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Whitepaper

The Customer Satisfaction Survey:

Measuring Customer Experience to Build Customer Loyalty

Overview
In The Value Profit Chain, Earl Sasser Jr. and his co-authors declare “So-called satisfaction surveys must go beyond
merely the question of satisfaction if they are to yield the data necessary for profiling the customer base.” Questions
they propose for use in surveys include:

• How satisfied are you (with the product or service)?

• How likely are you to repurchase?
• How likely are you to tell someone else about your experience?
• … and many more
The key point is that the domain known as “customer satisfaction research” is about much more than satisfaction. Most
organizations cobble together their own solutions for measuring customer satisfaction. In fact, in a recent survey that
Vovici and CGA conducted of 200 marketing professionals, 83% reported that their organizations were not using any
standard customer experience metric.

If you’re a market researcher, you will want to review each metric in this white paper, since each can be a valuable tool
in your toolbox; each has its strengths and weaknesses, covered below. If you’re a business user, you will only want to
review those metrics applicable to the situation at hand.

Customer Satisfaction Measures

The Importance of Internal Standardization
One important part of customer satisfaction work is to standardize on the same question wording and scale across
your products, departments and divisions. Whichever measures you decide are best for your organization, use them
consistently. This will enable you to compare and contrast different parts of the business.

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Public Domain Customer-Satisfaction Question: CSAT

Many organizations use the following question, often called CSAT, to measure customer satisfaction:

What is your overall satisfaction with our company?

1. Very dissatisfied
2. Somewhat dissatisfied
3. Neither satisfied nor dissatisfied
4. Somewhat satisfied
5. Very satisfied

This question has the twin advantages of brevity and familiarity, being recognized and easily answered by most
respondents. Any adult who has taken a survey has most likely answered a form of this question before.

CSAT is traditionally analyzed by tracking over time the percentage of “Satisfied” respondents, i.e., the percent who
answer 4 or 5. Many organizations are happy to see that 70-80% of their customers are satisfied and feel little sense of
urgency to make improvements so that satisfactions exceeds this level.

However, mere satisfaction is not enough: the key top-line number is the percent of respondents reporting themselves
to be “Completely satisfied”. This is a far more important metric. In the seminal paper, “Why Satisfied Customers Defect”
by Thomas O. Jones and W. Earl Sasser, Jr., the authors report that for Xerox completely satisfied customers (rating of
5) were six times more likely to repurchase over the next 18 months than somewhat satisfied customers (ratings of 3-4).
(For more on this paper, see the description of the Apostle Model below.)

If satisfaction is just one part of the customer experience and loyalty survey you are conducting, CSAT can be an
effective measure.

ACSI (American Customer Satisfaction Index) Score & Its Calculation

The American Customer Satisfaction Index (ACSI) is the most well known national customer satisfaction index model,
an economic indicator that assesses the overall satisfaction of U.S. consumers. New results are announced quarterly;
if you’ve ever read about changes in customer satisfaction in the business news, it was probably news about the ACSI.
The ACSI is compiled by the National Quality Research Center (NQRC) at the University of Michigan. While intended as
a macroeconomic measure, many corporations have used it to measure the satisfaction of their own customers.

The heart of the American Customer Satisfaction Index is a set of three questions that assess satisfaction on unique
10-point scales:

1. What is your overall satisfaction with [our product or service]?

2. To what extent has [our product or service] met your expectations?
3. How well did [our product or service] compare with the ideal [type of offering]?

Some organizations simply normalize and average the three ratings, like this:

((Satisfaction-1) + (Expectancy-1) + (Performance – 1)) / 27 * 100

This produces an overall score from 0 to 100 that can be used as an approximate benchmark to industry results
published at http://www.TheACSI.org.

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Customer Loyalty Measures

When asked to measure loyalty, what should you measure?

For instance, Sasser provides this list:

• How likely are you to repurchase?

• How likely are you to tell someone else about your experience?
• How many times have you purchased (all products or services of this type) in the past 6 months (or some
other period of time reflecting purchase frequency for product or service category)?

• How many times have you purchased (this product or service) from (our company) in the past 6 months?
• How many others have you told about your experience (with this product or service) in the past 6
months?

