The NCSI-UK uses customer interviews as input to a multi-equation econometric model developed at the University of Michigan's Ross School of Business for the American Customer Satisfaction Index (ACSI). The ACSI model embeds customer satisfaction within a series of cause-and-effect relationships. In the model, indices for the drivers of customer satisfaction are on the left side (customer expectations, perceived quality, and perceived value), customer satisfaction (NCSI) is in the centre, and the outcomes of customer satisfaction are on the right side (customer complaints and customer loyalty, including customer retention and price tolerance).
The indices (shown in the diagram below) are multivariable components measured by several questions that are weighted within the model. The questions assess customer evaluations of the determinants of each index. Indices are reported on a 0 to 100 scale. The survey and modelling methodology quantifies the strength of the effect of the index on the left to the one to which the arrow points on the right. These arrows represent "impacts." The model is self-weighting to maximize the explanation of customer satisfaction (NCSI) on customer loyalty. Looking at the indices and impacts, users can determine which drivers of satisfaction, if improved, would have the most effect on customer loyalty.
Customer expectations is a measure of the customer's anticipation of the quality of a company's products or services. Expectations represent both prior consumption experience, which includes some non-experiential information like advertising and word-of-mouth, and a forecast of the company's ability to deliver quality in the future.
Perceived quality is a measure of the customer's evaluation via recent consumption experience of the quality of a company's products or services. Quality is measured in terms of both customization, which is the degree to which a product or service meets the customer's individual needs, and reliability, which is the frequency with which things go wrong with the product or service.
Perceived value is a measure of quality relative to price paid. Although price (value for money) is often very important to the customer's first purchase, it usually has a somewhat smaller impact on satisfaction for repeat purchases.
Customer complaints are measured as a percentage of respondents who indicate they have complained to a company directly about a product or service within a specified time frame. Satisfaction has a negative relationship with customer complaints, as the more satisfied the customers, the less likely they are to complain.
Customer loyalty is a combination of the customer's professed likelihood to repurchase from the same supplier in the future, and the likelihood to purchase company's products or services at various price points (price tolerance). Customer loyalty is the critical component of the model as it stands as a proxy for profitability.