Customer Experience Correlates to Loyalty

Posted by Bruce Temkin on March 29, 2008

5 comments | 2832 reads

I just published a report called The Business Impact Of Customer Experience that I think will have a significant impact on how companies think about customer experience. Here's an excerpt from the executive summary:

Executives know that customer experience is important, but they can't always tie it directly to business results. So we examined the correlation between the customer experiences delivered by 112 US firms (as defined by Forrester's Customer Experience Index) and the loyalty of their customers. Our analysis shows that good customer experience correlates highly to loyalty.

Most of us already intuitively knew that good customer experience is good for business; that's the basis for My Manifesto: Great Customer Experience Is Free. But there's no longer a need to debate the issue. This research objectively shows a strong tie between customer experience and consumer loyalty. Here are some more of the specific findings in the research:

For all 9 industries that we examined, there was a strong correlation between customer experience and loyalty.
Bank customer experience was the most correlated with loyalty, followed by wireless carriers.
Health plan customer experience was the least correlated with loyalty, followed by investment firms and retailers.

For more information, read my blog: Customer Experience Matters

Bruce Temkin

Bruce Temkin, Managing Partner of Temkin Group, is a leading expert in how large organizations build differentiation with customer experience. He has worked with hundreds of large organizations on the business strategies, operational processes, organizational structures, leadership, and culture required to create and sustain superior customer relationships.

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5 comments »

Graham Hill

March 29, 2008

Hold the Champagne

Bruce

I don't think we should be popping the champagne corks quite yet, at least not until we find the answers to a few supplementary questions:

The 'What Exactly Are You Measuring?' Question
Does the suggested relationship correspond to the customer experience as perceived by customers and as used be them to decide whether they stay, repurchase or recommend to others? I have seen far too many customer experience instruments that are biased, for example towards easy to measure on-line experiences rather than the more difficult off-line experiences, or towards the CRM touchpoints of marketing, sales and service rather than the much more influential ownership and usage touchpoints. As we are beginning to realise, it is the end-to-end customer experience that really matters, in particular, the difficult ownership and usage part, not just the parts that are easy to measure.

The 'Is the Suggested Relationship a Causal One?' Question
Let's assume that your definition of customer experience is reasonable. That begs a second question: Does having a superior customer experience cause loyalty to increase, or are they indirectly and non-causally related through some other factor not measured, or even inversely related (being loyal bacause of some other factor causing customers to rate the customer experience higher). Correlation proves only that you need to do more homework. Tempting as it is to belive that superior customer experience drives loyalty, experience with the development of customer satisfaction measures (a far easier thing to measure than the customer experience) shows clearly that the relationship between customer experience and loyalty, or profitability, or anything else, will likely be anything but direct and simple.

The 'What's the Return on Customer Experience?' Question
Let's assume that customer experience is causally related to loyalty. That begs a the $64,000 question: Does investing in customer experience pay-off, by how much and in which circumstances? Even a causal relationship between customer experience and loyalty doesn't always equate to a profitable one. And even if it did, the real question is how much one should invest, in which touchpoints or capabilities, for which customer groups, to get the best return. This is what companies really need to know if they are to change things for the better. For customers and for shareholders.

I think your research is a valuable contribution to the development of thinking and practice in customer experience. But it clearly raises as many questions as it answers. I look forward to you sharing answers to these questions with us as you do additional research.

In the interim, the champagne is on hold.

Graham Hill
Independent CRM Consultant
Interim CRM Manager

Daryl Choy

May 18, 2008

Kirkpatrick's Four Levels of Evaluation

It's interesting that everything has to be measured in order to prove its value.

How about training? Even with the Kirkpatrick's model, it is always difficult to measure its impact on business results. Nobody can afford not to do training, because everyone knows training is important.

Sometimes, is it necessary to prove everything? Management is both art and science.

What is it that determines the value of a piece of artwork? Does it matter?

Experience is definitely free, so it is meaningless to try to measure experience. Positive experience is priceless, and there is no way that it can be measured.

So... forget about what gets measured gets managed and what gets managed gets done.

Who will not try to create positive experience when almost everything is alike in the world of information rich and time poor?

Daryl Choy
Make Little Things Count
wisdomboom.blogspot.com

Graham Hill

May 19, 2008

Trade-offs not Put-offs

Daryl

Business is a trade-off bewtween management as art and management as science. The challenge is to introduce as much management science as possible, without stifling the creativity required to stay ahead in today's competitive environment.

The challenge of measurement isn't about whether to measure or not, but what makes sense to measure, how to measure it and when to measure it. And that goes for more difficult things to measure like the customer experience too. Because it is difficult to measure doesn't mean we shouldn't try at all.

NASA wouldn't have put a man on the moon if they had just sat down and given up without trying because it was "difficult". They just got on and did it and didn't take "Can't be done" for an answer. And management's measurement difficulties are largely trivial in comparison to putting a man on the moon.

Graham Hill
Independent CRM Consultant
Interim CRM Manager

Daryl Choy

May 20, 2008

Just Do It

Graham

Thank you for your comments.

I totally agree with you that we shouldn't take no as an answer. However, there is also no point debating what the right measurement approach is.

"Ever tried. Ever failed. No matter. Try again. Fail again. Fail better." Samuel Beckett

Daryl Choy
Make Little Things Count
wisdomboom.blogspot.com

Francis Buttle

September 4, 2008

....but what are the measures?

Bruce

I'm a great advocate of Forrester's research, which is routinely expertly conducted, highly reliable and well presented. In this response, however, I want to echo some of Graham Hill's comments. Customer experience ranges across all touch points and channels, whether marketing, sales or service-related. Experiences across the customer life-cycle include exposure to advertising matter, buying a product, using the product, obtaining customer service, and even disposing of the product (excuse this product-centric perspective).

Judging from the summary on the Forrester website, the research that you conducted measures only usefulness, usability and enjoyability. Can you explain how these 3 measures are adequate to the task of measuring the full range of customer experiences across touch point, channel and life-cycle? A good start would be an account of how you operationalized these 3 constructs.

I do how you can cast some light into my darkness!

Thanks and best wishes.

Francis Buttle

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