![]() A full discussion is beyond the scope of this discussion but the interested reader can read more about this topic (Hayes, 1997). It is important to note that an exploratory factor analysis involves some form of judgment when determining the number of factors as well as which variables are related to the smaller set of factors. Specifically, for our problem, a factor analysis will help us identify if the relationship among the set of many loyalty items can be explained by fewer factors (constructs). The output of a factor analysis will tell us two things: 1) The number of factors that can explain the relationships among the set of observed variables and 2) Which variables are related to which factors. Factor analysis is a data reduction technique that explains the statistical relationships among a given set of variables using fewer unobserved variables (factors). A statistical analysis technique that is used to understand the meaning of items is called factor analysis. If we can provide evidence that each loyalty question, however, measures something different from the other loyalty questions, it would be appropriate to use each loyalty question as a unique measure of customer loyalty. Specifically, we want to know if each of the loyalty questions is an observable indicator of the construct of "customer loyalty." If we can provide evidence that the seemingly distinct loyalty questions are really measuring the same construct, it would be appropriate to create an overall index of customer loyalty. To answer that question, we need to understand exactly what each loyalty question is measuring. The question now becomes, "When multiple loyalty items are used in a customer survey, should we use a composite score as our ultimate loyalty criterion or use each item as unique measures of customer loyalty?" Another approach is to use a composite score (typically averaging across items) based on several loyalty questions. Still other researchers use "overall satisfaction" as their key measure of customer loyalty (Fornell, et al., 2006). For example, Reichheld (2006) recommends the use of the "likelihood to recommend" as the single best question to use as a measure of customer loyalty. One approach is to use single loyalty questions as the loyalty measure. There are different approaches in how these loyalty questions are used. Composite Loyalty ScoresĬustomer surveys, oftentimes, include multiple loyalty questions. Due to the length of the present discussion, I have broken down the entire discussion into several parts. Much of what I will present here will be included in the third edition of my book, Measuring Customer Satisfaction. I wanted to formally write my thoughts on this topic to get feedback from this community of users. With the latest critiques of the Net Promoter Score coming in from the both practitioners and academic researchers, there is much debate on how companies should measure customer loyalty. We have had thousands of offers sent but they have only been used like 20 times if that in nearly 3 years time.The measurement of customer loyalty has been a hot topic lately. I have been using them for nearly 3 years now (both recently fav and abandoned cart) and in my experience they are just not very effective or used very often which is likely why etsy stopped charging for them(they used to cost 10 cents per email sent). It's a good idea to try to manage expectations with those offers. Also, they aren't sent retroactively so only those who fav and meet the other criteria AFTER you set up the offer will be eligible to receive one. Most importantly the user has to have opted in to receiving promotional emails from etsy in their account settings to even be eligible to receive one. We have had thousands of offers sent but they have only been used like 20 times if that in nearly 3 years are a few criteria for receiving those offers, they aren't just automatically sent to everyone who fav's or carts an item. ![]() Are a few criteria for receiving those offers, they aren't just automatically sent to everyone who fav's or carts an item.
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