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Mystery Shopping Gap Analysis: Identify Service Attributes with Highest Potential for ROI

Research without call to action may be interesting, but in the end, not very useful.

This is particularly true with customer experience research.  It is incumbent on customer experience researchers to give management research tools which will identify clear call to action items –items in which investments will yield the highest return on investment (ROI) in terms of meeting management’s customer experience objectives.   This post introduces a simple intuitive mystery shopping analysis technique that identifies the service behaviors with the highest potential for ROI in terms of achieving these objectives.

Mystery shopping gap analysis is a simple three-step analytical technique.

Step 1: Identify the Key Objective of the Customer Experience

The first step is to identify the key objective of the customer experience.  Ask yourself, “How do we want the customer to think, feel or act as a result of the customer experience?”

For example:

  • Do you want the customer to have increased purchase intent?
  • Do you want the customer to have increased return intent?
  • Do you want the customer to have increased loyalty?

Let’s assume the key objective is increased purchase intent.  At the conclusion of the customer experience you want the customer to have increased purchase intent.

Next draft a research question to serve as a dependent variable measuring the customer’s purchase intent.  Dependent variables are those which are influenced or dependent on the behaviors measured in the mystery shop.

Step 2: Determine Strength of the Relationship of this Key Customer Experience Objective

After fielding the mystery shop study, and collecting a statistically significant number of shops, the next step is to determine the strength of the relationship between this key customer experience measure (the dependent variable) and each behavior or service attribute measured (independent variable).  There are a number of ways to determine the strength of the relationship, perhaps the easiest is a simple cross-tabulation of the results.  Cross tabulation groups all the shops with positive purchase intent and all the shops with negative purchase intent together and makes comparisons between the two groups.  The greater the difference in the frequency of a given behavior or service attribute between shops with positive purchase intent compared to negative, the stronger the relationship to purchase intent.

The result of this cross-tabulation yields a measure of the importance of each behavior or service attribute.  Those with stronger relationships to purchase intent are deemed more important than those with weaker relationships to purchase intent.

Step 3: Plot the Performance of Each Behavior Relative to Its Relationship to the Key Customer Experience Objective

The third and final step in this analysis to plot the importance of each behavior relative to the performance of each behavior together on a 2-dimensional quadrant chart, where one axis is the importance of the behavior and the other is its performance or the frequency with which it is observed.

Interpretation

Interpreting the results of this quadrant analysis is fairly simple.    Behaviors with above average importance and below average performance are the “high potential” behaviors.  These are the behaviors with the highest potential for return on investment (ROI) in terms of driving purchase intent.  These are the behaviors to prioritize investments in training, incentives and rewards.  These are the behaviors which will yield the highest ROI.

The rest of the behaviors are prioritized as follows:

Those with the high importance and high performance are the next priority.  They are the behaviors to maintain.  They are important and employees perform them frequently, so invest to maintain their performance.

Those with low importance are low performance are areas to address if resources are available.

Finally, behaviors or service attributes with low importance yet high performance are in no need of investment.  They are performed with a high degree of frequency, but not very important, and will not yield an ROI in terms of driving purchase intent.

Research without call to action may be interesting, but in the end, not very useful.

This simple, intuitive gap analysis technique will provide a clear call to action in terms of identifying service behaviors and attributes which will yield the most ROI in terms of achieving your key objective of the customer experience.

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Two Questions….Lots of Insights: Turn Customer Experience Observations into Valuable Insight

Customer experience researchers are constantly looking for ways to make their observations relevant, to turn observations into insight. Observing a behavior or service attribute is one thing, linking observations to insight that will maximize return on customer experience investments is another. One way to link customer experience observations to insights that will drive ROI is to explore the influence of customer experience attributes to key business outcomes such as loyalty and wallet share.

The first step is to gather impressions of a broad array of customer experience attributes, such as: accuracy, cycle time, willingness to help, etc. Make this list as long as you reasonably can without making the survey instrument too long.

For additional thoughts on survey length and research design, see the following blog posts:

Click Here: Maximizing Response Rates: Get Respondents to Complete the Survey

Click Here: Keys to Customer Experience Research Success – Start with the Objectives

The next step is to explore the relationship of these service attributes to loyalty and share of wallet.

Two Questions – Lots of Insight

In our experience, two questions: a “would recommend” and primary provider question, yield valuable insight into the relative importance of specific service attributes. Together, these two questions form the foundation of a two-dimensional analytical framework to determine the relative importance of specific service attributes in driving loyalty and wallet share.

