Innovating Analytics E-Book

Larry Freed

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 371

Veröffentlichungsjahr: 2013

Beschreibung

How does a CEO, manager, or entrepreneur begin to sort out what defines and drives a good customer experience and how it can be measured and made actionable? If you know how well the customer experience is satisfying your customers and you know how to increase their satisfaction, you can then increase sales, return visits, recommendations, loyalty, and brand engagement across all channels. More reliable and more useful data leads to better decisions and better results. Innovating Analytics is also about the need for a comprehensive measurement ecosystem to accurately assess and improve the other elements of customer experience. This is a time of great change and great opportunity. The companies that use the right tools and make the right assessments of how to satisfy their customers will have the competitive advantage. Innovating Analytics introduces an index that measures a customer's likelihood to recommend and the likelihood to detract. The current concept of the Net Promoter Score (NPS) that has been adopted by many companies during the last decade--is no longer accurate, precise or actionable. This new metric called the Word of Mouth Index (WoMI) has been tested on hundreds of companies and with over 1.5 million consumers over the last two years. Author Larry Freed details the improvement that WoMI provides within what he calls the Measurement Ecosystem. He then goes on to look at three other drivers of customer satisfaction along with word of mouth: customer acquisition, customer loyalty, and customer conversion.

Leseprobe

Contents

Introduction

Chapter 1: Customer Experience 2.0

Accelerated Darwinism

Chapter 2: NPS—What It Is and What It Does Well

Chapter 3: NPS—Fundamentally Flawed

Accuracy

Margin of Error

Oversimplification

Detractors Don’t Always Detract, and Promoters Don’t Always Promote

Where’s the Growth?

Insufficient Information

Simple Is Just . . . Simple

Chapter 4: WoMI—The Next Generation of NPS

WoMI Distinguishes between Positive Word of Mouth and Negative Word of Mouth

Negative Word of Mouth

The WoMI Research Approach and the Validity of the Results

Phase 1: ForeSee Independent Research

Phase 2: Initial Client Testing

Phase 3: Later Client Testing

WoMI Testing Results

NPS and WoMI Score Differences

Recommend and Discourage Scores

Continuing Implementation

In Virtually Every Industry, We See a Massive Overstatement of Detractors

Using WoMI with NPS

Chapter 5: The Four Drivers of Business Success

Customer Retention

Upsell

Marketing-Driven Customer Acquisition

Word-of-Mouth-Driven Customer Acquisition

Customer Intent and True Conversion Rate

The Common Thread

Chapter 6: Why the Customer Experience Matters

Why Measure Customer Experience?

How to Measure the Customer Experience and Answer the Big Three Questions

Measuring the Customer Experience at the Brand Level

Measuring the Customer Experience in Contact Centers

Measuring the Customer Experience in Stores

Measuring the Customer Experience on Websites

Measuring the Customer Experience with Mobile Experiences

How to Measure the Multichannel Consumer

Chapter 7: The Customer Experience Measurement Ecosystem

Behavioral Data

Getting Sticky

Mobile Complexity

Challenging Behavioral Metrics

Observation and Usability

Voice of Customer Measurement

Chapter 8: Best Customer Experience Practices

Amazon

Zappos

Panera Bread

Government Agencies

Eddie Bauer

Nutrisystem

House of Fraser

ABC

Testing New Store Programs Impact on the Customer Experience

Word-of-Mouth Index (WoMI)

Best Practices

Chapter 9: Big Data and the Future of Analytics

Big Data Volume

Big Data Variety

Big Data Velocity

The World of Big Data

Big Data Creates Value

Big Data and Retail

The Trap of Big Data

Innovation

Afterword: Measuring Customer Experience—A Broader Impact and the Start of a Journey

Appendix A: Satisfaction, WoMI, Net Promoter, and Overstatement of Detractors for Top Companies

Appendix B: Are Those Least Likely to Recommend Actually the Most Likely to Discourage?

Appendix C: Eleven Common Measurement Mistakes

Appendix D: An Overview of Measurement and Model Analysis Methods

Acknowledgments

Index

Cover image: © iStockphoto.com/aleksandarvelasevic

Cover design: Paul McCarthy

Copyright © 2013 by Larry Freed. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Freed, Larry.

