Ep. 573 – Why Invest in Customer Satisfaction – Michael Brereton, the Executive in Residence for the Department of Marketing at Michigan State University

My guest today is Michael Brereton, the Executive in Residence for the Department of Marketing at Michigan State University.

Michigan State University (Michigan State, MSU) is a public land-grant research university in East Lansing, Michigan. It was founded in 1855 as the Agricultural College of the State of Michigan, the first of its kind in the United States. 

Prior to joining MSMUR’s program as Executive in Residence, Michael served 27 years at MaritzCX, 11 of which were as the President and CEO. Meritz is a Customer Experience company rebranded as InMonent. Michael stated his career on the client side at General Motors. 

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Jamin Brazil: Hey, everybody. I’m Jamin, host of the Happy Market Research Podcast, which you’re listening to. Our guest today is Michael Brereton, executive in residence at the Department of Marketing at Michigan State University. Before joining the MSMUR’s program as the executive in residence, Michael served for 27 years at MaritzCX, 11 of which were as the president and CEO. Maritz is a customer experience company rebranded as InMoment. Michael started his career on the client side at General Motors. Michael, thanks so much for joining me on the podcast.


Michael Brereton: Hi. It’s great to be here Jamin, as always.


Jamin Brazil: The Michigan State University’s Master of Science in Marketing Research program delivers the number-one ranked in science and analytics degree in three formats: full-time on campus, full-time online, and part-time online. New for 2022, if you can’t commit to their full degree program, simply begin with one of their three-course certifications: Insights Design or Insights Analysis. In addition to the certification, all the courses you at broad.msu.edu/marketing. Again, broad.msu.edu/marketing. HubUX is a research operations platform for private panel management, qualitative automation, including video audition questions, and surveys. For a limited time, user seats are free. If you’d like to learn more or create your own account, visit hubux.com. So this is part of our series of introduction into market research. This will be one of the chapters in an upcoming book that I’m co-collaborating on with people like yourself, “The Market Research Field Guide”. Today we’re going to be talking about customer satisfaction, specifically as a discipline inside of market research. What do you see in a modern context as the primary business questions that customer satisfaction is addressing?


Michael Brereton: I think where we are evolving to that is I would use the word ‘integration’. So it’s still capturing the voice of the customer to understand their experience with a product or service, but then how integrating that with other aspects of the business in terms of –


Jamin Brazil: Kind of across the user journey.


Michael Brereton: Exactly. And that to me is kind of where we’re at now. It’s still kind of starting.


Jamin Brazil: Who inside of the organization initiatives we need to do a customer satisfaction study?


Michael Brereton: Well, it’s interesting because it’s usually owned on the operations side and then administered through the [CROSSTALK] department, which is very different than a lot of others, but I almost always found the budget sits in the channel management area, and they’re the ones that are saying we need to bring the voice of the customer into understanding our operations, so we can have a fact-based way of continuous improvement.


Jamin Brazil: And you mentioned that, the feedback loop, which whether it’s Eric Rice, Ries, I always forget how to say his last name. But these innovators who have kind of framed out the Build Measure Learn framework which is very much informed by customer satisfaction. So if you’re a software company or a car company, or whatever, you build something and then you test something, and then you learn from that and then you iterate, and then you do it again. And that’s what we’re really talking about the CX or the customer experience loop as we want to refine or improve that customer experience along the entire journey so that ultimately, and I liked how you said it, “saboteurs or terrorists.” Because that’s what happens with customers, to your brand in the event that they have a bad customer experience. And the megaphone is becoming larger every year with respect to social media and the ability of them being able to connect to bad experiences or good experiences to the brand. So is there a specific business question, or is it more holistic as is part of the operations of a well-run business where customer satisfaction is just built in as part of the rigor? Is it more like I guess I put it like legal and HR, so it’s just part of and parcel of the business. Or is it actually like have – is there an inception moment in the organization where I’m like oh my gosh, we really need to launch this study?


Michael Brereton: I think nowadays it’s more the latter, and I think in the beginning it was more to the former where you’re a little bit more. Now more in terms of what you were talking about there in terms of the feedback both on the aggregate as well as the individual customer level. People are saying is this – we have an opportunity here to truly understand what’s driving performance or like you were saying with the terrorists, what’s driving dissatisfaction. Understand it at the aggregate level, so we can tweak our operations this way and this way and that way. But also understanding it, and here’s where you crossover to CRM, at the individual customer, so we can get in and mitigate a negative situation now.


