Customer loyalty is a straightforward concept. Do your customers love you or not? Simple enough. Unfortunately, many marketing professionals overlook this powerful observation. Structural equation models. Multi-item scales. ACSI Scores. Customer research has progressed in sophisticated modeling but has regressed in actionable takeaways.
The Net Promoter Score, popularized by Fred Reichheld in his book, The Ultimate Question: Driving Good Profits and True Growth, is one of the simplest methods of measuring loyalty. Customers are asked, “How likely is it that you would recommend us to a friend or colleague?” and then provide a rating from 0 (“Not at all likely”) to 10 (“Very likely”).
Research backs up common sense. Customers who rate a company high on the “likely” scale bought more goods and services, bought them more often, gave the company a greater share of their wallet, and were more likely to talk up the company to others.
The “likely” scale is deceptively simple and exceptionally useful. Those customers who give your company a 9 or 10 are “promoters” – they are the customers that drive your company’s organic growth. Those who score your company a 0-6 are labeled “detractors” – these customers are the ones that erode your growth. 7’s and 8’s are “passives.” Your company’s NPS is calculated by subtracting the percentage of detractors from the percentage of promoters.
eBoost Consulting typically recommends tracking its client’s NPS every month. More promoters and fewer detractors are a good success measure for any company. This is the basis of profitable growth.
General Electric, HP, and Enterprise-Rent-A-Car are a few of the many companies that have created NPS measurement systems and actively track and report their scores. eBoost Consulting integrates Email Marketing to deliver the survey and inputs the results in structural equation models. The outputs of these models are concise, actionable items that identify points for process improvement. Like Lean Six Sigma, eBoost Consulting advises its clients adopt a Kaizen approach to increase their NPS. Small improvements over the long haul can transform a company’s performance.
The simplicity of NPS can present challenges that should not be ignored. Companies looking to implement a NPS tracking system must spend operational and organizational resources to impact change. Variations in NPS must also be tracked actively and incorporating field observations and/or survey results must be woven in the fabric of the company’s customer service DNA.
Would your customers miss your company if it disappeared tomorrow? With NPS, you can find out what customers really think about you and whether your company is headed to profitable, organic growth.
Pacific Ink | PacificInk.com
Pacific Ink offers premium inkjet and toner cartridges at great value. The company experienced a growth stall in 2007 and had trouble identifying which aspect of the business was the root cause of the issue.
Pacific Ink outsourced much of its customer service to outside vendors and had run operations from a remote factory. With so many key internal operating activities changing, Pacific Ink wanted to determine which area(s) were deficient.
Pacific Ink’s NPS reached levels higher than Staples’ industry peak. Organic growth was substantial compared to industry marks.
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Less than 20 websites around the world have a perfect Google PageRank score of 10 including the World Wide Web Consortium (www.w3.org), the Whitehouse (www.whitehouse.gov), and Facebook (www.facebook.com).