Loyalty Question

Research has determined the business attribute with the highest correlation to profitability is customer loyalty. Customer loyalty lowers sales and acquisition costs per customer by amortizing these costs across a longer lifetime – leading to some extraordinary financial results.

Measuring customer loyalty in the context of a survey is difficult. Surveys best measure attitudes and perceptions. Loyalty is a behavior not an attitude. Survey researchers therefore need to find a proxy measurement to determine customer loyalty. A researcher might measure customer tenure under the assumption that length of relationship predicts loyalty. However, customer tenure is a poor proxy. A customer with a long tenure may leave, or a new customer may be very satisfied and highly loyal.

Likelihood of referral captures a measurement of the customer’s likelihood to refer a brand to a friend, relative or colleague. It stands to reason, if one is going to refer others to a brand, they will remain loyal as well, because customers who are promoters of a brand are putting their reputational risk on the line. This willingness to put their reputational risk on the line is founded on a feeling of loyalty and trust.

Any likelihood of referral question can be used, depending on the specifics of your objectives. Kinesis has had success with both a “yes/no” question, “Would you refer us to a friend, relative or colleague?” and the Net Promoter methodology. The Net Promoter methodology asks for a rating of the likelihood of referral to a friend, relative or colleague on an 11-point (0-10) scale. Customers with a likelihood of 0-6 are labeled “detractors,” those with ratings of 7 and 8 and identified as “passive referrers,” while those who assign a rating of 9 and 10 are labeled “promoters.”

In our experience asking the “yes/no” question: “Would you refer us to a friend, relative or colleague?” produces starker differences in this two-dimensional analysis making it easier to identify which service attributes have a stronger relationship to both loyalty and engagement.

Engagement Question

Similar to loyalty, customer engagement or wallet share can lead to some extraordinary financial results. Wallet share is the percentage of what a customer spends with a given brand over a specific period of time.

Also similar to loyalty, measuring engagement or wallet share in a survey is difficult. There are several ways to measure engagement: one methodology is to use some formula such as the Wallet Allocation Rule which uses customer responses to rank brands in the same product category and employs this rank to estimate wallet share, or to use a simple yes/no primary provider question.

Methodology

Using these loyalty and engagement measures together, we can now cross tabulate the array of service attribute ratings by these two measures. This cross tabulation groups the responses into four segments: 1) Engaged & Loyal, 2) Disengaged yet Loyal, 3) Engaged yet Disloyal, 4) Disengaged & Disloyal. We can now make comparisons of the responses by these four segments to gain insight into how each of these four segments experience their relationship with the brand.

These four segments represent: the ideal, opportunity, recovery and attrition.

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Ideal – Engaged Promoters: This is the ideal customer segment. These customers rely on the brand for the majority of their in category purchases and represent lower attrition risk. In short, they are perfectly positioned to provide the financial benefits of customer loyalty. Comparing attribute ratings for customers in this segment to the others will identify both areas of strength, but at the same time, identify attributes which are less important in terms of driving this ideal state, informing future decisions on investment in these attributes.

Opportunity – Disengaged Promoter: This customer segment represents an opportunity. These customers like the brand and are willing to put their reputation at risk for it. However, there is an opportunity for cross-sell to improve share of wallet. Comparing attribute ratings of the opportunity segment to the ideal will identify service attributes with the highest potential for ROI in terms of driving wallet share.

Recovery – Engaged Detractor: This segment represents significant risk. The combination of above average share of wallet, and low commitment to put their reputational risk on the line is flat out dangerous as it puts profitable share of wallet at risk. Comparing attribute ratings of customers in the recovery segment to both the ideal and the opportunity segments will identify the service attributes with the highest potential for ROI in terms of improving loyalty.

Attrition – Disengaged Detractor: This segment represents the greatest risk of attrition. With no willingness to put reputational risk on the line, and little commitment to placing share of wallet with the brand, retention strategies may be too late for them. Additionally, they most likely are unprofitable. Comparing the service attributes of customers in this segment to the others will identify elements of the customer experience which drive attrition and may warrant increased investment, as well as, elements that do not appear to matter very much in terms driving runoff, and may not warrant investment.

By making comparisons across each of these segments, researchers give managers a basis to make informed decisions about which service attributes have the strongest relationship to loyalty and engagement. Thus identifying which behaviors have the highest potential for ROI in terms of driving customer loyalty and engagement. This two-dimensional analysis is one way to turn customer experience observations into insight.

