The Ultimate Question to Predict your Growth
I want to introduce you to a strong predictor of your company's growth: It's called the Net Promoter Score, or NPS. The reason it's so powerful is that it provides an objective measure of customer loyalty, and research has shown that companies with extremely loyal customers tend to grow faster and at a lower cost than competitors, because their customers continue to refer business.
The part I love about the Net Promoter Score is that while it's so effective, its also incredibly simple and cheap to put into place - You just ask your customers to answer this question: "Would you recommend us to a friend or colleague?" This ultimate question is used by Southwest Airlines, Apple, Vanguard and other companies known for customer service. Yet its simplicity means it can be implemented by companies of any size, and there is a ton of free support at the official website, www.netpromoter.com. (I also recommend the book The Ultimate Question shown on the site, which put NPS on the radar.)
I've been working with the Net Promoter Score for about 4 years now. To avoid bias, I find the question is best asked through an online survey tool so customers feel they can respond more honestly, versus having a representative asking the question by phone (it's cheaper too!). I'd suggest reading the material on the website to get an idea of how often to ask the question for your company, but if you have a decent size customer base, taking a representative sample each quarter to get an indication of where you stand is a good rule of thumb. You don't want to bug the same customers too often.
The Ultimate Question is asked with an accompanying 10-point scale, with 10 representing the highest value. Those rating your company a 8, 9 or a 10 are considered "Promoters", while those rating your company a 0, 1 or a 2 are considered "Detractors". (The original version uses a 7 point scale, but some consider the 10-point scale to be a more effective predictor.)
4 gave a score of 10 = 4%
9 gave a score of 9 = 9%
11 gave a score of 8 = 11%
14 gave a score of 7 = 14%
13 gave a score of 6 = 13%
16 gave a score of 5 = 16%
12 gave a score of 4 = 12%
10 gave a score of 3 = 10%
4 gave a score of 2 = 4%
4 gave a score of 1 = 4%
3 gave a score of 0 = 3%
Your % Promoters would be 11% + 9% + 4%, or 24%
Your % Detractors would be 3% + 4% + 4%, or 11%
24% - 11% leaves you with a NPS of 13%.
Looking at the table above, you can see that the majority of customers neither love you or hate you, they are kind of neutral. This is risky, as detractors and neutrals are doing nothing to help your business grow, and are likely to leave with just a little push from you (any little thing goes wrong), or pull from a competitor (like a tiny pricing incentive).
The goal of the NPS, then, is to drive more of your neutrals and detractors into the promoter camp. You want to get this score as close to 100% as possible - meaning 100% of your customers are promoters. Of course getting to 100% is near impossible, but be encouraged that there are companies with scores in the 70s and even 80s - meaning 70% or 80% of their customers would recommend them to someone else. Imagine having that kind of loyalty!
Don't be dismayed if your first run at this score ends up with a low result like the 13% in the example above. The very first time this was implemented at a company I worked with we only scored an NPS of 14%, but within 7 months we got it above 50%, a sizable jump. Remember the first run is nothing more than creating a benchmark, while at the same time it provides a reality check that should spur you into action. This is what makes the NPS so effective - If your company then becomes devoted to putting programs in place around driving your score up, this means you become extremely customer service focused, helping you grow as well as having a much better shot at withstanding downturns.
The most difficult part of conducting the NPS is getting customers to actually respond to the survey. If you end up with a low percentage of customers responding, it is safest to assume you have many more detractors and neutrals than the numbers represent. Otherwise you may be lulled into thinking your loyalty is much higher than it is, which prevents you from taking the steps to forge a closer relationship with your customers. There are some other nuances that can help you investigate where you're falling down on the job, which you'll find on their website.
I'd also like to point out the discussion on the Net Promoter website concerning "good profits" and "bad profits" that your team should also consider. Normally one wouldn't think there is any such thing as "bad" profits, and it's interesting that the industries we tend to like the least are the biggest users of them. Generally speaking, nickel and diming customers is considered bad practice versus having simple, transparent, predictable pricing.
I hope you'll take advantage of this simple opportunity to drive a customer-focused company. If you do put the Net Promoter Score into action, please let me know what you learn!
The part I love about the Net Promoter Score is that while it's so effective, its also incredibly simple and cheap to put into place - You just ask your customers to answer this question: "Would you recommend us to a friend or colleague?" This ultimate question is used by Southwest Airlines, Apple, Vanguard and other companies known for customer service. Yet its simplicity means it can be implemented by companies of any size, and there is a ton of free support at the official website, www.netpromoter.com. (I also recommend the book The Ultimate Question shown on the site, which put NPS on the radar.)
