By Rick Wartzman and Kelly Tang

One way to judge how satisfied consumers are with a company's products or services is to ask them -- opinions typically gleaned by conducting surveys or convening panels.

But there's another technique that captures customer sentiment, and it has become ever more relevant in our online age: Count clicks.

That's why this year, we're adding a new metric to our measure of corporate effectiveness, which serves as the foundation for the Management Top 250, a ranking published annually since 2017 through a partnership between The Wall Street Journal and Claremont Graduate University's Drucker Institute. Devised by the research firm ROI Rocket, this new metric, a "digital positioning score," looks at the amount of activity a company realizes over time, as compared with its industry peers, across four channels: search, traffic on its website (or sites), social media and any apps it has.

When things are popping online, it's "indicative of how people view a brand," says Rod Fertig, ROI Rocket's chief data officer. "It's predictive of future revenue growth."

The Drucker Institute's model for measuring corporate effectiveness, which now includes 35 metrics in all, is rooted in the core teachings of management scholar and former Wall Street Journal columnist Peter Drucker, who died in 2005. Among them: "To satisfy the customer is the mission and purpose of every business."

In addition to customer satisfaction, the rankings provide insight into four other areas: innovation, social responsibility, employee engagement and development, and financial strength.

Companies are compared in each of these five categories, as well as in their overall effectiveness, through standardized scores with a range of 0 to 100 and a mean of 50. We define "effectiveness" as Drucker did: "doing the right things well."

Bendable Labs, a private firm, works with the institute to perform the calculations and interpret them. In 2024, we analyzed a total of 842 large, publicly traded corporations.

To bring the new metric into the mix, we carefully assessed the digital positioning score to ensure that it correlated well with the other indicators in its category, and that it didn't degrade the statistical relationship between customer satisfaction and overall effectiveness.

Positive buzz

Fertig notes that not all online activity is positive. For instance, when a restaurant chain suffers an E. coli outbreak or an airline has a high-profile accident, people often swarm the internet, causing a spike in the inputs that ROI Rocket tracks.

But such incidents are usually rare and fleeting, according to Fertig, whereas true customer satisfaction spurs people to return again and again to their favorite brands' digital domains. "The positive buzz is more sustainable," Fertig says. It reflects "a loyal customer base."

Target has witnessed this phenomenon. It came in at No. 133 in this year's Drucker rankings, driven to a large degree by a very strong customer-satisfaction score of 59.4 (though the retailer has been losing market share to Walmart and Amazon.com, and its share price plunged last month after it reported another disappointing quarter). "The lines have blurred between physical and digital shopping," says Prat Vemana, Target's chief digital and product officer. "We see physical-plus-digital-plus-social as a connected and immersive ecosystem."

He points out that more than half of those who make a purchase in a Target store have visited the company's app or website the same day. That "shows us how shoppers move fluidly from physical to online and back again," Vemana says.

Of course, what happens online is not only a gauge of customer satisfaction; it can also goose it.

Just ask e.l.f. Beauty, the cosmetics company, which finished at No. 164 in this year's Drucker rankings -- a showing that was propelled by, among other factors, a customer-satisfaction score of 59.7. E.l.f. has been investing heavily to boost its digital presence, including through its Beauty Squad loyalty program, which lets customers earn points for every dollar they spend, as well as for connecting to the company on social media, completing a beauty profile, uploading receipts, playing games and more. The points can then be redeemed for products, special offers, retailer gift cards and cash back.

The Beauty Squad program has some 5.3 million members and is a prominent feature of e.l.f.'s app, which also has a tool that lets customers "try out" makeup products and shades virtually before they buy. When shoppers use the app, "we see higher average order values, they purchase more frequently and have stronger retention rates," says Kory Marchisotto, the chief marketing officer at e.l.f.

"The feedback we get from the community from our digital channels is the most real and real-time we can get," Marchisotto adds. "We have created campaigns, launched products, and changed formulas and packaging based on comments we receive on social and from our Beauty Squad loyalists."

B2B insight

In the Drucker model, the digital positioning score augments data supplied by the American Customer Satisfaction Index, J.D. Power and wRatings. All of that is derived by querying consumers about various aspects of their experience with a company's offerings, including convenience, clarity of product information, whether their expectations around quality were met, and how likely they are to recommend what the company is selling to a friend or colleague.

One drawback with this approach is that it can be difficult to unearth data for companies in the B2B space -- businesses that sell to other businesses, as opposed to individual consumers. Although most big companies conduct their own customer-satisfaction surveys, they tend to guard the results closely, and third-party surveying of corporate buyers can be challenging.

The digital positioning score presents a way around this limitation. In fact, by adding it, we were able to increase the total universe of companies we examined this year by 48 -- all while tightening the criteria for inclusion in the Management Top 250. To be listed, a company now needs three valid indicators in each of the five categories, up from two.

In some ways, the addition of the digital positioning score signals a generational shift, as millennial and Gen-Z buyers advance in their careers. "Digital natives are now becoming decision makers in B2B," says Barbara Winters, a principal analyst at Forrester, which recently forecast that by next year, more than half of large B2B transactions -- those of $1 million or more -- will be processed through digital self-serve channels.

Winters says, however, that even if a customer's interaction begins with their own online research and ends with a purchase made through the vendor's website or marketplace, successful sales often include a human touch along the way. "It's a blend," she says.

The lesson there is clear: When it comes to caring for customers, having great platforms is increasingly important, but having great people always has been -- and always will be -- essential.

Rick Wartzman is co-president and Kelly Tang is chief data scientist at Bendable Labs. They are also both senior research fellows at Claremont Graduate University. They can be reached at reports@wsj.com.

(END) Dow Jones Newswires

December 08, 2024 21:20 ET (02:20 GMT)

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