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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’.”
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“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
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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
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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
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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
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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
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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
• Goal of 70% return customers
• Goal of 80% return customers
Benchmark-Based Targets
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Selected Targets for Benchmarks and Linkage
Mean Satisfaction
Rating
Benchmarks Desired Business Results
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Logistic Regression
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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
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
Overall Satisfaction
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With Linkage-Based Targets Added
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
Market Share Leader Average/Competitor A
Best-in-Class
Pro
babili
ty
Aiming for 70% Retention
Aiming for 60% Retention/
Aiming for 80% Retention
Overall Satisfaction
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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
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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
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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
Overall Satisfaction
Aiming for 70% Retention
Aiming for 60% Retention/
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“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