Click Here For More Information About Kinesis' Research Services

Mystery Shop Key Driver Analysis

Best in class mystery shop programs provide managers a means of applying coaching, training, incentives, and other motivational tools directly on the sales and service behaviors that matter most in terms of driving the desired customer experience outcome.  One tool to identify which sales and service behaviors are most important is Key Driver Analysis.

Key Driver Analysis determines the relationship between specific behaviors and a desired outcome.  For most brands and industries, the desired outcomes are purchase intent or return intent (customer loyalty).  This analytical tool helps mangers identify and reinforce sales and service behaviors which drive sales or loyalty – behaviors that matter.

As with all research, it is a best practice to anticipate the analysis when designing a mystery shop program.  In anticipating the analytical needs of Key Driver Analysis identify what specific desired outcome you want from the customer as a result of the experience.

  • Do you want the customer to purchase something?
  • Do you want them return for another purchase?

The answer to these questions will anticipate the analysis and build in mechanisms for Key Driver Analysis to identify which behaviors are more important in driving this desired outcome – which behaviors matter most.

Next, ask shoppers if they had been an actual customer, how the experience influenced their return intent.  Group shops by positive and negative return intent to identify how mystery shops with positive return intent differ from those with negative.  This yields a ranking of the importance of each behavior by the strength of its relationship to return intent.

Additionally, pair the return intent rating with a follow-up question asking, why the shopper rated their return intent as they did.  The responses to this question should be grouped and classified into similar themes, and grouped by the return intent rating described above.  The result of this analysis produces a qualitative determination of what sales and service practices drive return intent.

Finally, Key Driver Analysis produces a means to identify which behaviors have the highest potential for return on investment in terms of driving return intent.  This is achieved by comparing the importance of each behavior (as defined above) and its performance (the frequency in which it is observed).  Mapping this comparison in a quadrant chart, provides a means for identifying behaviors with relatively high importance and low performance – behaviors which will yield the highest potential for return on investment in terms of driving return intent.

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Behaviors with the highest potential for return on investment can then be inserted into a feedback loop into the mystery shop scoring methodology by informing decisions with respect to weighting specific mystery shop questions, assigning more weight to behaviors with the highest potential for return on investment.

Employing Key Driver Analysis gives managers a means of focusing training, coaching, incentives, and other motivational tools directly on the sales and service behaviors that will produce the largest return on investment. See the attached post for further discussion of mystery shop scoring.

Click Here for Mystery Shopping Best Practices

 

 

Click Here for Mystery Shopping Best Practices

 

 

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Image/Perception: A Mirror to Your Brand

In an earlier post we discussed including a loyalty proxy as part of your brand perception research.

Establishing and measuring loyalty proxies is important, but your brand perception research should not end there.  Brand perception research should produce insight beyond loyalty.  It should determine the extent to which customers impressions of the brand are aligned with your desired brand image.  Additionally, perceptions of the brand among the most loyal and engaged customers should be compared to those who are deemed less loyal or engaged to identify opportunities to improve perceptions of the brand among customers at either risk of defection, or not fully engaged

In a subsequent post, we will address ways to measure engagement/wallet share.

Brand Definition

The first step in measuring your brand perception is to define your desired brand.  Ask yourself: if your brand were a person, what personality characteristics would you like your customers to describe you with?  What adjectives would you want used to describe your brand?

In addition to describing your brand personality with adjectives, come up with a list of statements that describe your desired personality.  For example, you may include statements such as:

  • We are easy to do business with.
  • We are knowledgeable.
  • We are like a trusted friend.
  • We are interested in customers as people, not just the bottom line.
  • We are committed to the community.

So, we defined the brand in terms of personality adjectives and statements.  Both will be used in designing the survey instrument.

The Survey Instrument

Unaided Top-of Mind

The first step in the survey instrument, is asking customers for their unaided top-of-mind perceptions of the brand.  This will uncover the first thing that comes to customers’ minds about your brand prior to the effects of any bias introduced by the research instrument itself.  There are many ways to capture unaided top-of-mind impressions.  We like a simple approach, where you ask the customer for the one word that they would use to describe the company.  This research question will yield a list adjectives that can be quantified by frequency and used to determine the extent to which customers top-of-mind impressions match the desired brand image.

Aided Image

After we have defined top of mind impressions of the brand, we recommend comparing brand perception to your desired brand identified in the brand definition exercise described above.  This is a fairly simple process of presenting the customers with your list of brand personality adjectives and asking the customer which of these adjectives would the customer use to describe the company.

