A customer measurement system needs to accomplish two things: first, identify what it takes to keep customers, and second, ensure that the company is constantly providing it.....

Understanding Customer Loyalty

Virtually every company has to contend with scarce resources (time, money, staff, and facilities) as an everyday fact of life. How those resources are applied to improving services and products has a major impact on a company's capacity to retain customers and increase its position within the marketplace.

Satisfaction is less reliable as an indicator of customer loyalty because it often tends to be more passive than proactive. Product and service performance measurements can also provide little direction because of their tactical, general, and reactive viewpoint. Many measurement systems fail because they do not consider customer needs and expectations, the value of a customer, or include staff as customers in the measurement process.

Proactive loyalty and retention measurement systems overcome these deficiencies and recognize that customers make trade-offs in every service, product, and supplier selection decision. As a result, customer needs, expectations, problems, and complaints must be identified and assessed on a systematic, continuous basis.

The Dimensions of Loyalty and Retention Measurement

The overall goal of customer measurement is to identify the smallest number of variables that drive customer satisfaction, loyalty, and retention the most. An effective customer measurement system needs to:

• identify customer needs, expectations, problems, complaints, and behavior.
• measure and quantify them within some type of meaningful reporting structure.
• yield information that can be used to improve service delivery systems, better predict customer behavior (loyalty and retention), and increase the company's competitive position in the marketplace.

Baseline Research - techniques used to measure and benchmark the current condition of the company:

• customer loyalty appraisal and modeling (current levels of satisfaction, repurchase intention, share-of-wallet, willingness to recommend, word of mouth, and public image).
• satisfier/dissatisfier analysis (company-based, employee-based, customer-based).
• moments of truth and key points of pain.
• market segmentation.
• competitive position with major competitors.
• customer complaint analysis (types, numbers, and complaint behavior).
• root cause analysis.
• satisfaction with and effectiveness of current customer response systems.

Employee Surveys - studies designed to solicit employee input regarding:

• the company's capacity to do the job right the first time.
• the effectiveness of current customer response systems.
• customer complaint analysis (types, numbers, and complaint behavior).
• their perceptions of the work environment.

Retention, Loyalty, and Economic Modeling - systems used to condense and identify organizational priorities:

• a first type of model is designed to quantify profits lost as a result of problems and the manner in which problems are resolved.
• the second type of model is designed to quantify the return on resources invested in terms of customer loyalty.

Tracking Studies - ongoing feedback systems designed to monitor company performance across your key drivers of customer loyalty, moments of truth, and key points of pain. Tracking systems are usually focused on monitoring customer needs, expectations, satisfaction, and loyalty, or event-based (focused on specific transactions).