Customer Loyalty and Employee Engagement
Posts tagged Net Promoter Score
7,960 Footsteps: A Measure of Loyalty
Feb 8th
Customer experience professionals look at loyalty using a broad assortment of metrics. We measure Net Promoter Score, Retention Rate, WOM Mentions, Share of Wallet, Customer Lifetime Value, and countless other indicators that help us to better understand the level of loyalty our customers have towards our companies.
But what about counting footsteps?
I recently attended a training event held in San Francisco, California. The training was held at a Westin Hotel – not a bad hotel by any stretch of the imagination, but it wasn’t a Marriott. (I’ve previously written about the fact that I am a rabid promoter of the Marriott brand of hotels).
Rather than staying at the hotel where the event was held, I instead opted to stay at a Marriott located several blocks away, walking to and from the Westin multiple times each day. This decision cost me about 7,960 additional footsteps over the course of my trip.
As I walked to the event one morning, fighting my way through a sea of tourists as the clouds started to let down a light rain, it occurred to me that this was loyalty economics at their best – that I, as a Promoter of Marriott, had chosen to give them my business even when presented with an alternative that was significantly more convenient.
The business case for customer loyalty is simple: loyal customers will spend more money, buy additional products, refer more business, and share better feedback. When you go the extra step for your best customers, they’ll go the extra 7,960 steps for you.
The Net Promoter System on a Napkin
Jan 25th
Therefore, since brevity is the soul of wit,
And tediousness the limbs and outward flourishes,
I will be brief- William Shakespeare, Hamlet
If brevity is the soul of wit, then simplicity is the soul of inspiring others. It has been my experience that creating a customer-centric revolution within an organization requires the ability to convey your vision as simply as possible. To that end, I thought it would be a fun exercise to attempt to explain the Net Promoter System on a single napkin.
Net Promoter on a Napkin
The end result of this exercise is posted above. Obviously, this illustration is overly simplistic, leaves out some key concepts, and is limited by my poor artistic ability. With all of those caveats, I still found this to be an incredibly worthwhile exercise. The next time you have a complex idea that you must communicate to a broad group, try drawing it out on a napkin first. The limited space will force you to ruthlessly edit out the fluff to let the essence of your idea shine through.
Net Promoter: Are You Playing Not to Lose?
Jan 16th
Playing Not to Lose is a pejorative used in sports to describe a coach, athlete or team who is so paralyzed by the fear of losing that they stop trying to win. All of their attention is focused on avoiding mistakes, causing them to miss opportunities to put points on the board towards a victory.
In my opinion, many companies are also guilty of Playing Not to Lose – by focusing their Net Promoter program exclusively on minimizing Detractors.
Don’t get me wrong – reducing Detractors is vitally important work. After all, having fewer Detractors than Promoters is at the heart of the Net Promoter Score metric.
But if the end goal of your Net Promoter program is simply to avoid Detractors, you don’t have a loyalty program – you have a complaint department. To take full advantage of the Net Promoter growth engine, you must focus on amassing an army of Promoters and then – here’s the important part – energize those Promoters towards taking actions that benefit both themselves and your company.
The following list, while far from exhaustive, contains four ways you can transform your Net Promoter program by playing to win.
Include Promoters in your Close-the-Loop Process
“Closing the Loop” refers to the two-step process of sharing a customer’s feedback with the employee(s) responsible for the experience, and talking directly to the customer to take appropriate action on the feedback provided.
Many companies using the Net Promoter system have a Closed Loop process in place for responding to feedback from Detractors – a vitally important activity. But few companies regularly and systematically close the loop with their Promoters.
Closing the loop with Promoters gives you the opportunity to thank them for their loyalty. No one likes to feel taken for granted, not even your raving fans. Let your Promoters know that you appreciate their feedback and their business. Ask questions to find out what you could be doing to make them even more loyal. Build rapport with your most important customers – your Promoters.
Extending your Closed Loop to include Promoters also has positive benefits on employee engagement. It allows your employees to hear praise, not just complaints. When employees hear first-hand how they have made a positive impact on a customer’s experience with your company, the end result is a more engaged and loyal staff.
