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

 
Measuring Satisfaction book cover
Business Over Broadway (BOB) developed two loyalty indices by analyzing the results from two satisfaction surveys that included 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
BOB than conducted a factor analysis on the results to determine which of three types of loyalty a question would better measure:
  • Advocacy Loyalty—reflecting the degree to which customers will recommend the company to others
  • Purchasing Loyalty—reflecting the degree to which customers will increase their purchasing behavior
  • Defection Loyalty—reflecting the degree to which customers will switch to a different company
This factor analysis showed which factor each question best fit with:

 

Advocacy Loyalty

Purchasing Loyalty

Defection Loyalty

Overall satisfaction

X

 

 

Likelihood to choose again for the first time

X

 

 

Likelihood to recommend

X

 

 

Likelihood to continue purchasing same products/services

X

 

 

Likelihood to purchase different products/services

 

X

 

Likelihood to increase purchase size

 

X

 

Likelihood to increase frequency of purchasing

 

X

 

Likelihood to switch to a different provider [scale reversed for analysis]

 

 

X

 
Each index is calculated simply by averaging the rating of each component. Since no benchmark information is provided, you are free to use whichever scales you find appropriate. Unfortunately, the original BOB scales use a 0-10 bipolar scale for satisfaction and 0-10 unipolar scale for likelihood.
 
Add this to the growing body of research that shows that likelihood to recommend is not a unique measure of advocacy.
 
Two counterintuitive findings from the research:
  • Overall satisfaction was found to be a factor of loyalty, despite significant research into how satisfaction and loyalty can differ. That said, part of the disconnect can be explained by the fact that satisfaction contributes primarily to one type of loyalty: advocacy rather than purchasing loyalty.
  • The likelihood to repurchase the same products was less an indicator of purchasing loyalty than it was of advocacy loyalty.
Of all the loyalty indices I’ve studied, 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.

Comments

Jeffrey, 
 
While I do value the work you re are doing, you are one of the smartest people I know in the industry by far and you write very well and short, I think it is time. 
 
It is time to retire the notion that there is ANY way we can measure satisfaction and loyalty with any degree of certainty. I have said this before, and I will continue to say it forever, there is no way we can measure either one properly - they are sentiments that are either ethereal in nature (satisfaction), or long-time buildup (loyalty). As sentiments, they cannot be measured properly - no matter how you structure the questions or what you ask. 
 
You can indeed measure correlation between specific actions and results (cause-effect if you may), but even that changes rapidly as circumstances change. 
 
How about if we stop pretending we can do something we cannot do and focus instead of doing the best job we can for all customers (creating awesome experiences), and for each individual (managed experiences)? I promise that if we do that, then we will have the cause (focus on effectively delivering awesome managed experiences), and the effect (continued support and purchase from us). Need an example? Look at Zappos, Apple,  
 
I hope this does not sounds like preaching, but I am getting tired of having this discussion of how you cannot measure what someone did once, ten years ago, in a lab and repeat it for all your customers successfully simply by asking one questions, or two, or three. 
 
It is time for Managers to realize somethings cannot be done to their liking, and roll-up their sleeves and get to the hard work for delivering. 
 
There is no magic pill that will make the lose 30 pounds, an there is no magic question that will get me to understand my customers simply. 
 
It is all about hard work. Sorry guys, it is time to stop dreaming and get to work!
Posted @ Wednesday, July 22, 2009 10:22 AM by Esteban Kolsky
I take this as another way of saying that any metric can be deceiving and that numbers alone are insufficient for wise decisions. But you don't have to toss the concept of measurement being helpful to realize its limitations.
Posted @ Thursday, July 23, 2009 8:13 AM by Erik Sherman
Back to your original point, that satisfaction and likelihood to recommend and to continue purchasing are not widely different concepts, but instead are highly correlated: Good, and thank you, this begins to get us past a lot of hype about proprietary measures and silver bullets.
Posted @ Tuesday, January 19, 2010 2:10 PM by Ian Straus
Thanks, Ian. In that vein, I do encourage you to look at Bob's new book, Beyond the Ultimate Question>. He will also be presenting at the Vovici 2010 user conference.
Posted @ Friday, January 22, 2010 11:20 PM by Jeffrey Henning
That book does look interesting, Jeffrey. I'll buy it. It may be good to keep handy, since aging management fads seem to pop up in this industry too.
Posted @ Monday, January 25, 2010 9:48 AM by Ian Straus
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