• How many of those that you have told in the past 6 months have, to your knowledge, also purchased (the
product or service)?

• How many times have you offered constructive criticism or suggestions for product or service
improvements over the past 6 months?

Forrester, TNS and Business Over Broadway each have their own unique takes on measuring loyalty.

Forrester Loyalty Measures

Forrester Research is a useful firm to start with, because the organization doesn’t provide one overriding loyalty index
but instead looks at three questions to determine types of loyalty behavior:

1. Willingness to consider the provider for another purchase

2. Likelihood to recommend the provider to a friend or colleague
3. Reluctance to switch business away from the provider

The following are generic versions of these questions.

1. Willingness to repurchase: How likely are you to repurchase from us? Not at all likely, Slightly likely,
Somewhat likely, Moderately likely, Very likely
2. Likelihood to recommend: How likely is it that you would recommend us to a friend or colleague? Not
at all likely, Slightly likely, Somewhat likely, Moderately likely, Very likely
3. Reluctance to switch How reluctant are you to switch from us to another provider for these products
or services? Not at all reluctant, Slightly reluctant, Somewhat reluctant, Moderately reluctant, Very
reluctant

The actual question text and the results have been published in the Forrester Research report, “Customer Experience
And Loyalty: A Closer Look”, March 6, 2009. Bruce Temkin has published some loyalty results using these measures on
his blog, http://experiencematters.wordpress.com/.

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TNS Customer Loyalty Index

The TNS CLI (Customer Loyalty Index) used in its satisfaction research is measured using four questions:

1. Overall satisfaction
2. Likelihood to recommend
3. Likelihood to repurchase
4. The competitive advantage your company provides

The TNS CLI is an average that can range from 0% to 100%. It is the average of % Satisfied (scores of 3 or 4 on the
4-point scale), the % Likely to Recommend (scores of 4 or 5 on the 5-point scale), the % Likely to Repurchase (scores of
4 or 5) and the % Competitive Advantage (scores of 4 or 5, “Big advantage” or “Vital advantage”).

Advocacy Loyalty Index (ALI) and Purchasing Loyalty Index (PLI)

Business Over Broadway (BOB) developed two loyalty indices by analyzing the results from two satisfaction studies that
covered these eight satisfaction and loyalty questions:

1. Overall satisfaction
2. Likelihood to choose again for the first time
3. Likelihood to recommend
4. Likelihood to continue purchasing same products/services
5. Likelihood to purchase different products/services
6. Likelihood to increase purchase size
7. Likelihood to increase frequency of purchasing
8. Likelihood to switch to a different provider

Each index is calculated simply by averaging the rating of each component. Since no benchmark information is
provided, you are free to use appropriate scales. Unfortunately, the original questions use a 0-10 bipolar scale for
satisfaction and 0-10 unipolar scale for likelihood (7-point scales have been proven to have the highest reliability and
validity for bipolar measurement; similar 5-point scales are best for unipolar measurement).

Of all the loyalty indices covered here, the ALI and PLI are the most rigorously developed. For more detail, refer to the
third edition of Measuring Customer Satisfaction and Loyalty by Bob E. Hayes, Ph.D.

Customer Experience Measures

Importance of Customer Experience
The recession is strengthening the correlation between customer experience and customer loyalty, across all 12 B2C
industries Forrester Research studied in its report “Customer Experience Correlates To Loyalty”, published February
17, 2009. Perhaps as a result, most businesses will cut other areas disproportionately more than how they will cut areas
that affect customer experience.

The gap model (also known as the “5 gaps model”) of service quality is an important customer-satisfaction framework.
In “A conceptual model of service quality and its implications for future research” (The Journal of Marketing, 1985), A.
Parasuraman, VA Zeitham and LL Berry identify five major gaps that face organizations seeking to meet customer’s
expectations of the customer experience.

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The five gaps that organizations should measure, manage and minimize:

• Gap 1 is the distance between what customers expect and what managers think they expect – Clearly
survey research is a key way to narrow this gap.

• Gap 2 is between management perception and the actual specification of the customer experience –
Managers need to make sure the organization is defining the level of service they believe is needed.

