To build customer loyalty, you must be able to accurately measure each customer’s experience, then build on what you’ve done well and correct shortcomings. This requires eliciting meaningful feedback from the customer, which is a tricky matter. Asking endless questions of the customer (the normal method) produces survey fatigue and mechanical answers. In most cases, a customer will only complete a long survey if there’s an incentive to do so, or if he or she has an axe to grind. Thus, most long surveys produce a good deal of corrupt and useless data.
By far, my favorite system of measuring customer loyalty is the Net Promoter Score devised by Fred Reichheld and outlined in his 2006 book The Ultimate Question. After years of researching customer retention measurement, Reichheld concluded that the essence of customer loyalty could be gleaned from one question: “How likely is it that you would recommend this company to a friend or colleague?”
It’s a simple, short question, but it implicitly requires the answerer to put her or his reputation on the line in evaluating a business. Customers answer on a 0-to-10 scale. Those answering nine or 10 are considered promoters, or loyal enthusiasts. Those answering 7-8 are passives, and those answering 6 or lower are detractors: as Reichheld puts it, “unhappy customers trapped in a bad relationship.” A business calculates its Net Promoter Score simply by subtracting its percentage of detractors from its percentage of promoters: P – D = NPS.
One of the great virtues of the Net Promoter Score is that it enables a company to easily distinguish “good profits”—money earned from delighted, brand-loyal customers—from “bad profits,” which might be derived from something like an industry monopoly. As examples, Harley-Davidson, which enjoys a worldwide and somewhat fanatical base of brand loyalists, has at times enjoyed a Net Promoter Score as high as 80 percent. By contrast, Comcast, which is often the only game in town for cable customers, has scored as low as -35 percent.
A shortcoming of the simple Net Promoter Score is that it is not actionable. A company has passives—probably satisfied customers—but how can it turn them into fans? And obviously, if it has many detractors, what is going wrong? Even a company with a high NPS may be thinking “I feel great, but how do I keep this score up?” So how does a company change its NPS numbers for the better?
Happily, Reichheld includes a second question for customers: What’s the main reason for the score you gave? To me, this is the true “ultimate” question. The penultimate question tells us where we stand with a client. But the “Why?” gives us the tools to hone our products, services, and delivery. It tells us how to revisit a relationship with a passive client and potentially covert them from “still shopping around” status into true brand loyalists. And in the worst situations, it can help us rescue a relationship with a detractor.
In my next post, I’ll discuss how I’ve worked with the NPS and its two ultimate questions, if you will, to build better relationships between my own company and its clients and to increase our number of loyal promoters.
Steven Salta is co-founder and CEO of Ascentium, a digital media and interactive marketing agency. Steven has overall responsibility for the agency’s revenue, profitability, customer loyalty, and corporate culture.