1. CLEAR 2008 Annual Conference Anchorage, Alaska “Promoting Regulatory Excellence Through Surveying” Bob E. Hayes, Ph.D President Business Over Broadway

2. CLEAR 2008 Annual Conference Anchorage, Alaska Outline Customer Loyalty, Profitability and Service Delivery Customer Loyalty and Regulatory Agencies Web-based Surveys Loyalty Management CLEAR Survey Results Summary

3. CLEAR 2008 Annual Conference Anchorage, Alaska Customer Loyalty and Profitability Decreasing customer defections by 5% increases profits from 25% to 85% across a variety of industries 1 1 Reichheld, F. F., & Sasser, W. E. Zero defections: Quality comes to service. Harvard Business Review, Sept-Oct. 1990.

4. CLEAR 2008 Annual Conference Anchorage, Alaska Business Models Customer variables (loyalty, value) impact company value Based on the article by Gupta, et al. (2006). Modeling customer lifetime value. Journal of Service Research, 9(2), 139-155.

5. CLEAR 2008 Annual Conference Anchorage, Alaska Business Models Employee, Partner, and Customer Loyalty Drive Business Results Based on the book, The Service Profit Chain: How leading Companies Link Profit and Growth to Loyalty, Satisfaction and Value (Heskett, Sasser & Schlesinger, 1997) Employee Survey Customer Survey Partner Survey Company Business Strategy Company Performance Internal System Employee Satisfaction Employee Productivity Perceived Value Customer Satisfaction Revenue Profits Employee Loyalty Customer Loyalty Partner Advocacy Purchasing Retention Market Share

6. CLEAR 2008 Annual Conference Anchorage, Alaska Customer Loyalty Degree to which customers feel/act positively toward the organization In business, there are three components of customer loyalty 1.Advocacy – likelihood to recommend or choose again 2.Purchasing – likelihood to buy different/more 3.Retention – likelihood to stay

7. CLEAR 2008 Annual Conference Anchorage, Alaska Regulatory Agencies Standard conceptualization of customer loyalty does not work Customers do not have a choice; Customers have to use agencies (e.g., licensing for physicians) In non-competitive environments, need to redefine what we mean by customer loyalty

8. CLEAR 2008 Annual Conference Anchorage, Alaska Customer Loyalty Measures Regulatory agencies can focus on three positive behaviors of customers 1.Expansion – likelihood of increasing level of business 2.Compliance or Influence – likelihood of complying with agency requests or being influenced by the agency in a way that benefits the agency 3.Advocacy – likelihood of speaking favorably/recommending or supporting agency on issues and matters that are important to the agency Based on the article, Parcenka, C. (2008). Beyond mere customer retention. Quirk’s, March, 42-46.

9. CLEAR 2008 Annual Conference Anchorage, Alaska Expansion Loyalty Signing up for programs that help customers do their job more effectively Using agency as a consultant when selecting products/services from a third party

10. CLEAR 2008 Annual Conference Anchorage, Alaska Compliance/Influence Loyalty Seeking agency’s advice/expertise on issues in my field Accepting agency’s advice or referrals to third party contractors Complying with/Influenced by agency’s advice or opinion Providing personal information (to better serve customers)

11. CLEAR 2008 Annual Conference Anchorage, Alaska Advocacy Loyalty Supporting agency’s position or action on licensing-related public issues Supporting agency’s issues on changing licensing process (e.g., new tests) Providing testimonials about positive experiences with the agency

12. CLEAR 2008 Annual Conference Anchorage, Alaska Desired Customer Behaviors What does the agency want from customers? How can customers support the agency’s mission? What can customers do to help agency better serve them? What can customers do to help agency minimize cost of doing business?

13. CLEAR 2008 Annual Conference Anchorage, Alaska Generating Loyalty Questions Qualitative approach using cross- functional team –Roundtable discussions –One-on-one interviews Qualitative approach using real customers –Panel discussions –One-on-one interviews –Open-ended questions on surveys

14. CLEAR 2008 Annual Conference Anchorage, Alaska Assessing Quality of Questions Is the meaning of loyalty clear? Is the loyalty behavior something the customer can do? How does the behavior benefit the agency?