• Gap 3 is from the experience specification to the delivery of the experience – Managers need to audit
the customer experience that their organization currently delivers in order to make sure it lives up to the
spec.

• Gap 4 is the gap between the delivery of the customer experience and what is communicated to
customers – All too often organizations exaggerate what will be provided to customers, or discuss the
best case rather than the likely case, raising customer expectations and harming customer perceptions.

• Finally, Gap 5 is the gap between a customer’s perception of the experience and the customer’s
expectation of the service – Customers expectations have been shaped by word of mouth, their
personal needs and their own past experiences. Routine transactional surveys after delivering the
customer experience are important for an organization to measure customer perceptions of service.

Each gap in the customer experience can be closed through diligent attention from management. Survey research can
be key to assisting management with this crucial task.

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Forrester CxPi Customer Experience Index

Forrester calculates its customer-experience index CxPi using the net score for three key questions:

1. Usefulness - Thinking about your recent interactions with these firms, how effective were they at
meeting your needs? 1 – Didn’t meet any of my needs to 5 – Met all of my needs
2. Ease of Use - Thinking about your recent interactions with these firms, how easy was it to work with
these firms? 1 – Very difficult to 5 – Very easy
3. Enjoyability - Thinking about your recent interactions with these firms, how enjoyable were the
interactions? 1 – Not at all enjoyable to 5 – Very enjoyable

The individual indexes were calculated by taking the percentage of consumers who selected one of the top two boxes
(4 or 5) and subtracting the percentage of consumers who selected the bottom two boxes (1 or 2).

To calculate each firm’s CxPi, Forrester Research subtracted the percentage of a firm’s customers that reported a bad
experience from the percentage that reported a good experience — for all three questions. The overall CxPi is an
average of those three results.

Forrester makes available a complimentary copy of the 2008 results to the Customer Experience Index:
http://www.forrester.com/Marketing/Campaign2/1,6538,1956,00.html.

What makes the CxPi an outstanding metric is its strong correlation to loyalty. Depending on industry, Forrester reports
a very high correlation to willingness to buy more, a high correlation to likelihood to recommend, and a medium
correlation to reluctance to switch. While the CxPi was only created in 2007, it has already emerged as a valuable and
important index.

Customer Effort Score™: A Loyalty Predictor for Customer Service Interactions

The Forrester CxPi is used to determine an overall experience with a product or service. While it is an excellent general
measure, it is not appropriate as a measure of a customer’s experience with a transaction: e.g., contacting technical
support for assistance with a hardware problem, calling a call center to change your address, or using a web portal to
request a warranty replacement.

For this more tactical experience, the Corporate Executive Board has developed a proprietary measure, the Customer
Effort Score™:

Exceeding customer expectations has long been the measure of success in customer service
interactions–89% of customer service executives believe that “delighting the customer” will lead to
increased loyalty. New research by the Corporate Executive Board’s Customer Contact Council, however,
reveals the alarming truth: exceeding customer expectations results in virtually no loyalty gains. In fact,
service and support centers have little stake in building customer loyalty at all.

“The probability that a service interaction will drive disloyalty is approximately four times greater than
the chance it will create any positive loyalty impression. In other words, as a function, customer service
typically plays on the ‘negative side’ of the loyalty field,” said Matthew Dixon, Ph.D., Managing Director of
the Customer Contact Council. “Most service executives are using traditional customer satisfaction (CSAT)
or the more recently popularized Net Promoter® Score (NPS) to gauge loyalty in service interactions,
but we found these metrics fail to capture the most powerful driver of disloyalty–the amount of personal
effort a customer has to put into the service experience.” In light of this new understanding, the Customer
Contact Council has developed an original metric that is far more predictive of loyalty than either CSAT or
NPS. This new metric, the Customer Effort Score™ (CES™), is based on a single question that determines
the degree of required customer effort during a service request.

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Unfortunately, the actual wording of the single question is only available to Conference Executive Board subscribers.
The Customer Contact Council, http://www.ccc.executiveboard.com/, has published a presentation, “Shifting the Loyalty
Curve: Mitigating Disloyalty by Reducing Customer Effort” at http://www.executiveboard.com/businessweek/pdf/
CCC1A8IGV5%20Essay.pdf, which provides an introduction to the research.

