Consumer loyalty index of a higher educational institution: application, calculation methodology and factors influencing the indicator

Demidova Anastasiya Vladimirovna PhD in Sociology Director of Personnel and Personnel Policy; Bauman Moscow State Technical University 105005, Russia, Moscow, ul. Second Baumanskaya, 5 p.1, room 380 demidova.av@bmstu.ru

Seiko Andrey Petrovich PhD in Sociology Director of the Center for Analytics and Monitoring; Bauman Moscow State Technical University 105005, Russia, Moscow, ul. Second Baumanskaya, 5, building 1, room 372 cloker@mail.ru.ru

The consumer loyalty index or NPS (Net Promoter Score) has firmly and widely entered the practice of corporate research, and this is not surprising, modern customer-oriented policy actualizes the need to understand and objectify feedback from the social environment with which the company interacts. Moreover, it can be both an external environment and an internal one.

Feedback analysis makes it possible for an organization to respond in a timely manner to a change in attitude towards it from the society interacting with it in one way or another. This relationship can often be latent and, for various reasons, can be elusive without proper study.

The term "loyalty" began to be used in the early 1920s by M. Copeland, who defined a consumer loyal to a brand as a person who buys your brand 100% of the time ^[1].

In the 1950s, D. Aaker, J. Jofmeir, and B. Rice proposed a method for assessing consumer loyalty, called the separation of needs method. It consists in determining the ratio of the frequency of choosing a particular brand to the number of purchases made. For example, a customer buys a certain brand 8 times out of 10, therefore the level of his loyalty to this brand is 80%. According to the author of the proposed method, the customer is considered loyal when the proportion of his repeat purchases is above 67%. The authors of the method called the remaining consumers who have this indicator lower "defectors" ^[2].

In general, there are quite a lot of methods for assessing consumer loyalty and such topics are being discussed quite actively. The works of D. Aaker, F. Reicheld, A. Parasuraman, M. Dixon, K. Hammond, J.J. Lamben, A. Brandt and others are devoted to this issue. In Russian science, authors can be noted: Zh.V. Papazyan, K. Parfenov, V. Pratusevich, V. Radaev, G.L. Bagieva, I.P. Shirochenskaya, A.V. Tsysar and others ^{[3, 4, 5, 6, 7, 8, 9, 10]}.

We will focus on the Consumer Loyalty Index (NPS), proposed in 2003 by Fred Reicheld of Satmetrix and Bain &Company ^[11]. This method is perhaps the most well-known and often used to get feedback.

F.Reicheld points out that NPS is designed to replace time-consuming and voluminous surveys in terms of the number of questions, promptly giving an idea of how satisfied the customer is with the purchased product, service or interaction with the company. Initially, it was suggested to ask only one question: "How ready are you to recommend our product / service to colleagues and friends?" However, later it became clear that it is quite difficult to draw informed conclusions without specifying questions that reveal the deep meaning of the assessment.

Moreover, in various surveys, the NPS is a separate logical block, along with others, allowing for a more complete and accurate picture of the organization's interaction with society.

Figure one shows the classic scale technique for calculating NPS. The methodology used for the calculation is quite simple: how is the scale from 0 to 10 points taken (less often from 1 to 10) and one question is asked with what probability a person will recommend a product, service or organization.

Fig.1. Scale for measuring the consumer loyalty index

Depending on the responses, users are divided into three groups:

Respondents who scored 9-10 points are considered promoters (supporters, loyalists, brand advocates, etc.) - these are customers who like the product/service and they are confidently ready to recommend you to friends and colleagues.

Respondents who scored 7-8 points are called neutrals - some of the buyers who use the product or service, but if they receive a better offer from a competitor, they will go to him.

Respondents who scored from 0 to 6 points are called critics (detractors) – this is a potential source of negative feedback. They won't recommend you. Moreover, they can ruin their reputation by leaving negative reviews. They are dissatisfied with the service or product, so they are guaranteed to find a replacement for you ^[12].

The votes are counted according to a fairly simple formula: the sum of all responses is taken as 100%, the share of promoters is summed up and the share of critics is subtracted from it – this will be the NPS.

Fig.2. The classical formula for calculating the consumer loyalty index

As shown in Figure two, the calculation method is really easy to understand. However, the question arises about the universality of its application for various cases not related to the momentary purchase of goods and the provision of services.

One such example is the evaluation of the consumer loyalty index of students of a higher educational institution.

