Customer Loyalty Case Study in Professional Organizations

A business association was experiencing a substantial defection rate among its members.  The Loyalty Research Center was hired to identify the problem and to determine a strategy to reduce the defection rate.

SITUATION

Loyalty Research Center administered member satisfaction surveys to the association’s members, and the association received moderate scores for each business process area.  Initial analysis revealed that a significant percentage of the association’s members had experienced problems with one of more of the association’s process areas during the past six months.  Further analysis revealed that only a small percentage of the member’s problems had been resolved.  Realizing that it would take too much of the association’s resources to eliminate all problems, the new challenge was to determine the extent of the negative impact that problem experience had on members.

IMPLEMENTATION 

Loyalty Research Center hypothesized that the members who experienced problems were more vulnerable to defection than those who had not experienced a problem.  LRC first classified the respondents into three groups:  those who did not experience a problem, those who experienced a problem that was resolved, and those who experienced a problem that was not resolved.  Analysis showed that the members who experienced a problem that was not resolved gave significantly lower scores for each process area compared to the members who did not experience a problem and the members who experienced a problem that was resolved. 

Although the respondents who did not experience a problem gave higher scores than those who experienced a problem that had been resolved, the difference between the scores was not significant.  Verbatim analysis was then performed, and it was revealed that roughly 50% of problem comments were about how the problem was resolved as opposed to an actual problem.  Suspecting a link between problem resolution and vulnerability, the Loyalty Research Center then classified the respondents as Loyal, Neutral, and Vulnerable.  Vulnerable members were classified as those who gave the two lowest possible ratings to the association’s overall value and at least one of the behaviors:  likelihood to recommend, likelihood to continue, and likelihood to expand.  Further analysis showed that Vulnerable customers experienced significantly more problems than Loyal or Neutral members and that significantly more of Vulnerable members’ problems were not resolved. 

The table below is a problem matrix that the Loyalty Research Center created for the association.  Note again that the differences in scores between members that did not experience a problem and members that did experience a problem that was resolved were not significantly different.  However, the scores between the members who experienced a problem and the members who experienced an unresolved problem were significantly different.  The percentages below represent Top 2 Box scores.

The analysis revealed that the most cost effective method of reducing the defection rate was not to eliminate problems, but to manage them better.  Although the association did not have the resources to eliminate all problems, by resolving problems quickly and effectively the association could reduce the association’s defection rate. 

KEY FINDINGS 

• Analysis shows a strong correlation between member vulnerability and unresolved problems for a professional organization. 
• Further analysis reveals that quick and effective problem resolutions are crucial in order for associations to reduce defection rate.
• Without the special analysis conducted by the Loyalty Research Center, the association’s defection rate would have continued to grow, while the association wasted valuable resources on trying to eliminate rather than resolve problems.  The Loyalty Research Center developed a more streamlined approach in order to create a more realistic solution for the organization.
• Striving to resolve problems not only can result in lowered defection, it can also aid in migrating the Vulnerable segment towards the Loyalty segment.