritz Research

American Marketing Association Advanced Research Techniques (ART) Forum

Seattle, 25-26 June 2012

Proprietary and Confidential © 2012 Maritz 1

“One client recently told me that her organization strives for a mean customer satisfaction score of 9 or higher (on a 10-point scale) because ‘that’s what management wants’.”

Proprietary and Confidential © 2012 Maritz 2 2

“How Good Is Our Score?”

• How and where should managers “set the bar” for measures of customer satisfaction and loyalty?

• What can be considered a “good score?”

• Managers ask these questions quite often—and for good reason:

– Decisions regarding resource allocation, reward and recognition, and accreditation of channel partners frequently are on the line

– The rationale for targets that impact these decisions must be clear and defensible


Objectives

• To determine and evaluate the similarities and differences among targets based on judgment, benchmarks and linkage analysis

• To use the results to develop a proposed framework for selecting and applying these targets


What Is a Target?

• Goal or aspiration:

– Improve customer satisfaction score by 5%

– Achieve best customer satisfaction index in our industry or market segment

• Reference point:

– Industry average

– Top quartile within an industry

– Key competitors’ scores

– Our own score at a previous point in time

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How Are Targets Selected?

• Judgment

• Benchmarking

• Linkage analysis

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Judgment-Based Targets

• Management picks a target based on judgment

• Key benefits:

– Few, if any, when used alone

– Works best in tandem with benchmarking and/or linkage

• Key limitations (when used alone):

– Often difficult for management to articulate the rationale for the target

– Target may not be realistic in view of current organizational resources and capabilities

– No way to know if achievement of target will yield desired business results


Benchmark-Based Targets

• Target defined via comparison to some benchmark:

– Intra-organizational

– Inter-organizational

– Previous point in time

• Key benefits:

– Often easier to explain

– Take into account the “current state”

• Key limitations:

– May promote false sense of confidence

– No way to know if achievement of target will yield desired business results

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Linkage-Based Targets

• Target is set based on strength and form of relationship between satisfaction and the business outcome of interest:

– How is customer satisfaction related to customer retention?

– To achieve a 60% retention rate, what level of customer satisfaction is required?

• Key benefits:

– Rationale is relatively easier to explain than judgment

– Hitting this target gives organization increased odds of achieving desired business result

• Limitations:

– Organizations are not always prepared or capable of performing the required linkage analysis


CEBenchmarks®

• Twelve sectors/subsectors

• Approximately 2,000–2,500 interviews quarterly, per sector

• Multiple measures:

– Recent transaction or experience

– Overall brand affinity and usage

• Upscale hotels selected for this study

• Key measures analyzed:

– Overall satisfaction

– Stated intent to return

• Average of all upscale hotel brands

• Average of top three market share leaders

• Individual scores for each of these leaders

• Best-in-class (hospitality)

• Best-of-the-best (all companies, all sectors)

The Data Benchmark-Based Targets


Linkage Analysis

• Currently, Maritz does not track behaviors of benchmarking survey participants

• However, previous research conducted in the hospitality sector demonstrates top-2 box on a 10-point ITR rating scale associated with 1+ actual return visits annually

• Therefore, we used top-2 box ITR as proxy for actual return visit order to focus on question of how variations in satisfaction are linked to probability of return visit

• Logistic regression - Dependent = Top-2 Box ITR

- Independent = Overall Satisfaction

The Data Analysis

• Goal of 60% return customers



Benchmark-Based Targets


Selected Targets for Benchmarks and Linkage

Mean Satisfaction

Rating

Benchmarks Desired Business Results


Logistic Regression

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0.20

0.40

0.60

0.80

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0 1 2 3 4 5 6 7 8 9 10

Predicted Probabilities of Return Visit

Overall Satisfaction

Pro

babili

ty

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Benchmark-Based Targets Related to Probability of Return Visit

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0.20

0.40

0.60

0.80

1.00

0 1 2 3 4 5 6 7 8 9 10

Best-of-the-Best

Client

Competitor B

Upscale Average

Market Share Leader Average/Competitor A

Best-in-Class

Pro

babili

ty


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With Linkage-Based Targets Added

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0.20

0.40

0.60

0.80

1.00

0 1 2 3 4 5 6 7 8 9 10

Best-of-the-Best

Client

Competitor B

Upscale Average

Market Share Leader Average/Competitor A

Best-in-Class

Pro

babili

ty

Aiming for 70% Retention

Aiming for 60% Retention/




A Proposed Framework for Setting and Using Targets

Yes Yes Yes

How Good Is Our Score?

Gather Measurements

Develop and Implement the “Right”

Customer Metrics

Are We Improving?

Are We Equal to or Better than Competitors?

Are We Driving Desired Business

Results?

Drive Continuous Improvement

Achieve Customer Experience Leadership

Realize Desired Business Results


Are We Equal to or Better than Competitors?

A Proposed Framework for Setting and Using Targets

No No No No

How Good Is Our Score?

Gather Measurements

Develop and Implement the “Right”

Customer Metrics

Are We Improving?

Are We Equal to or Better than Exemplars?

Are We Driving Desired Business

Results?

Identify and Pursue Priorities for Improvement • Key Drivers

Identify and Pursue Priorities for Improvement

• Differentiators

Identify and Pursue Priorities for Improvement

• Best Practices

Identify and Pursue Priorities for Improvement • ROI Levers

Drive Continuous Improvement

Achieve Customer Experience Leadership

Realize Desired Business Results


Alternative Targets Related to Probability of Return Visit

0.00

0.20

0.40

0.60

0.80

1.00

0 1 2 3 4 5 6 7 8 9 10

Best-of-the-Best

Client

Competitor B

Upscale Average

Previous Point-in-Time/Competitor A

Best-in-Class

Pro

babili

ty



Aiming for 60% Retention/


“How Good Is Our Score?”

Target or Objective

• Trending Favorably?

• Above Industry Average?

• Better than Key Competitors?

• Achieved Basic Retention Goal (60%)?

• Best-in-Class?

• Best-of-the-Best?

• Achieved Retention Stretch Goal (70%)?

Achieved?

Yes

Yes

Yes

Yes

No

No

No

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Summary and Conclusion

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• Use multiple criteria for setting targets for key customer metrics – Judgment

– Benchmarks

– Linkage

• Select criteria on the basis of business strategy and objectives

• Evaluate scores on these metrics using the selected multiple criteria and targets

• Use results of evaluation to focus and direct managerial action

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