If we turn to the meaning of the classical methodology for calculating NPS, then it quite understandably works in conditions when the client (consumer) has the opportunity to quickly maneuver in his behavior when interacting with a company, products or services. Namely, if he is not satisfied with the quality of the goods, the services provided, the quality of service, etc., then he can quite easily replace them with competing analogues.

At the same time, changing the object of interest does not involve spending excessive resources or time – for example, switching from one type of coffee to another may be the result of one tasting or advice; to close an account in one bank and open in another today, it is enough just to install an application, etc.

Accordingly, the recorded assessment can be linearly related not only to the probability of a recommendation, but also to the further behavior of individuals. Moreover, due to the presence of competitors and the ease of moving between them, such linearity can directly indicate the further outcome of such a relationship.

In the case of measuring NPS (as well as its various varieties, for example eNPS, because, on the one hand, students are consumers of educational services, and on the other hand, the internal society) of the university, the situation looks different. Changing the place of study (or its termination) is associated with a number of tangible costs: the availability of free places in a competing educational institution, the difficulty or impossibility of transferring to free education at another university, the need to pass the academic difference, the termination of the deferral from the army (for young men), possible criticism from relatives and friends, etc. – all this requires a significant expenditure of effort and money, not to mention time.

By purchasing an item, an individual, as a rule, immediately feels satisfaction from the achieved goal (from the acquisition and the possibility of use). The situation with education is somewhat different — it is stretched over time, lasts months and years. The initial enthusiasm from the admission gradually fades, because there is a feeling (effect) of habituation and the ordinariness of what is happening. During this time, the effect of the initial emotional uplift from admission is leveled, and training turns into a daily routine.

In addition to this, achieving the goal requires overcoming difficulties and exertion; one often has to experience defeats (retakes, academic leave, lack of time for personal matters, problems communicating with teachers, infrastructural inconveniences, etc.). During the year, physical, psychological and emotional fatigue accumulates, which affects mood and assessment.

As confirmation, we can cite data from surveys conducted at the beginning and at the end of the academic year, in which first-year students of Bauman Moscow State Technical University took part (surveys were conducted in October 2022. N= 1735 and June 2023. N=1007 people). According to the results of the NPS survey at the beginning of the academic year In 2022/2023, it was 27.9%, and at the end it was already 17.5%. The reasoning behind the grades (low and neutral) also varies markedly from the beginning to the end of the academic year. By the end of the year, the number of promoters is significantly decreasing (addiction occurs, which we discussed above), and the proportion of neutrals and critics becomes noticeably higher. The main arguments are difficulties in learning and comprehending subjects.

On the other hand, we can cite separate data from the survey of future applicants at the University's Open Day (the survey was conducted in April 2023. N= 1035 people). This event is characterized by high dynamism, positive emotional saturation, a variety of events compressed in a short period of time, the lack of commitment from participants and the presence of clearly relevant information for visitors. It is quite natural that the NPS of this event amounted to 76.6%.

Thus, the question becomes relevant: how straightforward is the extrapolation proposed by Fred Reicheld, the methodology for calculating NPS for an educational institution?

As it is known and mentioned above, the votes of loyalists and critics are taken into account by the NPS. The assignment of respondents to a particular cohort is based on an assessment of the probability with which they will recommend their educational institution. Here, you should pay attention to the essence of the scale with which the calculation is performed: in fact, it represents the percentage probability with which a recommendation will be given.

In our opinion, it requires rethinking the boundaries of how cohorts of assessments should be constructed, this is indicated in Figure three. Namely, it is logical to shift the boundaries of the existing ranges to the left side of the scale.

Fig. 3. The proposed scale for calculating the consumer loyalty index

A kind of "boundary" that clearly separates critics (as an obviously emotionally colored cohort) from other groups is a score of "5" (in other words, a 50% probability) - the normal logical middle of the scale. According to probability theory, the occurrence of an event, in our case recommendations or not recommendations, is equally possible. In other words, there is no certainty that an educational institution will be recommended, and, therefore, recommendations below this limit are unlikely (critical). We see a similar approach in the methodology of 100-point assessment of student academic performance, promoted in our country in a number of universities: marks up to and including 50 points are an unsatisfactory assessment.

Thus, critics' ratings should rather be in the range from 0 to 5 points. Moreover, the very use of zero is also very conditional – as soon as you talk about a product or service, you actualize it in your mind, and therefore, promote (arouse interest).