Jamin Brazil: And that’s where you have things like triggers that are built in to surveys and this has been around for forever but really popularized in the last twelvish years, where you can have somebody do a CX survey of a customer. They have an experience and then they get a survey invitation. They take the survey and if it’s a bad experience, or they report a bad experience, then in line with the survey, you can say, “Would you like someone to follow-up with you?” So immediately now you have this opportunity to create a resolution on that experience, which of course, then it means that it needs to be tethered to the CRM. It’s interesting how we are seeing the lines of research in sales and marketing blur, so we’re really becoming more of a function of the revenue generator of the business.


Michael Brereton: And to your point there, also, is with that information now, of course with the application of AI, we can go in and discover so many things just based upon what’s being captured in an automated way, start responding in mitigating and routing and so forth at far less expensive in a far faster way.


Jamin Brazil: From my vantage point, some of the best run businesses have very clear delineated user journeys, and they’re able to measure CX at each one of those journeys and by doing that, then they get to your feedback loop, so there’s these micro loops that are happening in between each stage of the customer experience and that’s where the improvement happens at a micro level. But then, as you know, the outcome is at a macro level, there’s a big lift to brand and customer retention and growth. Let’s move into the next question. What are some common analytic techniques that are used for customer satisfaction?


Michael Brereton: I think in general compared to other types of research, I think the analytic techniques are comparatively simple. And if you look at the standard reports, there’s a lot of [INAUDIBLE] basic [INAUDIBLE] testing so far. But I found that there’s one unique analytic application, and I think it stood the test of time in the decades here, and it’s around driver’s analysis. And I think that’s worth noting. Again, not real – that’s using multiple [INAUDIBLE] on their correlations but creating a derived importance measure as opposed to a stated importance measure that you would see on so many servers because there’s really two reasons for doing it. One is you can cut out a whole battery of questions, you can just go with performance measurement and then correlate that against some sort of measures and so it shortens your instrument. But it also found over time coming up with a derived importance as opposed to a state importance. The derived importance gave of what we found were more differentiated understanding of the business or things to act on. So a lot of times with stated importance and what you’re hearing are people telling you what’s a cost-of-entry stuff, with [INAUDIBLE] fees kind of things, hygiene factors or whatever you want to call that. But basically, it’s things that if the business does better at, they’re not going to necessarily satisfy more. There’s only downside with not doing it whereas with the derived importance, we’re able to identify things that the company does better at, and they indeed do get better outcomes in terms of satisfaction at the time to repurchase and so forth. And so this became kind of a standard analytic tool back in the 80’s, and I see companies still using this over and over and over again because what they’ll do is create a quadrant analysis. So plot each attribute being measured by its derived importance versus by the actual performance, derived performance versus performance on a quadrant analysis, and it’s a real easy to understand tool that’s perceived to be very actionable to put in the hands of all those hotel properties, dealers, restaurant locations, or whatever, because remember, most of the effort, most of the money being spent in customer experience measurement is being pushed out to the individual retailer. That’s where most of the money is being spent in these programs. It’s not some aggregate number at the top. And so, you need real, simple tools because it’s not going out to researchers and so I just find it’s really interesting that this tool that we created in the ’80s is still kind of a standard offering and there’s not much else in a lot of those reports that’s going out to the individual reporting units besides something like that. Because usually you typically want some sort of a benchmarking and so that’s very important, but it’s got to be very actionable, so pretty simple reporting from an analytic perspective, again, compared to brand studies or product development studies.


Jamin Brazil: It’s interesting that the analytics really maps very nice. It has become part of the SOP, or standard operating procedure, for all businesses. Everyone needs to understand what a quadrant map is and that really is a primary analytics technique that they can be distributed across your organization, and everyone can understand that whether you’re a cashier or whatever, or a CEO. And that could be and is in fact a very effective communication tool. Thinking about operation, so what are some common research operations that need to be taken into consideration when doing customer satisfaction keeping in mind that you’ve already touched on a couple, but maybe we can just briefly highlight those.


