The Power of Perception
By Dieu Anh Vu and Sarah McKinney
Customer Value Analysis (CVA) is a tool that has been widely used by Forethought Research (Forethought) to provide our clients with an insight into how customers and potential customers evaluate the value of alternatives in the market, based on direct experience and/or perceptions held. Specifically, the CVA methodology recognises that markets comprise of customers and potential customers each with differing levels of experience with alternative providers in the market. It provides an understanding of the perceived relative value of the various market offerings using two dimensions: the perceived benefits delivered (the quality dimension) and the perceived cost of acquiring benefits (the price dimension). These aspects provide insight into market share gains and losses by both our clients and their competitors. Also, in recognition of the role played by brand performance in purchase decisions the analysis may include a drilldown component into reputation.
More recently Forethought has further developed this methodology by augmenting the data with assessments of performance via the Satisfaction section of a client questionnaire. The following discusses this augmented approach to market analysis and provides examples of key applications and the exciting insights that they offer.
Forethought regularly assesses satisfaction of existing customers with their current provider. However, recent market studies conducted by Forethought have also required respondents to provide their perceptions of a competitor’s performance on the same performance aspects, including account management capabilities, communication to customers and handling of telephone enquiries for example. Although respondents do not currently deal with the competitor (or in the case of non-customers, the client) they are asked to provide their top-of-mind perceptions of that organisation’s performance. These perceptions are generally formed as a result of hearing about the competitor by word of mouth or being exposed to their brand advertising and other marketing activities. These perceptions with regard to specific areas of performance provide deeper insights into drivers of retention and acquisition in the market.
The capture of customer and non-customer perceptions
Perceptions of alternative market offerings play a key role in purchase decisions. To acquire the data required to augment the CVA dataset, existing customers are required to rate not only their satisfaction with their current provider (our client) but to also provide their perceptions of competitors’ performance on the same performance aspects. This provides insight into competitive threats or perceived weaknesses.
Perceptions of our client’s performance (non-customer perceptions) are also captured from respondents who do not currently use our client’s services. This provides insight into our client’s perceived strengths and weaknesses. When compared to identified drivers of acquisition and satisfaction, these perceptions provide insight into reasons for non-use of our client’s services by customers of competitors. As a result it assists the identification of key barriers to acquisition based on performance, whether real or perceived, by these non-customers.
Key applications
Customer experience scores (satisfaction ratings) are compared directly to non-customer perceptions of our client’s performance on the same dimensions. The extent of the gap between customer experience and the non-customer perceptions can highlight the effectiveness of ‘word-of-mouth’ and other marketing communications that convey a provider’s performance to the wider market (Diagram 1). For example if our client’s perception-experience gap is smaller than that of our client’s competitors’, it would suggest that ‘word-of-mouth’ and other marketing communications have been successful in conveying an accurate view of your actual performance on that particular aspect in the market.
Forethought has traditionally provided these types of comparisons via CVA analysis for five key dimensions: quality, performance, reputation, price competitiveness and overall value. Through the modification of the satisfaction section of client questionnaires we now provide this form of comparative analysis at a more granular level. For example, Diagram 1 depicts the results of respondents being asked to rate their experience with their current provider and their perception of a provider(s) they do not have experience with, in relation to being treated as a valued customer.
Not only does this data enable the comparison of experience with perception of performance, it also enables greater insight into the specific drivers of acquisition. Specifically, our CVA models identify the relative impact of performance in decision-making versus the impact of reputation and price in decision-making. By augmenting the data set with the perception and experience scores gathered from the satisfaction section of a questionnaire, Forethought is able to identify the specific components that drive performance. A comparison of non-customers perceptions of the client on these specific drivers of performance provides insight into reasons for non-use of client services. That is, Forethought essentially models the ‘gap’ between non-customer perceptions and customer experience scores. This assists our clients in identifying the key communication challenges they face within the market in terms of shaping and improving non-customer perceptions of key components.
Additional Applications
Identifying customers at risk and possible threats
An examination of the perceptions of competitors’ performance held by our client’s own customers permits drilldown analysis to identify the specific nature of potential competitive threats and pockets of customers at risk. Specifically, it enables the perceived strengths of competitors from the perception of your customers to be revealed in detail and linked to the risk of defection and drivers of other business outcomes, such as loyalty. It also provides specific insight into the likely recipient of any business that does defect.
Improvement of market position
By examining both perceptions of competitors’ performance held by our client’s customers and perceptions of our client’s performance held by non-customers, opportunities to improve the client’s market position and therefore market share, can be uncovered. For example, if our client is perceived to be better than its competitors with regard to “the ability to resolve problems ” and this is a significant driver of acquisition, it highlights an opportunity for the client to leverage and increase its market share by maximising awareness and recognition of its performance on this aspect.
Requirements to incorporate this analysis
In order for this analysis to be undertaken, each respondent in a market study is asked to provide their perceptions of a competitor they do not currently use (in the form of a perception rating) in addition to their satisfaction with their current provider on each key performance area assessed (termed semi-globals by Forethought). These ratings are collected in addition to ratings of each of the five CVA questions: quality, performance, reputation, price and overall value.
Through the augmentation of CVA data using additional perception data captured via the satisfaction section of a questionnaire, Forethought can provide clients with deeper insights into their relative market position, both in terms of market share and overall reputation. Also, from a business retention and growth perspective Forethought can highlight the challenges and opportunities our clients face in moving forward.