Grades "6" and "7" should be considered as a neutral position, because they are higher compared to the previous range (in other words, the probability of a recommendation is higher than 50%), but in the range from 6 to 10 (in analogy with the 100-point academic performance scale, these are positive grades, where the range is from 51 up to 75 points – "satisfactory") occupy grassroots positions and, rather, indicate a neutral position with a tendency to loyal. I.e., the position of those who have given such an assessment does not contain a pronounced negative position, but at the same time does not indicate a clear willingness and desire to recommend an educational institution and the services provided by it.

The next cohort with a clear positive assessment is the loyalists – it is logical to limit it to 8-10 points. If the value of the estimates "9" and "10" does not raise questions – they are quite consistent with the usual methodology for calculating NPS, then a separate justification is needed for the assessment of "8".

In fact, "8" is an 80% probability that respondents are ready (agree) with to be ambassadors of your educational institutions and recommend them, and this is a very high indicator, therefore it is not true to classify such people as neutrals. From the point of view of formal logic, a person who in 8 cases out of 10 is ready to give a positive recommendation cannot be called neutral in relation to the object of the recommendation. This is confirmed by the results of the above-mentioned study, during which respondents, often answering unequivocally "I advise", gave a score of "8". In another case, the survey participants explained, "I have already advised my brother and friends. They are coming in" and the score was also "8".

The author of this methodology, Fred Reicheld, does not provide a reasoned explanation of the division of clients into cohorts, as it is happening now, which leaves room for a critical understanding of the methodology. The main message of his explanations is the degree of pleasure that a person gets from making a purchase or receiving a service — as a result, does he get more than he paid or less?

For a highly competitive and "fast" market (where the situation can change quite quickly, under the influence of various, including subtle factors), this technique is quite understandable at the level of everyday logic - the presence of competition, the possibility of a quick and easy transition from one supplier to another, a large number of diverse offers, etc. — this allows you to "shift" the boundaries of the groups are right on the scale, because first of all, the emotional assessment of the acquisition is fixed, which is very influenced by a large number of momentary factors.

In the case of a "slow" market or slow decision-making processes that are stretched over time (which, once again, is academic education), the emotional component loses its weight and does not have such a strong influence on the momentary, final assessment. Thus, it can be argued that there is a "shift" of the boundaries of the assessment groups to the left on the scale, due to the inclusion of the rating "8" among the loyalists and the rating "6" among the neutrals.

In support of the above concept, it should be pointed out that an additional influence on the index of consumer satisfaction is exerted by the factor that students have not yet achieved the final result at the time of assessment - they have not received the service for which they enrolled. And accordingly, they are not fully able to assess how much effort is worthy of the final result.

They are in a situation of overcoming the difficulties mentioned above, respectively, the assessment is influenced by many momentary factors: from the satisfaction of getting a good grade or participating in an interesting event to a conflict situation or the formation of academic arrears. But the most important thing, which is the main element influencing the willingness to recommend or not recommend a university, is the lack of a sense of satisfaction from the opportunity to take advantage of the results of receiving a service. This again distinguishes consumers of goods or services in a "fast" market, who immediately get the desired effect.

On the other hand, there is a category of consumers who have already received a fully appreciated service – graduates. The comparison of their assessment with the assessment of students is very revealing. As a result of the survey of graduates, the NPS index according to the classical methodology was 18.1%, and according to the proposed one – 49.3%. In both cases, the value is quite different from what the students put up.

Confirmation of the above can be seen in the concept proposed at the end of the twentieth century by two American consultants – Joseph Pine and James Gilmore. In 1999, they published the book "The Economics of Impressions", in which they argued that the most important thing for the development of the economy now is the ability and opportunity to bring the buyer the joy of purchasing a product or service ^{[13, p.11]}. At the same time, the purchase itself does not matter much – the emotional accompaniment of everything that happens is appreciated first of all. Satisfaction (joy) from the acquisition (i.e. from admission to university) is high at the initial stage, because the inspiration from overcoming the entrance tests, joining the number of people who were able to prove their worth (intellectual, psychological, etc.) is very high. This is a milestone, a transition to a new stage. In the future, the degree of emotionality decreases, passes into the category of ordinariness, which affects the assessment.

Thus, it is the emotional component that is of primary importance when rating in NPS, this should be taken into account when using this technique. In the case of education (again, as a process stretched over time) it tends to lose intensity, and therefore changes the score.

It is necessary to understand that due to the specifics of training - a long stay within the same organization, the period of study, subjective circumstances (session period, accumulation of fatigue, etc.) – the assessment can be quite different from the really weighted one. In this case, it is advisable to supplement the NPS with more flexible tools, for example, a satisfaction index, which will allow for a more correct presentation of the NPS index calculated for an educational institution.