This week, we’ll be exploring the idea of customer loyalty and how it can be leveraged to better satisfy your current customers and keep them coming back for more.
Do you have a way of easily identifying your most important customers? It’s not as hard as it sounds – using a framework called Net Promoter, you can easily understand and improve your customer loyalty. Net Promoter is used by companies like Apple, Intuit, and Volusion … and now you can too!
The Net Promoter Score was developed by Fred Reicheld, Bain & Co. and Satmetrix as a simple way to understand customer loyalty. In Reicheld’s book “The Ultimate Question”, he states:
Companies spend lots of time and money on complex tools to assess customer satisfaction. But they’re measuring the wrong thing. The best predictor of top-line growth can usually be captured in a single survey question: Would you recommend this company to a friend? This finding is based on two years of research in which a variety of survey questions were tested by linking the responses with actual customer behavior–purchasing patterns and referrals–and ultimately with company growth. Surprisingly, the most effective question wasn’t about customer satisfaction or even loyalty per se. In most of the industries studied, the percentage of customers enthusiastic enough about a company to refer it to a friend or colleague directly correlated with growth rates among competitors.
To calculate a company’s Net Promoter Score, customers are asked “How likely are you to recommend (company) to a friend or colleague?” on a scale from 0 to 10, with 0 being extremely unlikely and 10 being extremely likely.
Customers who answer 9 and 10 are categorized as Promoters – these are you most loyal customers and generally buy more often, spend more, refer more business, and cost less to serve than any other group of customers. Customers who answer 0 through 6 are categorized as Detractors – these customers generally behave in the exact opposite way as your Promoters. And finally, customers who answer 7 or 8 are categorized as Passives – these customers could go either way.
The goal, of course, is to have more Promoters than Detractors. As such, the Net Promoter Score metric is simply the percentage of Promoters minus the percentage of Detractors. The number can range from -100% to +100%.
Once a company has identified which customers are Promoters and which are Detractors, they can begin crafting strategies to improve their overall customer loyalty by digging in to why Promoters love them and why Detractors don’t.
Getting started with Net Promoter can be easy and inexpensive.
1) Design your survey
There are several free or low cost survey tools that you can find online. Choose your favorite, and create a survey that contains the following two questions:
- How likely are you to recommend (your company) to a friend or colleague? (scale from 0 to 10)
- What did we do to earn that rating? (open text box)
2) Distribute your survey to your customers
One of the easiest ways to get your survey link into the hands of your customers is by including the link in your email newsletter. Make sure to set the expectation that the survey will take less than 5 minutes to complete, and that every response will be read.
3) Analyze your results
Once your survey is complete, it’s time to start looking through your responses. What do Promoters like about you? What do Detractors dislike? Where are their opportunities to improve? During this process, I highly recommend contacting select customers from each group to further understand the feedback they provided.
4) Make a plan
Identify and prioritize a list of 3 to 5 ways that you can create more Promoters and neutralize more Detractors. Commit to specific goals that are actionable, time-based, and measurable.
5) Communicate your progress
As you make improvements based on the feedback you received, communicate your progress back to your customers in your monthly newsletters. When customers know that their feedback is acted on it creates goodwill and loyalty.
Repeat this process at least once per year, if not more often. Make it a regular part of how you do business.
Net Promoter is a very powerful framework, and this article just scratched the surface. However, it should give you the foundation you need to get your program up and running in no time at all.
- David Mitzenmacher, Chief Customer Officer
What do you think of the Net Promoter Score model? Are you using this or a different type of model? How do you quantify customer loyalty? Share your thoughts below!