RAPID Loyalty A Comprehensive Approach to Customer Loyalty

Coauthors: David Jackson, CEO ClicktoolsBob Hayes, CCO TCELab

BusinessPrograms

Productdevelopment

Marketing

Sales

Service

Infrastructure

Figure 1. Three ways to grow your business

Figure 2. Adoption rates of multi-dimensional loyalty measurement

1. CustomerRenews

2. New Customers

CustomerLifetime

Value

FirmValue

3. CustomerBuys More

(Retention Loyalty)

(Acquire through Advocacy Loyalty)

(cross/up-sell through Purchasing loyalty)

Percent of Companies that Measure...

76%33%

30%Most companies’ customer loyalty metrics are

insufficient. Gain an advantage by assessing different types of loyalty.

ADVOCACY

PURCHASING

RETENTION

Growing a Sustainable Business

Companies can grow their business organically in three ways; (see Figure 1). First, they can keep their current, valu-able customers around for a long time. Second, they can attract and acquire new customers. Finally, they can expand their relationships with existing customers through up/cross-selling.

Whilst the influence of each differs based on a company’s specific business model, recent research on the measure-ment of customer loyalty shows how the three different types of customer loyalty (retention, advocacy and purchasing) are predictive of different types of business growth through new and existing customers. Specifically, customers can continue to provide revenue to the bottom line through renewal of their service contract. Also, customers can increase new customer growth through recommending your company/brand to their friends. Finally, customers can expand their relationship with you by opening up their pocketbooks to buy additional products/services you provide.

Multi-dimensional loyalty measurement Multi-dimensional loyalty demands a measurement approach that enables a company to track performance in each dimension. No singular approach provides the granularity of data to enable a company to understand and fine-tune its customer experience strategies.

The RAPID loyalty approach includes three easy-to-understand indices that assess three components of customer loyalty:

• Retention Loyalty Index (RLI): Degree to which customers will remain as customers and not leave to competitors; contains loyalty questions like: renew service contract, leave to competitor (reverse coded). • Advocacy Loyalty Index (ALI): Degree to which customers feel positively toward/will advocate your product/service/brand; contains loyalty questions like: overall satisfaction, recommend, buy again. • Purchasing Loyalty Index (PLI): Degree to which customers will increase their purchasing behavior; contains loyalty questions like: buy additional products, expand use of product throughout company.

Research has shown that each of the RAPID loyalty indices has excellent measurement properties; each index is a reliable, valid and useful indicator of customer loyalty and predictive of future business growth. In a nationwide study

© 2015 CallidusCloud Clicktools

of more than 1000 cellular customers, these loyalty indices were predictive of business growth metrics across several US network operators (Alltel, AT&T, Sprint/Nextel, T-Mobile, and Verizon):

• RLI was the best predictor of future churn rate. • ALI was a good predictor of new customer growth. • PLI was the best predictor of Average Revenue per User (ARPU) growth.

Our research shows that improving each type of customer loyalty will lead to different types of business growth.

How well are companies measuring these three types of customer loyalty? In an informal online poll taken during a talk, Asking the Right CX Questions (part of CustomerThink’s Customer Experience Summit 2011), participants were asked about their CEM program loyalty metrics (see Figure 2). While a little over 75% of the respondents said their company uses advocacy loyalty measures, only a third of the respondents indicated that their company uses purchasing loyalty measures (33%) and retention loyalty measures (30%).

It is clear that there is real scope for companies to drive their customer experience programs more effectively by adopting a richer loyalty measurement framework.

Benefits of Measuring Different Types of Customer Loyalty

Companies that measure and understand different types of customer loyalty and how they are impacted by the customer experience have an advantage over companies who measure only one type of loyalty:

• Companies can target solutions to optimize different types of customer loyalty to improve business growth. For example, including retention loyalty questions (e.g., “likelihood to quit”) and a purchasing loyalty questions (e.g., “likelihood to buy different”) can help companies understand why customers leave and identify ways to increase customers’ purchasing behavior, respectively. • Key performance indicators (KPIs) can be identified for each type of customer loyalty. Identification of different KPIs (key drivers of customer loyalty) helps companies ensure they are monitoring all important customer experience areas. Identifying and monitoring all KPIs helps ensure the entire company is focused on matters that are important to the customer and his/her loyalty. • Companies are better equipped to quantify the value of their CEM program and obtain more accurate estimates of the Return on Investment (ROI) of the program. The ROI of a specific improvement opportunity will depend on how the company measures customer loyalty. If only advocacy loyalty is measured, the estimate of ROI is based on new customer growth. When companies measure advocacy, purchasing and retention loyalty, the estimate of ROI is based on new and existing customer growth.