In a much earlier post we discussed using word clouds to interpret brand personality adjectives.

The next step in comparing the reality of brand perception to your branding goals is to ask the customers to what extent do they agree with each of the brand personality statements described above.  As with the list of adjectives, this holds a mirror up to your desired image and measures the extent to which customers agree that you are perceived in the manner that you want to be.

Identifying Attributes with the Most ROI Potential

The value of these brand perception statements goes beyond just evaluating if you live up to your brand.  Used in conjunction with the loyalty proxies discussed in the previous post, they become tools to determine which of these brand personality attributes will yield the most ROI in terms of improving customer loyalty.  This is achieved with a simple cross-tabulation of agreement with these statements by customer loyalty segment.  For example, if NPS is used as the loyalty proxy, then we simply compare agreement to these statements from promoters to detractors to determine which attributes have the largest gaps between promoters and detractors.  Those with the largest gaps have the most ROI potential in terms of customer loyalty.

Click Here For More Information About Kinesis' Research Services

Loyalty: The Foundation of Brand Perception

Customer loyalty is the business attribute with the strongest correlation to profitability. Loyalty lowers sales and acquisition costs per customer by amortizing these costs across a longer lifecycle, leading to extraordinary financial results. A 5% increase in customer loyalty can translate, depending on the industry, into a 25% to 85% increase in profits.

ROI

Many customer experience managers want to include a measure of loyalty in their customer experience research.  Indeed loyalty and how brand perception drives loyalty is the foundation of any brand perception research.  However, loyalty is a behavior measured longitudinally over time, and surveys best measure customer attitudes.  As a result, researchers typically use attitudinal proxies for customer loyalty.  Generally the two most common proxies are either a “would recommend” or a “customer advocacy” question.

  1. Would Recommend:   A “would recommend” question is typically Net Promoter (NPS) or some other measure of the customer’s likelihood of referring to a friend, relative or colleague.  It stands to reason, if one is going to refer others to a brand, they will remain loyal as well.  Promoters’ willingness to put their reputational risk on the line is founded on a feeling of loyalty and trust.
  1. Customer Advocacy: A customer advocacy question asks if the customer agrees with the following statement, “the brand cares about me, not just the bottom line.”  The concept of trust is perhaps more evident in customer advocacy.  Customers who agree with this statement trust the brand to do right by them, and not subjugate their best interests to profits.  Customers who trust the brand to do the right thing are more likely to remain loyal.

We’ve seen some loyalty surveys (particular those employing the NPS methodology), which only ask the loyalty proxy with little or no other areas of investigation.  We believe this is a bad practice for a number of reasons:

  1. Customer Experience: Customers who have affirmatively taken the action of clicking on the survey want to give you their opinion (they want to participate in the survey), and based on their experience are expecting a multiple question survey.  Presenting them with just one rating scale risks alienating them as they may feel they didn’t get an appropriate opportunity to share their opinion, and ultimately feel it was not worth their time to participate.  Secondly, some customers may conclude the survey system is broken in some way as it only presented them with one question, resulting in customer confusion.
  1. Actionable Research Results: A survey consisting of one NPS rating is not going to yield any information from which to draw conclusions about how customers feel about the brand.  It will produce an average rating and frequency of promoters and detractors, but no context in which to interpret the results.

Establishing and measuring loyalty proxies are an important first step in evaluating brand perception.  Additional areas of investigation should include indentifying and comparing customer impressions of the brand to your desired brand personality, and evaluate customer engagement or wallet share.

 

In a subsequent post, we will address ways to measure the brand personality.

Also, in a subsequent post, we will explore ways to measure engagement/wallet share.

 

Click Here For More Information About Kinesis' Research Services

Build Call to Action into Your Brand Perception Research

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These days, post-transaction surveys are ubiquitous.  Brands large and small take advantage of internet-based survey technology to evaluate the customer experience at almost every touch point.  Similarly, loyalty proxy methodologies such as Net Promoter (NPS) are very much in vogue.  However, many NPS surveys are fielded in a post-transaction context (potentially exposing the research to sampling bias as a result of only hearing from customers who have recently conducted a transaction), and are not designed in a manner that will give managers appropriate information upon which to take action on the research.