Michael Brereton: Well, the big thing is and why not every agency is the big player in this is because it’s, first of all, it’s a large volume. It tends not to be a sampling of a company’s customer base. It’s senseless. It’s a lot of volume in terms of [INAUDIBLE]. It’s a lot volume in terms of reporting. It tends to be B to C. There is some B to B, but it tends to be B to C census, this whole multi-nodal reporting. And a lot of times the reporting is the things that if you were to go talk to the big agencies in the space and say, “What’s your biggest operational pain point?” They would probably say hierarchal reporting because if it’s – I’ll go back to my automotive example about those dealers in this region, which is in this zone, which is in this territory or whatever. And those things change every day. They’re moving [INAUDIBLE] thousands of dealers around or buy, sell or whatever going on. And the manufacturer will say yeah, and so I want you to show it how it was yesterday but with the new alignment. I want you to show how it is today too with this new. And this hierarchal report sounds easy, but it just brings, from a technology perspective, it brings companies to its knees. And so a lot of the operational things today are volume scope of reporting and the technology around that. The other thing from a research operations perspective is as we go back, talk about integration again, is now more and more companies are wanting to integrate any voice of the customer contact is this idea of ongoing dialog relationship with a customer and so if you think about all the different touchpoints, well, the customer’s calling into a customer care center or perhaps out there on social media talking about their experience. They’re filling out a survey and an operational challenge is that a customer or a company will say I want to integrate on that voice, and it’s extremely hard to do, and then you combine all that in a report in terms of at an individual customer level or a group of customers level. And so that’s sort of a unique I think operational challenge. The last one, I would say is I recall the linkage and it’s sort of a design and sort of an operations issue, but I’m always trying to link customer and their experience of the customer satisfaction to the broader brand experience. There’s a lot of work being done to link customer experience measurement to emotion. There’s a lot of work being done to link it to reputation management of a company.


Jamin Brazil: So data linking. That’s one of the big commonalities of – yeah, that makes sense. I want to be sensitive time here, and we have about five more questions to get through, so we’re going to jump into the next part. Do you have a specific or favorite case study?


Michael Brereton: Yeah, and I saw that, and yes, I do. One would be McDonald’s and this is kind of different because it goes back to my graduate work in the 80’s when I did a customer satisfaction measurement program for McDonald’s, and it was really like I was talking about before, I was trying to understand that stated importance or derived importance and what we found is we’re not going to get any more points with the customer for having a clean bathroom. That’s the only downside. If it’s not clean, you’re in trouble. You’re not going to get any more points for getting the order right. That’s what they expect. And if you don’t do it right, then you’re out of the game, but there were other attributes when you measure satisfaction for which if you did it better, you’ve got greater satisfaction and greater intent to come back like friendliness, like the time at which, like the time to fill the order and the time to take the order and so forth. To me, it was really interesting all the way back then to what you were saying earlier of the person on the cash register is being able to bring this down to a language and concepts that they could understand and why. So we were able to do that and then when I watched, and we also at the time tried to implement and rule out a standardized way of measuring customer satisfaction in McDonald’s restaurants, and we were trying to do it through intercepts and standing in the drive-thru lanes and so forth. And as you can imagine, it was extremely challenging to try to rule that out.


Jamin Brazil: And for those that don’t know intercepts are where you will actually have usually a human being that will intercept the customer or connect with the customer as they’re actually going through the process of purchasing or getting their fulfillment of whatever they purchased.


Michael Brereton: Yeah, and in this case, trying not to get run over and raining and so forth. But anyways, now, years later, as I’ve been watching McDonald’s over the years, and they have tried so many different methods to try to, in a standardized way, across the whole network to capture the voice of the customer and act on it. And I’m seeing so many different things like kiosks and QR codes and offering incentives and so forth, and I haven’t seen anything that’s really stuck over time. But I think it’s really interesting that even though they still may not have a common approach, I still see signs of the attempt. I think they still had that understanding that religion of the need for customer satisfaction, and it’s just a tough, tough execution.


Jamin Brazil: How much would a company – if you were working at a brand and currently customer satisfaction’s not being done, and you want to roll it out. Obviously, it sounds like you’re probably on the operation side, maybe even on the growth operation side, how much would you expect to spend a year on that study? Thinking, I know that it’s a really weird question because it has everything to do with scope, but broadly speaking, what do you think the allocated budget would need to be in year one?


Michael Brereton: Yeah, I was looking at that and looking from two ways. One is, I don’t think banks and big hotels and big manufacturer car companies like that, they’re spending three, four, five million a year on a base program for the U. S. market. Another way to look at it is, and we always say your research budget is about 10% of your ad budget, and probably about half of that would be on post transaction, this type of thing, so that would be two ways I’d look at it.