15. CLEAR 2008 Annual Conference Anchorage, Alaska Customer Loyalty 0 to 10 Satisfaction/Likelihood Scale –Respondents indicate satisfaction/likelihood to behave in a certain way (e.g., recommend, purchase) –Higher scores indicate higher levels of customer loyalty (0 to 10) 0 Not at all Likely 5 10 Extremely Likely 67891234

16. CLEAR 2008 Annual Conference Anchorage, Alaska Potential Loyalty Questions How likely are you to sign up for different programs we offer? How likely are you to comply with the agency’s advice in regulatory matters in your field? How likely are you to support the agency’s position or action on licensing-related public issues?

17. CLEAR 2008 Annual Conference Anchorage, Alaska Customer Experience The sum of all experiences a customer has with a supplier of goods/services Company treats customers in certain ways that can be positive or negative Impacts/drives customer loyalty Perception of/Satisfaction with specific characteristics of the customer experience

18. CLEAR 2008 Annual Conference Anchorage, Alaska Customer Satisfaction 1 to 5 agreement scale –Respondents indicate the extent of agreement that an attribute (customer experience element) describes their experience –Higher score indicates higher quality or better customer experience (1 to 5 rating) 1 Strongly Disagree 3 Neither Agree Disagree 5 Strongly Agree 4 Agree 4 Disagree

19. CLEAR 2008 Annual Conference Anchorage, Alaska Data collection is cost effective Survey process is simplified –Fewer data management concerns Utilize the capabilities of the Web –Real-time results –Ease of analysis and access to information Survey process integrated with IT applications Web-based Survey

20. CLEAR 2008 Annual Conference Anchorage, Alaska Micro Level Loyalty Management Understand the customer relationship for a specific survey respondent Identify customers who indicate they are disloyal (rating on loyalty questions) Target improvements on disloyal customers to address specific needs immediately –Action plan directed at impacting individual customers

21. CLEAR 2008 Annual Conference Anchorage, Alaska Use trigger e-mails to identify disloyal customers  Negative responses to loyalty/satisfaction questions trigger notification to pre- determined employees and managers  Trigger email alerts enable employees to take immediate action on important customer issues Micro Level Approach

22. CLEAR 2008 Annual Conference Anchorage, Alaska Macro Level Loyalty Management Understand the customer relationship across all customers Identify systemic reasons causing loyalty/disloyalty Target company-wide improvement programs directed at all customers Help improve the service delivery system –Impacts how the work gets done

23. CLEAR 2008 Annual Conference Anchorage, Alaska CLEAR Survey Content Five Customer Loyalty Questions Ten Business Attribute Questions Membership length What are your original reasons for joining CLEAR? What is major benefit you are receiving from CLEAR? How could CLEAR offer more value?

24. CLEAR 2008 Annual Conference Anchorage, Alaska Customer Loyalty –Degree to which customers feel/act positively toward the organization (CLEAR) 1.Overall Satisfaction 2.Recommend 3.Continue Membership 4.Use Different Types of Services 5.Renew Membership Rated on a scale from 0 (Extremely Dissatisfied/Not at all Likely) to 10 (Extremely Satisfied/Extremely Likely).

25. CLEAR 2008 Annual Conference Anchorage, Alaska Satisfaction with Attributes Perception of specific characteristics of the customer experience 1.Services are excellent 2.Provides needed resources 3.Offers training I want 4.Organized events are excellent 5.Excellent reputation 6.Responsiveness 7.Knowledgeable 8.Courteous 9.Understands needs 10.Membership is a good value Rated on a scale from 1 (Strongly Disagree) to 5 (Strongly Agree).

26. CLEAR 2008 Annual Conference Anchorage, Alaska CLEAR Survey Method Mail list received from CLEAR (347 potential respondents) Duplicate email addresses removed Email invitation (with hyperlink to Web- based survey) sent to 315 people Survey open Sept 10 through 17, 2008

27. CLEAR 2008 Annual Conference Anchorage, Alaska CLEAR Invitation Email

28. CLEAR 2008 Annual Conference Anchorage, Alaska Web-based Survey

29. CLEAR 2008 Annual Conference Anchorage, Alaska Results Respondents who indicated they were not CLEAR members were excluded from all analyses. Received 127 completed responses for a response rate of 40% (127/315)

30. CLEAR 2008 Annual Conference Anchorage, Alaska Member Loyalty Key Findings A high percentage of members (~95%) indicate that they will continue/renew their membership with CLEAR Members are more likely to continue/renew their membership than advocate (~77%) or use different services (~54%) Percent of respondents who had a rating of 6 or greater on a 0-10 scale.

