A Financial Case for Loyalty Management

It sounds fairly intuitive that if a service provider consistently meets customer expectations, then it will prosper financially. Industry Standard Research examined this relationship using four years of service provider performance data paired with share price for five leading CROs. The conclusion: There exists a very strong relationship between a CRO's service quality, as measured by ISR's Service Variability Index (SVI™), and its financial performance as measured by share price. Readers will recall that ISR created the SVI in 2009 as a representation of a service provider's consistency in meeting customer expectations.

On average service providers have improved their delivery consistency over the past four years.

ISR analyzed the SVI data from 2009, 2010, 2011, and 2012 alongside each company's closing stock price on the first day of trading in that year. This analysis includes 816 sponsor ratings of encounters with Covance, ICON, Kendle (to 2011), PAREXEL, and PPD. Both the SVI and the share price were indexed (100), using 2009 as the base year.

Two conclusions of note: Overall, these service providers have, on average, improved their delivery consistency over the past four years and with an R2 value of 70%, the SVI has a very strong relationship to the average company share price.

—Industry Standard Research, www.ISRreports.com.