How Will The Coronavirus Affect Market Research In Indonesia & The Asia Pacific Region With Yanti Nisro
In our recent podcast, MRDC Software’s founder, P…Read more
The buzzwords of the last two or three years in marketing and market research have been ‘Customer Experience’, ‘Customer Journeys’ and ‘Insights’. The analysis from these types of projects have mainly focused on three measures – NPS (Net Promoter Score), CES (Customer Effort Score), CSAT (Customer Satisfaction Index). Missing from these and, arguably more important, are ESG (Expectation-Satisfaction Gap) and VIR (Vulnerability Index Rating).
I have never liked the term ‘Customer Journey’. It implies that we are making a science out of something that is often quite woolly and it is easy to force customers into one, two or, possibly, too few profiles. I similarly dislike the term ‘insights’ which is what the market research industry claims it is now bringing to the business world. Hasn’t it always done that assuming there is some insight to reveal? But let’s focus on what analysis you can carry out from Customer Experience data. (I’m happy with the term ‘Customer Experience’, by the way!).
This has been around a while and has become the benchmark for measuring Customer Experience programmes. By asking respondents whether they would recommend a service to friends and relatives, a rating from 0 to 10 is banded into three groups – Promoters (9 to 10), Passives (7 to 8) and Detractors (0 to 6). To get the Net Promoter Score, you subtract detractors from promoters. It offers a way of tracking performance, but has some serious flaws.
In my view, the calculation is highly flawed for 4 reasons:
Customer Effort Score is cited as being a good measure as it equates to how easy and convenient the transaction was – and, we all like easy and convenient. The question asked to derive this information is a slightly clumsy one. The question you ask is something like “How much effort did you have to put in while making a purchase at our store?” I think it’s worthwhile collecting this data, but it’s not an easy question to answer.
I see it more as a reference point rather than a measure to be at the centre of business decisions. Its biggest flaw though is that it assumes that a customer is not willing to make more effort for something that they want. This is not always true. The last car I bought was purchased from a dealer some distance away because I liked the dealer more than my local one. It was more effort, but I had a better customer experience. Similarly, you might be harsher when judging a restaurant that you love which is one hour away, but the effort might be worthwhile if you love the food or the service.
A CSAT score calculates the percentage of the possible score that is achieved. A scale of 0 to 10 would equate to a score of 0% to 100% as would a score of 1 to 7. There is nothing wrong with a CSAT score and it is good for tracking, but it doesn’t give a business its true position. Is the service good enough? Does it need to improve?
CSAT doesn’t tell you enough. Many marketers will tell you that a business should seek to exceed expectations at every step of the Customer Journey (sorry, it’s that term again). What they mean is that you should aim for the highest standards at every touchpoint. This is nonsense. This assumes that providing a higher service doesn’t cost anything. It assumes customers don’t realise that you usually pay more for a better service or product. Certainly, operating more efficiently or providing a better service that customers want should not be ignored, but businesses are about providing a profitable service that the customers want. So, CSAT alone is not good enough, though useful as a simple trackable measure.
And so, we come to the measure that we promote with every CX project. What is the gap between Expectation and Service? If the satisfaction with the Service was 8 and the Expectation was 6, you can expect a customer to return in most cases. This would be an ESG of +2. However, if the satisfaction with Service was 8 and the Expectation was 10, this is likely to be a problem.
ESG works across all product fields. If you are buying a luxury service where you expect a 10 out of 10 experience, a satisfaction score of 9 could have a negative effect. Similarly, if you are purchasing a service that is mundane or unemotive, you might only score 7 but have an expectation of 6, which is positive. From ESG, you will get a measure of whether you are meeting a customer’s needs. Is your service good enough?
ESG, however, needs another measure to give you far more than NPS, CES and CSAT offer as measures. It is important to ascertain whether there is a competitor service at a similar price that is considered. This is where a Vulnerability Index Rating (VIR) becomes important to make the ESG a stronger measure that allows you to hone your business, matching profitability with customer needs.
The perceived strength or weaknesses of competitors when combined with ESG gives a clear picture of what is needed to grow and retain customers. VIR is calculated by scoring the results of CSAT, ESG , Effort and Competitor strength together to provide a rating which can be tracked.
Let’s say that a restaurant in a town is the best Italian restaurant for some distance around, but it’s not especially good. It might have a fairly good CSAT score, a positive ESG score, Effort could be positive and Competitor Strength is weak. Now, a new and better Italian restaurant moves in. CSAT might drop as word gets about. ESG would fall as expectations rise, Effort might not change but Competitor Strength would increase. The first restaurant will need to improve its CSAT and Effort and raise expectations to keep in business – or, drop prices, which may not work.
Running CX programmes is becoming an increasing part of our business. To get the best value for money, there is no need to use too much of your budget. Understanding and analysing the data in the right way can put a business in the right direction to meet its customers’ needs and improve profits. Contact firstname.lastname@example.org to find out how our CX programmes can help you.