BusinessPrograms

Productdevelopment

Marketing

Sales

Service

Infrastructure

Figure 1. Three ways to grow your business

Figure 2. Adoption rates of multi-dimensional loyalty measurement

1. CustomerRenews

2. New Customers

CustomerLifetime

Value

FirmValue

3. CustomerBuys More

(Retention Loyalty)

(Acquire through Advocacy Loyalty)

(cross/up-sell through Purchasing loyalty)

Percent of Companies that Measure...

76%33%

30%Most companies’ customer loyalty metrics are

insufficient. Gain an advantage by assessing different types of loyalty.

ADVOCACY

PURCHASING

RETENTION

© 2015 CallidusCloud Clicktools

Feedback, Meet CRMWhilst RAPID’s multiple loyalty measures provide a better view of customer experience, it becomes even more effective when results are integrated with other customer data in your CRM system.

Integration delivers four significant benefits.

1. Linking RAPID measures with process, purchase and financial measures provides even greater insight, which can be used to generate more effective improvement programs. This linkage enables companies to answer questions like:

• Which customer segments generate the highest retention? • Which attributes of the customer experience do we need to change to improve retention? • Which customers are most willing to recommend the company and what do they value most in our proposition? • Which segments should we target to generate high retention rates?

2. Surveys can be automatically deployed using changes in CRM records. CRM data can be used to personalize the presentation and content of the surveys, thus improving response rates and reliability of results. The administrative work of issuing surveys is removed, freeing up time for the added-value work of building insight and taking action. 3. Including feedback results as part of a single customer view enables differentiated marketing campaigns to expand existing relationships, for example, offering different content to satisfied and dissatisfied customers. 4. People serving the customer can shape their interactions to reflect the customer’s feedback, for example, thanking highly satisfied customers and requesting reviews.

Implementing RAPID Loyalty for your CEM ProgramWhen you are ready to begin, RAPID Loyalty requires three interrelated steps:

1. Develop a survey instrument that tests for key attributes of the customer experience and the three RAPID Loyalty indices. 2. Integrate the RAPID feedback into your CRM system to facilitate improved reporting and insights. 3. Build the linkage models to understand the impact of the three measures of loyalty and drive the most optimal improvements.

TCELab and Clicktools have co-developed a package to make it easy for companies to implement RAPID Loyalty for the Salesforce™ customer community. The package, downloadable from the AppExchange includes:

• The RAPID Loyalty questions embedded into a series of event driven surveys1

• Pre-built Salesforce custom object that includes the RAPID Loyalty results • Pre-built integration to pass results of the RAPID Loyalty survey into Salesforce CRM

1 Many of the standard RAPID loyalty questions may not be applicable to your setting. They do provide a great start-ing point to help you think about customer loyalty more broadly for your particular situation.

© 2015 CallidusCloud Clicktools

About the Authors

© 2015 CallidusCloud Clicktools

Founded in early 2011, TCELab uses science to help companies succeed through new customer acquisition, decreased churn and increased $$$ per customer. The CLAP (Customer Loyalty Analytics Platform) is based on Dr. Hayes RAPID Customer Loyalty model and research. CLAP combines subjective data from Voice-of-Customer surveys with existing objective big data from company sys-tems (CRM, Operations, Marketing, Finance) and creates predictive analytics that correlate customer loyalty and sustained revenue growth. For CEO’s and the executive suite, CLAP provides timely actionable insights needed to instill confidence in the right actions, plans and budget. As well, disparate product, marketing and service teams gain a common view of the customer in order to co-or-dinate, collaborate and measure their progress. Based in Boston with offices in Seattle and Calgary, TCELab has 9 Business Intel-ligence solutions incorporating the RAPID Customer Loyalty model; including the Customer Relationship Diagnostic (CRD) Survey, Partner (PRD), (ERD), as well as TCEAudit (a review of CEM processes, questions and data organization) and TCELinkage (using existing customer and business data to extract insights). For help identifying the right loyalty metrics or implementing the RAPID loyalty approach, please email RAPID@TCELab.com.

Clicktools provides SaaS solutions that leverage CRM to collect, centralize, and act on customer interactions. Since 2001, Clicktools has helped organizations of all sizes and across industries improve customer experience. Thousands of marketing, sales, and support professionals worldwide use Clicktools to collect information through surveys, scripts, and forms; centralize the data in CRM; and act on insights to deepen customer relationships. Notably, Clicktools was the first survey provider to integrate with Salesforce.com and was an original member of the AppExchange. The company is privately held with headquarters on the South Coast of England and a US-based office in Phoenix, Arizona. Get more information at www.clicktools.com or email us at sales@clicktools.com.