31. CLEAR 2008 Annual Conference Anchorage, Alaska Membership Tenure and Loyalty Key Findings Long-term members report higher levels of loyalty compared new members, especially with respect to renewing their membership and recommending CLEAR

32. CLEAR 2008 Annual Conference Anchorage, Alaska Membership Tenure and Quality Key Findings No major difference among member tenure levels. Long- term members report same quality as new members. Reputation of CLEAR is rated higher for longer- term members.

33. CLEAR 2008 Annual Conference Anchorage, Alaska Membership Tenure and Quality Key Findings No major difference among member tenure levels. Long- term members report same quality as new members.

34. CLEAR 2008 Annual Conference Anchorage, Alaska Macro Level Loyalty Management Goal is to increase customer loyalty Target Analysis –Compare agreement ratings of attributes –Low ratings (below a target) = poor customer experience ATTRIBUTE 12345678910 Performance (Agreement) 4.003.77 4.28 4.184.094.483.924.23 Make improvement here.

35. CLEAR 2008 Annual Conference Anchorage, Alaska Goal is to increase customer loyalty Driver Analysis 1.Examine agreement ratings of attributes 2.Correlate agreement ratings of attributes with Likelihood to renew membership ATTRIBUTE 12345678910 Performance (Agreement) 4.003.77 4.28 4.184.094.483.924.23 Impact (Correlation Coefficient).49.37.39.33.21.14.11.28.42 Macro Level Loyalty Management

36. CLEAR 2008 Annual Conference Anchorage, Alaska Loyalty Matrix - Renew Plot performance and impact of each business attribute AgreeImpact A14.00.49 A23.77.37 A33.77.37 A44.28.39 A54.28.33 A64.18.21 A74.09.14 A84.48.11 A93.92.28 A104.23.42 AVG4.10.31

37. CLEAR 2008 Annual Conference Anchorage, Alaska Loyalty Matrix High Impact Low Key Drivers INVEST in these areas. Improvement in these areas are predicted to increase customer loyalty (attract new customers, increase purchasing behavior, retain customers) Hidden Drivers LEVERAGE as strengths in order to keep current customers loyal ADVERTISE as strengths in marketing collateral and sales presentations in order to attract new customers, increase purchasing behavior and retain customers CONSIDER as lowest priority for investment. These areas have relatively low impact on improving customer loyalty Weak Drivers ADVERTISE as strengths in marketing collateral and sales presentations in order to attract new customers EVALUATE as areas of potential over- investment Visible Drivers Low Performance High

38. CLEAR 2008 Annual Conference Anchorage, Alaska Weak Drivers: –Lowest priority for investment is A7 and A9 Hidden and Visible Drivers: –In Marketing and Sales, use A4, A5 and A10 –A6 and A8 Loyalty Matrix – Renew Key Drivers: –To increase customer renewal rate, invest in A1, A2, and A3 Key Drivers Weak Drivers Hidden Drivers Visible Drivers

39. CLEAR 2008 Annual Conference Anchorage, Alaska Weak Drivers: –Lowest priority for investment is A7 and A9 Hidden and Visible Drivers: –In Marketing and Sales, use A10 –A4, A5, A6 and A8 Loyalty Matrix – Use Diff Services Key Drivers: –To increase customer loyalty, invest in A1, A2, and A3 Key Drivers Weak Drivers Hidden Drivers Visible Drivers

40. CLEAR 2008 Annual Conference Anchorage, Alaska Summary of CLEAR Survey Majority of members will continue/renew their membership To increase advocacy and use of different services, focus on improving: –Service –Resources to help members do their jobs –Knowledge sharing – Training targeted on specific issues and expanded offering

41. CLEAR 2008 Annual Conference Anchorage, Alaska Summary Increasing customer loyalty is necessary for business success Need to conceptualize customer loyalty in different ways for regulatory agencies Need to improve the customer experience in order to improve customer loyalty –Loyalty Management

42. CLEAR 2008 Annual Conference Anchorage, Alaska Summary Micro level loyalty management approach –Addresses special causes of disloyalty –Focuses on changing individual issues –Customer-specific improvements/Short-term Macro level loyalty management approach –Addresses common causes of disloyalty –Focuses on improving systemic issues –Organization-wide improvements/Long-term

43. CLEAR 2008 Annual Conference Anchorage, Alaska Speaker Contact Information Bob E. Hayes, Ph.D. President 206.372.5990 bob@businessoverbroadway.com