I've been working with the Net Promoter Score for about 4 years now. To avoid bias, I find the question is best asked through an online survey tool so customers feel they can respond more honestly, versus having a representative asking the question by phone (it's cheaper too!). I'd suggest reading the material on the website to get an idea of how often to ask the question for your company, but if you have a decent size customer base, taking a representative sample each quarter to get an indication of where you stand is a good rule of thumb. You don't want to bug the same customers too often.
The Ultimate Question is asked with an accompanying 10-point scale, with 10 representing the highest value. Those rating your company a 8, 9 or a 10 are considered "Promoters", while those rating your company a 0, 1 or a 2 are considered "Detractors". (The original version uses a 7 point scale, but some consider the 10-point scale to be a more effective predictor.)
To calculate your company's Net Promoter Score (NPS), you just take the percentage of customers
who are Promoters, and
subtract the percentage who are Detractors. The equation below shows it in a nutshell:
% of Promoters - % of Detractors = Net Promoter Score (NPS)
As an example, say you have scores from 100 customers that look like this:4 gave a score of 10 = 4%
9 gave a score of 9 = 9%
11 gave a score of 8 = 11%
14 gave a score of 7 = 14%
13 gave a score of 6 = 13%
16 gave a score of 5 = 16%
12 gave a score of 4 = 12%
10 gave a score of 3 = 10%
4 gave a score of 2 = 4%
4 gave a score of 1 = 4%
3 gave a score of 0 = 3%
Your % Promoters would be 11% + 9% + 4%, or 24%
Your % Detractors would be 3% + 4% + 4%, or 11%
24% - 11% leaves you with a NPS of 13%.
Looking at the table above, you can see that the majority of customers neither love you or hate you, they are kind of neutral. This is risky, as detractors and neutrals are doing nothing to help your business grow, and are likely to leave with just a little push from you (any little thing goes wrong), or pull from a competitor (like a tiny pricing incentive).
The goal of the NPS, then, is to drive more of your neutrals and detractors into the promoter camp. You want to get this score as close to 100% as possible - meaning 100% of your customers are promoters. Of course getting to 100% is near impossible, but be encouraged that there are companies with scores in the 70s and even 80s - meaning 70% or 80% of their customers would recommend them to someone else. Imagine having that kind of loyalty!
Don't be dismayed if your first run at this score ends up with a low result like the 13% in the example above. The very first time this was implemented at a company I worked with we only scored an NPS of 14%, but within 7 months we got it above 50%, a sizable jump. Remember the first run is nothing more than creating a benchmark, while at the same time it provides a reality check that should spur you into action. This is what makes the NPS so effective - If your company then becomes devoted to putting programs in place around driving your score up, this means you become extremely customer service focused, helping you grow as well as having a much better shot at withstanding downturns.
The most difficult part of conducting the NPS is getting customers to actually respond to the survey. If you end up with a low percentage of customers responding, it is safest to assume you have many more detractors and neutrals than the numbers represent. Otherwise you may be lulled into thinking your loyalty is much higher than it is, which prevents you from taking the steps to forge a closer relationship with your customers. There are some other nuances that can help you investigate where you're falling down on the job, which you'll find on their website.
I'd also like to point out the discussion on the Net Promoter website concerning "good profits" and "bad profits" that your team should also consider. Normally one wouldn't think there is any such thing as "bad" profits, and it's interesting that the industries we tend to like the least are the biggest users of them. Generally speaking, nickel and diming customers is considered bad practice versus having simple, transparent, predictable pricing.
I hope you'll take advantage of this simple opportunity to drive a customer-focused company. If you do put the Net Promoter Score into action, please let me know what you learn!
This sounds intriguing. I recently got asked this question by my brokeage house. It was followed by a few other questions, which basically asked the same exact question, but put something along the lines of:
"Based on our Customer Service, would you recommend us to a friend"? Or "Based on our website trading capability, would you recommend us to a friend?"
I assume they are trying to determine where their weaknesses are under this program.
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Yes, that is how you dive into specific areas of your company. When applying this secondary level of questions, you should really keep it to no more than 7 or so as you'll hurt your response rates.
I would personally contact a decent slice of unhappy customers to get the real dirt on what was going on with the company. I'd call around 10 customers a month - it's a great reality check. In fact, several of the customers at Entellium I used to call on who had problems early on have now become friends. As a senior executive, it's easy to get too detached from customers but you need to hear from them how you're doing as a company and what you can improve on - no matter how big the company gets. Not only does it potentially help save an account, but for each customer that's willing to tell you about a problem, you can be sure there are plenty more who experience it but then simply vote with their feet.
The shame is that many companies wait until customer retention is a huge problem before focusing on customer service. They see customer service as a "cost" of doing business, and spend their time cutting these costs to the bone. Take Sprint for example - As someone who used to work there, it embarrasses me to see what the executive team let happen to what was once a stellar company - Only when they were bleeding customers did the exec team turn their focus to customer retention. Now their reputation is mud - and so is their bottom line. And for good reason.
Natalee
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