1. What is the construct that GE is trying to measure? GE Company is trying to use Net promoter score (NPS) to measure customer loyalty. According to Bhote (2000), customer loyalty indicates customers are delighted with a company’s products or services and turn into enthusiastic world-of-mouth advertisers. In general, customer loyalty can be expressed in different aspects. Here GE’s primary focus is on recommendation. Through measuring this construct, GE is able to know whether the clients would recommend GE’s service to others.
Because customer experiences will affect customer loyalty, these experiences will not only affect the buying behavior of the original customers but also their likelihood of sharing these experiences to others. Therefore, GE tries to use customer loyalty to predict the future market share which is induced by the loyal customer. Net promoter score (NPS): Based on aneleven-point scale on likelihood to recommend. 0| 1| 2| 3| 4| 5| 6| 7| 8| 9| 10| Detractor| Passive| Promoter| NPS = % of Promoter – % of Detractor 2. How might GE assess construct validity?
The way for GE to assess its construct validity is asking the possibility for its customer to recommend and using a convergent construct of customer satisfaction to test its construct of customer loyalty. It is general accepted that behavior like recommending products to others is a benefit which created by customer loyalty. In the Net-promoter score (NPS), customer were asked to rated the scale of the likelihood of being a representative of GE. The higher the score is, the more customers would willing to recommend GE`s products.
The result of the test can show us whether those consumers are loyal to the company or not and the possibility for them to be the representative to turn others get in touch of GE products. Because customer satisfaction might affect loyalty, thus, GE uses customer satisfaction to measure its customer loyalty. As Fornell (1992) states, “loyal customers are not necessarily satisfied customers, but satisfied customer tend to be loyal customer. ” Therefore, GE spent lots on testing customer satisfaction, from service quality to perceived value to predict the number of potential loyal consumer.
All in all, it is obvious that the test which GE is using base on the recommendation item as well as convergent construct to test the customer loyalty. 4. What is the operational definition of the construct? Operational definition of customer loyalty: customer loyalty defines the satisfaction of customer transform into promotion. It is measured by Net Promoter Score (classifies on an eleven-point scale of 0 to 10 how likely they would be to recommend GE to a friend) which targets GE’s customers.
The red lines in the diagram below stand for operational definition. Regarding Churchill and Iacobucci (2002), operational definition defines how the construct is to be measured. 5. Does the scale adequately address the underlying construct? The scale doesn’t adequately address the underlying construct. The purpose of the scale is creating a net-promoter score. It means that the answer should be standardization and the differences between different answers could be compared. However, the current scale does not meet the requirement.
Firstly, there is no specific definition for ‘neutral’ point which stands for the meaning of ‘no attitude’. So when the firm asked participants rate that if they would recommend GE unit to others, the responders might understand the scale at least in two ways (see table) that lead two totally different results. Scale | 0| 1| 2| 3| 4| 5| 6| 7| 8| 9| 10| Perspective of company| detractors| passives| promoters| Perspective of customer| detractors| passives| promoter| Secondly, as the consequence of overmuch rate is that responders could regard different score as one meaning.
For example, customers may rate 6 or 7for same meaning, because they subjectively think there is no difference between these two numbers. While it may lead the further difference on statistics Anyway, both these issues will reduce the validity of the result. Furthermore, it may decline the number of promoter directly and lower net-promoter-score consequently. 6. What level of measurement is being used in the research? Could a higher level have been used? GE uses NPS which is based on interval scale (Fig1) to measure customer loyalty.
Interval scale contains the features of ordinal scale with the same interval between contiguous points and it has a random zero point (McDaniel & Gates, 2010). The reasons that NPS is interval level of measurement can be expressed as follow. First, NPS has a scale from 0 to 10; also, every number in this scale is different. In addition, the numbers on the scale have an ascending order. As a result, NPS has the characteristics of ordinal scale. Based on the above, NPS has equal interval between adjacent points; therefore, it meets all features of interval scale.
Fig 1 ?| ? | ? | ? | ? | ? | ? | ? | ? | ? | 0 1 2 3 4 5 6 7 8 9 10 The higher level of interval scale is ratio scale to some extent. It has attributes of interval scale with an absolute zero(McDaniel & Gates, 2010). However, ratio scale is not necessary applied in this research and there are the causes below. On the one hand, NPS is a tool to examine one variable which is customer loyalty, so it does not require a meaningful zero point. On the other hand, interval scale is better than ratio scale in this research because its result is more efficient.
Reference Bhote, K. R. (2000)The Customer Loyalty Audit. Cambridge: Cambridge Strategy Publications Ltd. Churchill, G. A. and Lacobucci, D. (2002) Marketing Research: Methodological Foundations. 8thedn. Harcourt College Publisher. Fornell, C. (1992) A National Customer Satisfaction Barometer: The Swedish Experience. Journal of marketing 56(1), 6-22 McDaniel, C. and Gates, R. (2010) Marketing Research with SPSS, 8thedn, John Wiley & Sons (Asia) PteLtd..