Customer Loyalty Segmentations

Segmenting the results of your customer satisfaction survey by the attitude and intended behavior of current customers
can help you identify what separates those customers you are likely to lose from those that are loyal. It’s a great
foundation for a successful plan to keep those customers that you are in danger of losing.

Of the many loyalty models proposed and used, the most influential is the Net Promoter Score, which is as much a
segmentation scheme as it is a loyalty measure.

NPS (Net Promoter Score)

The Net Promoter Score®, popularized by Fred Reichheld in his book The Ultimate Question: Driving Good Profits
and True Growth, is one of the simplest loyalty segmentations. Customers are asked “How likely is it that you would
recommend us to a friend or colleague?” and then provide a rating from 0 (“Not at all likely”) to 10 (“Very likely”).

This provides a one-question segmentation into three groups:

• Promoters – 9 or 10 – customers most likely to speak positively about your business

• Passives – 7 or 8 – customers unlikely to speak about your business
• Detractors – 0 through 6 – customers most likely to speak negatively about your business

The measure is called the “net promoter” score, because detractors are subtracted from promoters, to net out the
estimate of how many more promoters than detractors the organization has. Detractors are defined as respondents
rating their likelihood to recommend 6 or less, with promoters only those who rated their likelihood a 9 or 10
(respondents who selected 7 or 8 are considered neutral). The NPS measure can run from -100% (0% promoters, 100%
detractors) to 100% (100% promoters, 0% detractors), with typical measures in the 30-40% range.

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Traditional customer-satisfaction measures typically omitted likelihood to recommend, instead focusing on aspects like
perceived value, overall quality and customer complaints (see the ACSI model).

Avis, HP and IBM are among the many prominent adopters of NPS. The benchmark is popular for its simplicity, and
Reichheld claims it correlates to company growth better than any other measure.

Critics contend that NPS is not a better question than other measures, that its 11-point scale has lower predictive validity
than other scales, that the segmentation of promoters/neutrals/detractors is arbitrary and that other questions may be
better predictors of growth rates.

The Apostle Model

The notion that customer satisfaction directly affects customer loyalty is an old one. As late as 1994, when the American
Customer Satisfaction Index was defined, customer loyalty was modeled as being directly determined by customer
satisfaction and complaint behavior (how organizations react to complaints).

The idea that customer satisfaction and customer loyalty could in fact be orthogonal to one another was revolutionary
when first described in the article “Why Satisfied Customers Defect” by Thomas O. Jones and W. Earl Sasser, Jr. in
Harvard Business Review, November-December 1995.

By contrasting customer satisfaction and customer loyalty, Jones and Sasser pioneered what has come to be known as
the “Apostle Model”, named after one of its customer types.

This provides a one-question segmentation into three groups:

• Loyalist/Apostle - high loyalty, high satisfaction - “staying and supportive”

• Mercenary - low to medium loyalty, high satisfaction - “coming and going; low commitment”
• Defector/Terrorist - low to medium loyalty, low to medium satisfaction - “leaving or having left and
unhappy”

• Hostage - high loyalty, low to medium satisfaction - “unable to switch; trapped”

Second Generation of Apostle Model

The original Apostle Model does not have a dimension corresponding to likelihood to recommend (promoter/detractor).
In 2003, Sasser revised the model to include word-of-mouth behavior. The revised model is published in Value Profit
Chain: Treat Employees Like Customers and Customers Like Employees.

Defectors/Terrorists are now called Antagonists, and this segment repeats negative word of mouth, based on their
low level of satisfaction. Viral Loyalists are introduced as more loyal, more satisfied Loyalists. And Apostles/Owners
are even more loyal and more satisfied. Rather than display this typology as a grid, Sasser now shows the customer
segments along a path. Sasser proposes that Satisfaction leads to Loyalty, which leads to Commitment, which leads to
Apostle-like Behavior, which leads to Ownership.

Implicit in this revised model is that loyalty and satisfaction correlate to high likelihood of recommendation; no data is
given to back this assumption.

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Best Practices for Customer Satisfaction Studies

General advice for survey research is beyond the scope of this white paper. For that, turn instead to Survey Software
Success, also published by Vovici.

