CXA Methodology White Paper

THE FORESEE
CXA METHODOLOGY:
WHITE PAPER

© 2013 ForeSee

THE FORESEE CXA METHODOLOGY: WHITE PAPER (DECEMBER 2013)

OVERVIEW
ForeSee helps organizations measure and analyze their customers’ experience with advanced predictive
analytics and a robust scientific methodology that together radically change the way organizations make
important decisions. Our proven method accurately identifies the causal relationships between key indicators
of customer satisfaction and future behaviors, enabling executives and managers to prioritize investments
that will have the biggest impact on the customer experience.
The ForeSee CXA methodology links customer satisfaction directly to financial outcomes, including customer
spending, shareholder value, cash flow and business performance. By focusing on customer satisfaction to
improve the customer experience, ForeSee offers its clients a unique advantage by providing better tools for
managing the customer experience.
ForeSee’s proven cause-and-effect theoretical framework is based on empirical findings from 80 years
of social psychology research, 20 years of econometric research and more than a decade of practical
field implementation at leading global organizations. The heart of the company’s methodology is
centered on consumer behavior theory, psychometrics and statistics – combining survey-based,
voice-of-the-customer-derived performance measurement with advanced modeling algorithms to deliver
powerful diagnostic capabilities, actionable insights and prescriptive guidance.

EFFICIENT ALLOCATION OF SCARCE RESOURCES
All management decisions make basic cause-and-effect assumptions (i.e., If we do X, Y will happen),
but without knowing what outcomes to expect, decision-making may devolve into a guessing game.
Unfortunately, managers often base their decisions on hunches, and data and correlations that do not
support causal inferences. Since the allocation of scarce resources to accomplish desired objectives is the
fundamental management task of all organizations, it is critical that organizations quantify the impact of
changes before making them.

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THE FORESEE CXA METHODOLOGY: WHITE PAPER (DECEMBER 2013)

The ForeSee CXA methodology is based on a theory that isolates the effects that specific changes to the
customer experience will have on customer satisfaction and desired behaviors, providing managers with
powerful, forward-looking insights that tie business decisions to specific financial outcomes.

ESSENTIAL QUESTIONS FOR MEASURING
CUSTOMER EXPERIENCE
To measure the customer experience accurately, managers must implement a system that asks customers
three essential questions:
1. How are we doing? To measure all areas of the customer experience in order to provide meaningful
performance measurement in each area, both as a snapshot and across time.
2. What should we do? To prescribe customer experience improvement targets and prioritize investments.
3. Why should we do it? To predict how prescribed improvements affect financially relevant business
outcomes prior to investment.

BENEFITS OF THE FORESEE CXA METHODOLOGY
The ForeSee CXA methodology provides three distinct benefits that address the questions above:
1. Powerful Diagnostic Capabilities – ForeSee’s valid, reliable and sensitive customer experience
measurement delivers metrics that managers can rely on to accurately assess the customer experience.
2. Prescriptive Guidance – Advanced modeling algorithms quantify the link between perceived
experience and attitudinal evaluation, prioritizing the best course of action and helping managers
optimize resource allocation.

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THE FORESEE CXA METHODOLOGY: WHITE PAPER (DECEMBER 2013)

3. Prognosis of Future Outcomes – ForeSee’s cause-and-effect framework predicts future outcomes to
serve as a basis for accurate return-on-investment (ROI) calculations, before investments are made. It
provides specific, quantifiable data about how changes to a process, service, aspect of quality, etc. will
affect customer satisfaction and profits.

UNDERSTANDING CUSTOMERS’ POST-EXPERIENCE
THOUGHT PROCESSES
ForeSee’s framework uses models to evaluate customers’ post-experience thought processes in order to
create the most accurate picture. These include:

> The perception of the performance of various facets of the product or service;

> The attitudinal evaluation of the experience (including satisfaction); and

> The future behavioral intentions toward the product or service.

THREE INDICATORS OF CUSTOMER SATISFACTION
ForeSee uses three measurable indicators to assess and define the dimensions of customer satisfaction –
overall satisfaction with the experience, whether the experience met expectations and whether the
experience was ideal. The measures examine:
1. How well the experience fulfilled the user’s needs or desires;
2. How well the experience met the user’s expectations; and
3. How well the experience compared to a hypothetical ideal experience for the user.

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THE FORESEE CXA METHODOLOGY: WHITE PAPER (DECEMBER 2013)

Questions based on these three concepts are used to build a composite measure of customer satisfaction
that offers superior reliability, validity, and precision. Three questions are necessary to achieve these benefits
because satisfaction is made up of multiple dimensions. By consistently asking these questions, comparisons
can be made across individuals, organizations, market segments, and even industries over time. This ability is
invaluable for customer satisfaction benchmark comparisons.

KEYS TO SUPERIOR PERFORMANCE MEASUREMENT
ForeSee delivers superior customer experience measurement because it uses measures that are accurate,
reliable and precise:

> Accurate – The degree to which measures are free from measurement error and reveal the truth
about an object or quality of an object.

> Reliable – The degree to which measures are free from random error and therefore yield
consistent results.

> Precise – The ability of a measure to reveal small differences in values over successive measurement
occasions or between groups (also known as the power to detect change).