Innovating analytics : word of mouth index—how the next generation of net promoter can increase sales and drive business results / Larry Freed.

pages cm

Includes index.

ISBN 978-1-118-77948-4 (cloth); ISBN 978-1-118-77949-1 (ebk);

ISBN 978-1-118-77950-7 (ebk)

1. Consumer satisfaction. 2. Marketing research—Statistical methods. 3. Word-of-mouth-advertising. 4. Internet marketing. I. Title.

HF5415.335.F74 2014

658.8'72—dc23

2013025416

Introduction

In 2006, Pulitzer Prize winner Thomas Friedman of the New York Times wrote an international best seller titled The World Is Flat in which he analyzed the accelerating pace of globalization. The title encapsulated the idea that the world had increasingly become a level playing field in terms of commerce: new companies could rise to prominence in the blink of an eye and could fail as quickly. The title also described the shift required by countries, companies, and individuals to remain competitive in a global market where historic advantages were becoming increasingly irrelevant.

Friedman outlined 10 flatteners of the world, including the fall of the Berlin Wall, the development of Netscape, and the rise of search engines like Google. The tenth flattener was the most potent of them all: the “steroids,” which involved digital, virtual, mobile, and personal. Friedman showed that all analog content and processes (from entertainment, to photography, to word processing) were being digitized and therefore they could be shaped, manipulated, and transmitted. The virtual could be performed at high speed with total ease, the mobile could be executed anywhere and anytime, and the personal could be performed by anyone—ergo more and more flatteners, such as the iPhone and iPad, Twitter, Facebook, Yelp, and on and on.

These steroids have greatly influenced the field that I study, the customer experience. To adjust Friedman’s metaphor to this area, I would describe it as The World Has Turned Upside Down. There has been a dramatic shift in the relationship between companies and customers. In the twenty-first century, customers have vast amounts of information at their disposal, they have the ability to switch from one product and service to another with incredible ease, and they can broadcast their pleasure or unhappiness to thousands if not millions of others. Where consumers have freedom of choice, the companies they do business with and are loyal to will be determined by how satisfied they are with the customer experience.

In such a world, how does a CEO, manager, or entrepreneur begin to sort out what defines and drives a good customer experience and how it can be measured and made actionable?

Every smart company and every smart manager knows that an excellent customer experience always has been and should be a business goal. But without a concrete metric, customer experience efforts in the past were often nonspecific and lacking in meaning and direction. The starting point is understanding that customer satisfaction is the right measurement system to gauge the customer experience.

That is how I saw customer satisfaction when I was the vice president of e-business at Compuware, the information technology company, and when I worked in other roles at financial institutions, including chief technology officer for Bank One. Customer satisfaction efforts tended to end up like other initiatives, like TQM (total quality management), Five 9s (reliability to 99.999%), Zero Defects (striving for no quality defects), BPR (business process reengineering), and even Six Sigma (a Motorola-developed strategy utilizing quality methods and statistical analysis). Many programs sounded great, looked great, got people excited, and sometimes even added a little value, but very rarely could you quantify the impact on a company’s bottom line. The average satisfaction program went the way of the dinosaur after a few months.

Similarly, traditional satisfaction studies in the past were short-lived and ineffective. Data and action plans were shared in follow-up meetings and quickly forgotten. The one exception to this morass of misinformation and forgotten efforts over the past two decades was the American Customer Satisfaction Index (ACSI) that Dr. Claes Fornell and his colleagues at the University of Michigan created. The ACSI is a macroeconomic indicator that economists use to predict gross domestic product and consumer spending at the macroeconomic and microeconomic levels. The ACSI releases customer satisfaction scores for hundreds of individual companies each year.

Established in 2001, ForeSee built on this scientific, academic work by Dr. Fornell and his partners. By taking the scientific approach of the ACSI and constructing a practical business approach on its foundation, my colleagues and I knew that properly measuring satisfaction with the customer experience could actually predict the future of a business and help companies decide where to focus their improvement efforts in order to optimize their investments and maximize their returns. More than twenty years of research gave us confidence that an effective customer satisfaction methodology could:

Measure what we can’t see with our own eyes (e.g., customer attitudes and expectations).

Put nonobservables into a cause-and-effect system.

