By Dr. Laura Brooks, VP Research and Business Consulting, Satmetrix
The ability for companies to move beyond measuring satisfaction to
understanding who will recommend them is improving their success. Net Promoter
is more than just the question or the score. It is a discipline that focuses on
creating a customer-centric view. By implementing a Net Promoter discipline
throughout the corporate culture, companies are finding they can increase
positive word of mouth and drive profitable growth.
Every company says customer satisfaction is a top priority.
Who wouldn’t? Satisfied customers are more likely to remain customers versus
disgruntled ones who may jump ship and purchase from a competitor the next time
around.
Is customer satisfaction a good predictor of future customer behavior and
growth? To some extent, it is. But is it enough? I would argue that one needs to
go beyond satisfaction to capture true customer loyalty. Loyalty is what
companies should measure and strive to increase, to help their businesses grow.
Satisfaction and loyalty aren’t the same. Examine the definitions of each from
one dictionary:
Satisfy – to conform to (as specifications) a: Be adequate to (an end
in view) b: To make true by fulfilling a condition
Loyal – unswerving in allegiance: c: Faithful to a cause, ideal,
custom, institution or product
If a customer is satisfied, it doesn’t necessarily mean he or she is loyal.
Satisfaction is about fulfilling promises/expectations; loyalty goes way beyond
that by creating exceptional experiences and long-lasting relationships. There
is a reason why marketers strive to build brand loyalty, not brand satisfaction.
Customer loyalty has become an even more important marketing measurement and
strategy. The reason is word of mouth. When customers are loyal to a company,
product or service, they not only are more likely to purchase from that company
again, but they are more likely to recommend it to others – to openly share
their positive feelings and experiences with others. In today’s world, thanks to
the Internet, they can tell and influence millions of people. That equates to
new customers and revenue. The same holds true, if not more, when customers are
disloyal. Disgruntled customers can share their negative experiences with an
ever-widening audience, jeopardizing a company’s reputation and resulting in
lost revenue.
So how can you measure and increase customer loyalty? Today, many companies are
having success implementing Net Promoter.
Net Promoter
In 2006, Fred Reichheld, Director Emeritus at Bain & Company, published his
third book on customer loyalty titled, “The Ultimate Question: Driving Good
Profits and True Growth.” It has drawn a lot of attention and became a number
one best seller on both the Wall Street Journal and USA Today lists.
The book introduces Net Promoter, which Satmetrix helped develop. At its core,
Net Promoter is a simple way for companies to measure and truly understand how
loyal their customers are by asking one simple question: “How likely are you
to recommend (company, product, service) to a friend or colleague?”
This ‘recommend’ question gets to the heart of the matter in truly understanding
customer loyalty. If customers are willing to put their reputations on the line
and make the effort to tell others about your company, product or service, then
they are demonstrating their utmost loyalty toward your company. The Net
Promoter metric – based on this core question – has been linked both to
individual customer behaviors (e. g., spend and repurchase) as well as word of
mouth.
The book also suggests asking customers ‘why’ they provided their particular
rating. This enables you to understand exactly what opportunities and obstacles
are in front of you. For example, one company that recently presented at our Net
Promoter conference in Miami discovered that a service fee it charged was
frustrating customers and impacting their loyalty. Even though the company
received very high satisfaction scores, these additional charges were eroding
loyalty over time. As a result, the company decided to rebate the charges to
enhance customer loyalty.
The Net Promoter Score
When surveying its customers, companies that follow the Net Promoter methodology
use an 11-point scale on which customers are asked to rank their willingness to
recommend (0 being not at all likely, 10 being extremely likely). Once the data
is collected, customers are segmented into three loyalty categories:
- Promoters (scores of 9 and 10), who are enthusiastic customers that will keep buying and who refer others
- Passives (scores of 7 and 8), who are satisfied, but unenthusiastic customers that may consider competitive offerings
- Detractors (scores from 0 to 6), who are unhappy customers that are less likely to buy from you again and may spread negative word of mouth
By segmenting customers into these three categories, companies are able to
calculate their Net Promoter Score (NPS). This is done by taking the percentage
of Promoters (those who are highly likely to recommend your company, products or
services) and subtracting the percentage who are Detractors (those who are less
likely to recommend your company, products or services).
NPS = % of Promoters – % of Detractors
NPS is a means to measure and gauge customer loyalty
performance over time. It also serves as an indicator of growth. There have been
several studies and analyses showing that companies with higher NPS than its
competitors achieve higher long-term profitable growth. In some studies, NPS
leaders have outgrown its competitors by an average of 2.5 times.