At their core, loyalty proxies are brand perception research – not transactional.  We believe it is a best practice to define the sample frame as the entire customer base, as opposed to customers who have recently interacted with the brand.  Ultimately, these surveys are image and perception research of the brand across the entire customer base.

Happily, this perception research offers an excellent opportunity to gather customer perceptions of the brand, compare them to your desired brand image, as well as measure engagement or wallet share.  An excellent survey instrument to accomplish this is a survey divided into three parts:

  • Loyalty Proxy: Consisting of the NPS rating or some other appropriate measure and 1 or 2 follow up questions to explore why the customer gave the NPS rating they did.
  • Image perception: consisting of 3 or 4 questions to determine how customers perceive the brand.
  • Engagement/Wallet Share: consisting of 3 or 4 questions to determine if the customer considers the brand their primary provider, and to gauge share of wallet of various financial products & services across the brand and its competitors.

This research plan will not only yield an NPS, but it will provide insight into why the customers assigned the NPS they did, evaluate the extent to which the entire customer base’s impressions of the brand matches your desired brand image, as well as identify how the brand is perceived by promoters and detractors. This plan will also yield valuable insight into share of wallet, and how wallet share differs for promoters and detractors.

Such a survey need not be long, the above objectives can be accomplished with 10 – 12 questions and will probably take less than 5 minutes for the customer to complete.

In a subsequent posts, we will explore each of these 3-parts of the survey in more detail:

 

Click Here For More Information About Kinesis' Research Services

Taking Action on Mystery Shop Results

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Previously we examined best practices in mystery shop sample planning.

Call to Action Analysis

A best practice in mystery shop design is to build in call to action elements designed to identify key sales and service behaviors which correlate to a desired customer experience outcome.  This Key Driver Analysis determines the relationship between specific behaviors and a desired outcome.  For most brands and industries, the desired outcomes are purchase intent or return intent (customer loyalty).  This approach helps brands identify and reinforce sales and service behaviors which drive sales or loyalty – behaviors that matter.

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Earlier we suggested anticipating the analysis in questionnaire design in a mystery shop best practice.  Here is how the three main design elements discussed provide input into call to action analysis.

HowShoppers are asked if they had been an actual customer, how the experience influenced their return intent.  Cross-tabulating positive and negative return intent will identify how the responses of mystery shoppers who reported a positive influence on return intent vary from those who reported a negative influence.  This yields a ranking of the importance of each behavior by the strength of its relationship to return intent.

WhyIn addition, paired with this rating is a follow-up question asking, why the shopper rated their return intent as they did.  The responses to this question are grouped and classified into similar themes, and cross-tabulated by the return intent rating described above.  The result of this analysis produces a qualitative determination of what sales and service practices drive return intent.
WhatThe final step in the analysis is identifying which behaviors have the highest potential for ROI in terms of driving return intent.  This is achieved by comparing the importance of each behavior (as defined above) and its performance (the frequency in which it is observed).  Mapping this comparison in a quadrant chart, like the one to the below, provides a means for identifying behaviors with relatively high importance and low performance, which will yield the highest potential for ROI in terms of driving return intent.

Gap Graphic

 

This analysis helps brands focus training, coaching, incentives, and other motivational tools directly on the sales and service behaviors that will produce the largest return on investment – behaviors that matter.

Taking Action

Part of Balanced Scorecard

A best practice in mystery shopping is to integrate customer experience metrics from both sides of the brand-customer interface as part of an incentive plan.  The exact nature of the compensation plan should depend on broader company culture and objectives.  In our experience, a best practice is a balanced score card approach which incorporates customer experience metrics along with financial, internal business processes (cycle time, productivity, employee satisfaction, etc.), as well as innovation and learning metrics.

Within these four broad categories of measurement, Kinēsis recommends managers select the specific metrics (such as ROI, mystery shop scores, customer satisfaction, and cycle time), which will best measure performance relative to company goals. Discipline should be used, however. Too many can be difficult to absorb. Rather, a few metrics of key significance to the organization should be collected and tracked in a balanced score card.

Coaching

Best in class mystery shop programs identify employees in need of coaching.  Event-triggered reports should identify employees who failed to perform targeted behaviors.  For example, if it is important for a brand to track cross- and up-selling attempts in a mystery shop, a Coaching Report should be designed to flag any employees who failed to cross- or up-sell.  Managers simply consult this report to identify which employees are in need of coaching with respect to these key behaviors – behaviors that matter.

Click here for the next installment in this series: Mystery Shop Program Launch.

Click Here for Mystery Shopping Best Practices

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