Bu

urke – Play
y Thatt Mov
ves You
A Ca
ase stud
dy on Custome
C er Loyallty – Parrt - 1

Burke is an independent, full-servicce

marketting rese
earch and
d decisio
on
supporrt compan
ny founded in 1931.
Burke Inc is a commerciial researcch
firm t
that speccializes in
n customer
satisfacction m
measurem ent nd
an
manag
gement programss, defin
ne
custom
mer loyallty and how th
his
constru
uct is op
perationalizzed into a
ex called the secure
measurable inde
mer index.
custom

The ide
ea that loyyal custome
ers are especially va
aluable is not
n new to today’s bu
usiness
manag
gers. Loya
al customers repea
atedly purrchase pro
oducts orr services. They
recomm
mend a co
ompany to
o others. And
A they sttick with a business over time
e. Loyal
custom
mers are worth
w the special
s effo
ort it may take to ke
eep them. But how can
c you
provide
e that speccial treatme
ent if you don’t
d know
w your customers and
d how theirr loyalty
is won and lost?

derstanding
Und g loyalty—
—what make
es your
custtomers loyyal and how
w to measu
ure and
understand loyal cusstomers—e
enables
ny to improve cus
your compan stomer-
driven quality. A custom
mer loyalty
y index
vides man
prov nagement with an easily
understood to
ool that helps foc
cus the
orga
anization towarrd improving
satis
sfaction an
nd retentio
on, for a positive
p
impact on the bottom line.
What Customer Loyalty Is and Isn’t

To better understand the concept of customer

loyalty, let’s first define what customer loyalty is
not. Customer loyalty is not customer satisfaction.
Satisfaction is a necessary component of loyal or
secure customers. However, the mere aspect of
being satisfied with a company does not
necessarily make customers loyal. Just because
customers are satisfied with your company today
does not mean they will continue to do business
with you in the future.

Customer loyalty is not a response to trial offers or incentives. If customers suddenly

begin buying your product or service, it may be the result of a special offer or
incentive and not necessarily a reflection of customer loyalty. These same customers
may be just as quick to respond to your competitors’ incentives.

Customer loyalty is not strong market share. Many businesses mistakenly look at
their sales numbers and market share and think, “Those numbers are surrogates for
direct measures of customer loyalty. After all, we wouldn’t be enjoying high levels of
market share if our customers didn’t love us.” However, this may not be true. Many
other factors can drive up market share, including poor performance by competitors
or pricing issues. And high share doesn’t mean low churn (the rate at which existing
customers leave you—possibly to patronize your competition—and are replaced by
new customers).

Customer loyalty is not repeat buying or habitual

buying. Many repeat customers may be choosing your
products or services because of convenience or habit.
However, if they learn about a competitive product
that they think may be less expensive or better quality,
they may quickly switch to that product. Habitual
buyers can defect; loyal customers usually don’t.
Now that we know what does not constitute customer loyalty, we can talk about what
does. Customer loyalty is a composite of a number of qualities. It is driven by
customer satisfaction, yet it also involves a commitment on the part of the customer
to make a sustained investment in an ongoing relationship with a brand or company.
Finally, customer loyalty is reflected by a combination of attitudes and behaviours.

These attitudes include:

 The intention to buy again and/or buy additional products or services from the
same company.
 A willingness to recommend the company to others.
 A commitment to the company demonstrated by a resistance to switching to a
competitor.

Customer behaviours that reflect loyalty include:

 Repeat purchasing of products or services.

 Purchasing more and different products or services from the same company.
 Recommending the company to others.

Any one of these attitudes or behaviours in isolation does not necessarily indicate
loyal customers. However, by recognizing how these indicators work together in a
measurement system, we can derive an index of customer loyalty or, in a broader
sense, customer security.

At Burke Customer Satisfaction Associates,

we have developed a Secure Customer Index
(SCI) using three major components to
measure customer loyalty: overall customer
satisfaction, likelihood of repeat business, and
likelihood to recommend the company to
others. Other elements may be included in the
index depending upon the industry. However,
in our experience, these Three components
are core of meaningful customer loyalty index.
 T Secu
The ure Custtomer Ind
dex (i.e., Custom
mer Loyallty Index
x)

Satisfied
Custommer

Secure
Likelihoo
L od C
Custome
er
To
Re
ecommend
Likeliho
ood
To
Repurch
R ase

Hands
s-on Exe
ercise

Using the
t materia
al from the
e Presentattion on Me
easuremen
nt and Scalling as well as the
above information, answer each of the following
g questionss:

1. Identify an
nd provide
e a meaningful defin
nition of each
e of the construc
cts that
researchers at Burke
e Custome
er Satisfacttion Assocciates belie
eve are the
e driving
hind measu
forces beh uring the concept of customer
c loyalty.

2. What is the dimenssionality of

o each off these co
onstructs? That is, are
a the
constructss uni-dimen
nsional or multidimensional in nature? F
For each of
o those
constructss that you believe
b is multidimen
m nsional, ide
entify the possible domain of
subcompo
onents thatt would be
e represen
ntative of th
hat construct. Also, explain
why you fe
eel your prroposed do
omain set represents
r that consttruct.

3. In your jud
dgment, wh
hat level of scale des
sign would
d be the mo
ost approp
priate in
creating th
he necesssary scale measurem
ments for collecting primary data
d on
each consstruct?

4. For each construct,

c design an example of the actu
ual scale m
measureme
ent that
could be used
u by Bu
urke Customer Satisfaction Asssociates to collect the
e data.