What’s a good Net Promoter score? That depends on the type of industry a company
is in. Customer expectations vary depending on the industry segment. For
example, consumers of financial service products have higher expectations than
they have of telecommunication providers. In some industries, there are
companies that score below zero, which means they are at great risk of losing
business through negative word of mouth. In others, where customer service and
loyalty are a premium, scores are higher and new customers have been attracted
by positive word of mouth from Promoters.
Regardless of industry, the most important thing a company can do is to take
action to move the NPS needle higher. That’s where the true value of Net
Promoter comes into play.
More Than a Question/Score
Net Promoter is more than just the question or the score. It is a discipline
that enables companies to profitably grow by focusing on their customers. This
was no more evident than at one of our recent Net Promoter conferences.
During the two-day event, numerous companies such as GE, Symantec, LEGO, Intuit
and eBay presented cases on how their companies are achieving success with Net
Promoter. Many of them explained how Net Promoter creates a customer-centric
culture, empowering their employees to achieve a higher NPS. Some speakers
talked about how customer feedback has helped them identify specific needs for
improvement in areas such as operations, marketing, product development and
customer service. And, several provided details about how they integrate
customer feedback into day-to-day activities and provide employees with the
information they need, when they need it, to improve the customer experience.
Though the companies that presented apply varying techniques to act on customer
feedback, there were some consistent themes and words of wisdom I’d like to
share:
- Executive buy-in and employee accountability are a must
- Capturing trustworthy data boils down to asking the right questions in the right way, to the right customers, at the right time
- Measuring and understanding customer experience across all touch points enables companies to pinpoint areas and opportunities for improvement
- Segmenting customers into categories (Promoters, Passives, Detractors) enables employees across the organization (sales, service, marketing, products) to rapidly respond
- Getting timely feedback to employees and empowering them to improve/enhance the customer experience is key
Springboard for Marketing
Knowing who your Promoters are through Net Promoter also provides the foundation
for word of mouth.
Many companies are building their own online communities to engage with their
customers and maintain an ongoing dialogue with them. In contrast to general
online communities such as Facebook, MySpace, etc., these brand communities
provide a more personalized relationship and customer experience to improve
brand loyalty with their Promoters, as well as move Detractors and Passives to
Promoters.
There are many benefits associated with this strategy. First, it allows
companies to hear what customers like or dislike and to understand the
root-causes driving loyalty. Second, it allows companies to build relationships
with their customers through continuous dialog and personalized communications.
Some even use their communities as a means of involving customers in the
development of new products or services. For example, LEGO developed and
launched several new products based on ideas generated by its community members.
One of these products sold out an entire year of production in only five weeks.
Brand communities also serve as a springboard for word of mouth. By engaging
your community members and communicating back to them that you listen and act on
their feedback, you create enthusiastic Promoters of your brand. Brand community
members are often active in other communities, increasing the opportunity to
refer. The key is to inspire them to recommend your products and services, which
can involve a number of different tactics such as exclusive product offers,
special discounts and sneak previews or exclusive content.
Whatever the tactic, the foundation for increasing loyalty through an online
brand community stays the same: Closing the loop. Listening to and engaging with
customers becomes much more sustainable and powerful if your company can show
members how their engagement effected decisions or outcomes.
Conclusion
What makes Net Promoter so valuable is that it is an open standard that all
companies, large or small, B2C or B2B, can apply to their organizations. It
creates an organizational discipline and culture for the entire company to rally
around. It establishes measurement and accountability to gauge improvement. It
provides valuable customer insight and feedback to make improvements and enhance
the customer experience. It can serve as the foundation to activate positive
word of mouth. And, it is an indicator of customer retention, customer
acquisition through word of mouth and overall profitable growth.
Dr. Laura Brooks is Vice President of Research and Business
Consulting at Satmetrix, a software and services company focused on customer
experience management. She has extensive experience working with clients in the
areas of employee opinion surveys, organizational development, customer
satisfaction, management development, team building, quality, job evaluation and
compensation. Prior to joining Satmetrix, Laura worked as a Project Director and
Manager for several consulting firms that specialized in statistical and
psychological tools for measuring customer satisfaction and employee
performance. She has published on Inter-Rater Reliability and Validity in
Behavioral Research Methods in Computers and also participated in the
survey-specific portion of the Malcolm Baldrige Award. For article feedback,
contact Laura at laura.brooks@satmetrix.com.
 
|