How Measuring Customer Satisfaction Can Improve Customer Satisfaction

A Rice/NYU study showed that customers who took part in a customer-satisfaction survey were more loyal than those
who did not. These customers were:

• More than three times as likely to have done new business with the firm.
• Less than half as likely to have defected.
• More profitable than the control group.
• Did new business at a faster rate and defected less than customers in the control group, even 12 months
later.

The study, “How Surveys Influence Customers”, published in the Harvard Business Review in 2002, has some important
caveats, of course. But the authors, Paul Dholakia and Vicki Morwitz, theorize about how surveys can improve
satisfaction:

Several theories of consumer psychology might apply. The simplest is that satisfaction surveys appeal to
customers’ desire to be coddled, reinforcing positive feelings they may already have about the surveying
organization and making them more likely to buy its products. Surveys may also increase people’s
awareness of a company’s products and thereby encourage future purchases. More subtle is the idea
that the very process of asking people their opinions can induce them to form judgments that otherwise
wouldn’t occur to them–that they really do like a company’s estate-planning services, for example. These
so-called measurement-induced judgments, the theory holds, can influence later behavior.

Combine this with the use of survey triggers/email alerts to intervene when customers provide low satisfaction ratings,
and you have two compelling arguments for how conducting customer satisfaction surveys can improve overall
satisfaction levels.

Survey Alerts (Trigger Emails) Improve Satisfaction

Once upon a time, surveys were conducted quarterly or annually, and the results were used to understand the overall
satisfaction level of customers in aggregate. Online surveys have transformed this process in many ways, two of
which are of special interest to satisfaction research: first, web surveys are often conducted continuously rather than
periodically, and second, surveys can now be used to intervene on the behalf of individual respondents. Measuring
satisfaction in aggregate is no longer sufficient, when you can intervene to improve that satisfaction on a respondent-
by-respondent basis.

Since at least 2003, many survey software applications, including that of Vovici, have enabled authors to set up email
alerts or triggers based on answers to individual questions.

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Closing the Feedback Loop: Sharing

Results with Online Community Members &
Respondents

When surveying customers, employees, community

members and other key constituencies, your respondents
complete the survey because they value their relationship
with you and they want to see you improve. Implicit in the
fact that you sent them a survey is your intention to learn,
adapt and change based on the results. Accordingly, to
close the feedback loop with respondents and community
members, you should:

• Explain what you’re using the data for

• Share summaries and slices of the data
• Identify actions you’re taking as a result of
survey

• Consider using web seminars, video

conferences and meetings to share data
Many survey-software applications include the ability to send a thank-you notice to all respondents. This is an
excellent way to point out some of the above.

With the survey completed, use the occasion to stimulate additional participation and tease out feedback that
elaborates on some of the points raised. For the long-term success of your online community or survey panel, you
have to demonstrate to participants that you value their participation and will use it to serve them better in the future.
Closing the feedback loop is the best way to achieve steady participation and response rates over time, while steadily
improving customer satisfaction and loyalty.

About Vovici
Vovici is the pioneer in Enterprise Feedback Management (EFM), providing comprehensive survey software, panel
management and online community solutions. Our survey tools enable organizations to centralize feedback data
collection, build and manage proprietary panels, leverage corporate social networking, and utilize robust survey
analytics and reporting. Our solutions increase customer loyalty, facilitate collaboration and innovation, influence critical
business decisions and provide voice to online communities. Organizations worldwide, including more than half of the
Fortune 500, rely on Vovici to gather feedback on customer satisfaction, perform market research and gauge employee
satisfaction.

• We are 100% focused on Enterprise Feedback Management

• We have more than 15 years of industry experience
• We have over 3,000 customers and are used by 58% of the Fortune 500
• We invented the term Enterprise Feedback Management and persuaded Gartner and our competitors to
adopt it

• We were the first EFM vendor to provide functionality to engage online communities for feedback
• We have processed over 150 million completed surveys for our customers
• We have a full spectrum product offering that meets the needs of our customers from simple survey tools
to comprehensive, fully integrated feedback solutions

• We have our roots in two of the early pioneers and market leaders in Enterprise Feedback
Management—Perseus and WebSurveyor.

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