Separate the relevant from the trivial (smart companies need to know the difference between what people complain about loudest and what actually impacts their likely future behaviors, which are often very different things).

Generalize from a small sample to a target population (a methodology that allows a smaller sample size while still maintaining statistical significance at a high confidence interval, saving companies millions of dollars).

Use customer satisfaction to measure the customer experience and accurately and reliably predict financial success and other desired outcomes.

Over the past decade since our founding, we have developed proprietary customer experience measurement technologies and a methodology to understand today’s powerful consumers, who have so many choices available to them.

What we’ve cultivated is an analytical approach that allows managers, executives, and companies to connect customer experience to the bottom line and optimize the efforts to achieve customer satisfaction.

In the last decade, customer satisfaction is no longer the warm and fuzzy program worthy of a few inspirational posters in a lobby that it was in the 1980s and 1990s. Instead it is now an incredibly powerful management tool, an actionable metric that objectively could quantify the direct impact the customer experience has on a company’s bottom line. The customer experience, when measured correctly, shows that a satisfied customer is a long-term, loyal, and profitable customer who is likely to recommend your business to others. Such future customer behaviors are critical to the success of any business.

If you know how well the customer experience is satisfying your customers and you know how to increase their satisfaction, you can then increase sales, return visits, recommendations, loyalty, and brand engagement across all channels. More reliable and more useful data lead to better decisions and better results.

As for ForeSee, what started in 2001 as a scientific, robust, incredibly sophisticated technology used to measure online customer satisfaction continues to expand: deeper into the online customer experience analytics and broader into other channels of customer experience analytics (such as call centers, stores, mobile sites and apps across every kind of device, kiosks, and social media channels).

In this book, I introduce a powerful new metric we developed at ForeSee called Word-of-Mouth Index (WoMI), which incorporates and builds on a widespread metric of customer loyalty and customer satisfaction called Net Promoter Score (NPS). NPS has many strengths but just as many weaknesses and has outlived its usefulness as a metric. This book is also about the need for a comprehensive customer experience measurement ecosystem in addition to WoMI to accurately assess and improve the other elements of customer experience. This is a time of great change and great opportunity. The companies that use the right tools and make the right assessments of how to satisfy their customers will be the ones that will enjoy a substantial competitive advantage and, ultimately, success. Your customers have high expectations and the power to get those expectations met—from you, or from your competitor. It is your job to meet these expectations, and it is our job to help you meet them. It is a job I look forward to every day.

Chapter 1

Customer Experience 2.0

In the fall of 2011, ForeSee played host to a few hundred clients who came to our hometown of Ann Arbor, Michigan, for our annual user summit. The week of our user summit is always such a great time to interact with our clients and hear their opinions, not only about what we’re doing but also about the customer experience industry in general. Among many other topics up for discussion over the three days, I was planning to introduce WoMI, or the Word of Mouth Index, which my company, ForeSee, designed to substantially build on the value of the Net Promoter Score (NPS). At that point, we’d already conducted research to test the fundamental concepts behind WoMI and were ready to invite our clients to join in for the second round of testing.

I didn’t have long to wait to start hearing attendees’ opinions. In the lobby, on my way to grab an early breakfast in the University of Michigan’s Executive Education Center, I passed one of our clients on his way back from the exercise room. (I wish I could say I ran into him in the hotel gym, but I can barely make time to eat during our summit, much less exercise!)

As we crossed paths, he caught my eye and bellowed, “Hey, I hear you’re gonna tell us tomorrow all about why you hate NPS! Let me tell you something. You’re way off base. I love it.”

I smiled, not quite prepared for a confrontation at 7:24 in the morning, and replied, “Well, you’ve got me wrong. I don’t hate NPS, although in the past I’ve had critical things to say about it. But I’ve come to recognize some of its strengths. Why do you like it so much?”

John was a CEO at a multichannel retailer. It was his first year at our summit, though his staff had attended every year the company had been a client. As the company struggled to make sense of how various customer touch points interacted with each other and impacted the overall customer experience with its brand, John had come to sit in on some of the higher-level strategic sessions at our summit. I’d been told he was looking forward to hearing our take on NPS, which he enthusiastically endorsed in investor and analyst calls as a critical metric for his company. John explained that he loved the simplicity of one question.