IMPROVING PRECISION AND POWER
ForeSee combines best practices from psychometric science with an advanced structural equation modeling
algorithm. The key characteristics of ForeSee’s superior CXA methodology are highlighted below:

> Voice-of-the-Customer (VOC) Measurement – The ForeSee methodology discovers the true
meaning of a customer’s experience and converts the customer’s “voice” into actionable insights.

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THE FORESEE CXA METHODOLOGY: WHITE PAPER (DECEMBER 2013)

> Multiple Measures – Asking a number of questions enables ForeSee to evaluate intangible
psychological concepts accurately (e.g., perceptions and attitudes about experience and
satisfaction). Because single measurements of psychological phenomena have a high probability of
random measurement error, they are typically discouraged. However, when ratings for three to five
items are combined to triangulate the essence of the customer experience, the validity is increased
by 20% to 30% over that of other methods. While an individual item contains measurement error,
multi-item measures are less prone to distortion from biases, cancelling out random error and
improving stability, reliability and precision over time.

> Smaller Samples, Same Precision – Because of the increased precision of ForeSee’s
multiple-measure methodology, it can use smaller sample sizes without sacrificing accuracy,
resulting in a cost savings for clients.

> State-of-the-Art Analysis Algorithm – The ForeSee modeling analysis uses a structural equation
algorithm to produce a system of optimally weighted scores. The weights are based on the
relationships between experiences, evaluations and intentions.

> Network of Multiple-Measure Concepts – ForeSee’s measurement system is based on a network
of multiple-measure concepts linked together in a cause-and-effect framework. The experience and
satisfaction indices and future intention outcomes are a function of the framework. The process
ensures prescriptive and prognostic power, and minimizes the correlation problems that limit the
effectiveness of competing methodologies (e.g., measures correlating among themselves).

> 10-Point Scales – ForeSee implements 10-point scales in its customer experience
measurement because they yield more precise results and provide more meaningful information,
increasing the explanatory power of the system, especially for organizations with inherently
small customer populations.

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THE FORESEE CXA METHODOLOGY: WHITE PAPER (DECEMBER 2013)

ABOUT FORESEE’S TECHNOLOGY PLATFORMS
ForeSee’s unique combination of technology platforms is organized around data capture, data refinement
and knowledge sharing.

> Data Capture – ForeSee uses surveying techniques (i.e., questionnaires) or observation (e.g.,
recording website behavioral patterns). Data collection includes sampling rates, triggering processes,
database creation/management and session recording.

> Data Refinement – ForeSee uses advanced statistical technologies to build models and other
constructs, as well as clinical techniques, to analyze the customer experience, particularly the
usability of websites.

> Knowledge Sharing – ForeSee applies technologies that focus on the presentation and
customization of refined data. The ForeSee Portal aggregates data from multiple sources and
provides tools that enable clients to manipulate results for further custom analysis, including
business-intelligence tools, filters, comment clustering and prepared analysis reports.

THE POWER OF FORESEE PREDICTION
Accurate predictions are the ultimate proof of a good measurement system. The ForeSee CXA methodology
and causal analytic framework, combined with more than a decade of experience measuring and analyzing
customer experience for some of the world’s largest brands, offer a unique customer experience to satisfied
clients. ForeSee provides reliable measurement based on a scientific cause-and-effect framework that helps
organizations better evaluate decisions, determine the best course of action, and predict financially relevant
future outcomes before any investment is made. We help managers and executives accurately measure
and analyze the customer experience to efficiently optimize customer satisfaction, the ultimate driver of
business growth.

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THE FORESEE CXA METHODOLOGY: WHITE PAPER (DECEMBER 2013)

Elements of the ForeSee Methodology

Objectives

Diagnosis
“How are we performing?”

Prescription
“What should we do?”

Prognosis
“What happens if we do it?”

> Accuracy

> Impact or key-driver analysis

> Prediction of future
financial outcomes

> Calculated within the
context of a complex
cause-and-effect network

> Predictive “what if” tool

> B ased on unstandardized
slopes, not correlation

> Future effects are
comparable across time,
location, or segment

> Reliability
> Precision
Characteristics

> Voice-of-the-customer
(VOC)-based
> Multiple measures,
optimally weighted
> Reduced measurement error
> Reduced confidence intervals
> Unstandardized
performance scores

Benefits

>O
 ptimized with regard to key
management objectives
> Control of multicollinearity
for more reliable
impact estimation

> Accurate

> P rioritizes improvement efforts

> Meaningful

> P rovides impacts that are
additive and comparable
across groups

> Comprehensive
> Comparable

> Quantifies the effects of
changes across multiple nodes

> Allows for more efficient
allocation of resources

> F ocuses on the dynamic
quantification of change
> Increases ability to predict
key financial outcomes before
investing
> Enables fact-based
ROI calculation

ABOUT FORESEE
As a pioneer in customer experience analytics, ForeSee continuously measures satisfaction across customer
touch points and delivers critical insights on where to prioritize improvements for maximum impact. Because
ForeSee’s superior technology and the proven ForeSee CXA methodology connect the customer experience to
the bottom line, executives and managers are able to drive future success by confidently optimizing the efforts
that will achieve business and brand objectives. The result is better business for companies and a better
experience for consumers. Visit us at www.foresee.com for customer experience solutions and original research.