Jamin Brazil: That’s great. How long does it take for a project to be executed? And then I realized this is usually longitudinal in nature, so it’s forever ongoing. But what is the frequency of data reporting?


Michael Brereton: The frequency of data reporting now is real-time and so from a timing, like you said, tend to be continuous program, three to six months to set one up for a medium-sized, large company and this continuous real-time feedback after that. Because the industry has largely gone now to platforms as opposed to the way. When I started up, it was a bespoke kind of custom design program. Now it’s configured platforms on a subscription basis, and I think most of them say give us three to six months to put it up and then you just get continuous feedback.


Jamin Brazil: When they do that, when they set it up, is it about 20% of that contract is ongoing like managed services, or is there usually – so it’s a combination of technology and services, right?


Michael Brereton: Yeah. And most of them, the companies now want to make that services very small and so it’s all about software subscription, so that’s where the vast, vast majority of the cost is. And again, a lot of these companies are tech-based companies or evolved out of the tech space, or they want to be seen as a tech company to drive their valuations and multiples. And one of the things that investors are looking for is subscription base, and lots of logos, and lots of retention, and most of the revenue tied to that subscription relatively little tied to services. Matter of fact, when the predominant models in terms of delivery now that it’s going is as a large company will bring in like a Medallia or a Qualtrics as the platform, as the customer experience platform and buy that on a subscription basis. And then bring in another company like Accenture or something to actually put it up.


Jamin Brazil: That’s interesting. So you’ve got the technology provider and then you have a separate entity who’s basically the services side of that. You mentioned two companies. Thinking about DIY Solution, so if a brand is scrapped and they want to try and do it themselves, these are probably small to medium-sized brands. Are there any DIY solutions that you’re aware of?


Michael Brereton: It’s a relatively easy space for a company to break into and so if you went out and just did a search right now, you would probably find 40 or 50 DIY platforms in the customer experience space and probably none of those would have the word ‘research’ in them anywhere. And those are largely just DIY. You want to get into more of a DIY and do it with me or do it for you kind of model, then there are fewer. Obviously the two that I mentioned, they’re in terms of Qualtrics and Medallia are the two largest that are in that space, and they can go anywhere from DIY to do it for you. And the other thing that’s interesting, too, though for me is, is that if you look at, there’s still into this space, the big data platform companies like Oracle and Salesforce show up on the radar, and I think why is that? But because they supply to a company that broad data enterprise management backbone, and they sort of hang off of that modules for finance and modules for HR and modules for whatever. And oh yes, there’s a VOC module, there is a customer experience measurement management module that’s hanging off that. And I think the market data indicates that more and more companies are buying it that way and so their vendor shows up as Salesforce or it shows up as Oracle and there may be a sub brand under that, or maybe Salesforce’s own home grown customer experience management or measurement solution. But I think that’s a wave that you’re going to see continue to increase.


Jamin Brazil: Who are the go-to partners? So these would be agencies that companies are using.


Michael Brereton: I see the big consulting names show up like I mention –


Jamin Brazil: Accenture.


Michael Brereton: – Accenture, like KPMG, like McKinsey shows up and so forth. So one of the services that they’re offering is to really put up the instance in this plan.


Jamin Brazil: Do you see market research agencies, thinking about the top three, are they playing in this space heavily?


Michael Brereton: Yes. Still and say, for instance, if you looked at the suppliers for a personal experience, Ipsos and Kantar are still there. Now it’s interesting when you peel back what’s going on there, a lot of times what you will see is the sale to the client is Ipsos and they’re partnered with Medallia or they partnered with Qualtrics and they actually co-present the solution. The other thing that’s interesting is there’s a frenemy thing going on there because maybe Ipsos is going on partnering with Medallia, and then Medallia’s going in straight, and then Medallia also is going in with somebody else. It’s a very much in flux kind of situation right now in terms of channel.


Jamin Brazil: Our guest today has been Michael Brereton, the executive in research for the Department of Marketing at Michigan State University. Michael, thank you very much for joining me on the Happy Market Research Podcast.


Michael Brereton: You’re very welcome.


Jamin Brazil: Everyone else, I hope you found a ton of value in this like I did. I love the historical framework and context that was set. And then moving this straight through our framework to give you a one-on-one or brief overview of what customer satisfaction is, what business problems it addresses, how to do it, and the outcomes, and who you might want to use if you are planning watching your own customer satisfaction. So Michael, thank you. Everyone else, I hope you have a great rest of your day.