Special Benefits for Promoters
American Express (a company of which I am a Promoter) has an advertising campaign that centers around the slogan “Membership Has Its Privileges”. The campaign is effective because it quickly conveys Amex’s value proposition– get an Amex card, and you too can get exclusive perks not available to the general public.
Likewise, being a Promoter of your company should come with privileges. Promoters are customers who engage in long-term economically positive behavior, and as such, are your most valuable customers. Reward them as such.
There are many ways that you can reward your Promoters – exclusive offers, opportunities to participate in focus groups, or simply a hand-written “Thank You” card are all ways that you can help your Promoters know that you appreciate them.
Spark Referrals
By very definition, your Promoters are customers who are extremely likely to recommend you to a friend or colleague. Yet many companies are often hesitant to ask their Promoters to do exactly that – refer new business.
There is no shame in encouraging Promoters to tell others about your company. Platforms like Extole and Amplifinity give your Promoters the tools to share their passion for your company with their friends and colleagues, and allow you to reward your Promoters for referring business. That’s a win-win situation.
Promoter-focused Analytics
Many companies incorporate text analytics and statistical analysis into their Net Promoter program to unlock the information hidden within their customer feedback.
These tools are often used to identify opportunities for improvement – but they can also be used just as effectively to find ways to increase engagement amongst your Promoters. What type of language do your Promoters use to describe your company? What attributes do your Promoters tell you are Critical to Quality? What do your Promoters value?
By understanding the underlying data, you can prioritize actions to further expand the love that your Promoters already have for your company.
The companies that are truly “winning” at Customer Loyalty – companies like Apple, Zappos, and USAA – aren’t simply trying to minimize Detractors. World-class companies are intentional about amassing and energizing an army of Promoters.
Elements of a Successful Net Promoter Survey Invitation
Jun 16th
One of the keys to success for your Net Promoter Score program is generating a high response rate. Unlike many other customer feedback frameworks, Net Promoter is designed to emulate a census, with target response rates of 50% of more.
The are many factors that contribute to your overall response rate, one of which is the execution of your survey invitation. Many new NPS practitioners don’t know where to start when creating a survey invitation. The chart below lists some of the factors that I have used in my survey invitations to generate response rates of up to 68%.
Click on the image to enlarge
Once your Net Promoter program evolves, you will no doubt develop your own best practices that work for your particular business and customer type. This chart is intended to give you a place to start.
3 Easy Steps to Calculating Net Promoter Score
Apr 16th
Calculating your Net Promoter score is easier than you may think. Here’s an illustration that shows the three easy steps you take to calculate your NPS.
Click to enlarge
Calculating Net Promoter Score with Microsoft Excel
Jun 9th
If your Microsoft Excel kung-fu is a little rusty, calculating your Net Promoter Score can seem intimidating. But worry not … it’s a lot easier than you might think!
Let’s say you have an Excel spreadsheet containing all of your survey responses. Each row in your spreadsheet contains a unique response. To make things easy, let’s assume that the answer to the ‘likelihood to recommend’ question is contained in Column A. Your spreadsheet should look a little bit like this example:
Sample Spreadsheet
To calculate your Net Promoter Score, simply paste the following formula into any cell (one caveat: you cannot paste this formula into the same column that contains the answer to your ‘likelihood to recommend’ question or else you will get a circular reference error.)
=ROUNDUP((100*((COUNTIF(A:A,">8")-COUNTIF(A:A,"<7"))/COUNT(A:A))),0)
NPS formula is pasted into cell B&
If the answer to your ‘likelihood to recommend’ question appears in a different column, simply change all instances of A:A the formula above to reference the appropriate column name. So, for example, if the answer to your ‘likelihood to recommend’ question is in Column E, replace all three instances of A:A with E:E as illustrated below:
=ROUNDUP((100*((COUNTIF(E:E,">8")-COUNTIF(E:E,"<7"))/COUNT(E:E))),0)
What is Net Promoter?
Jun 9th
What is Net Promoter?
Net Promoter is a methodology for measuring customer loyalty. It was developed jointly by Fred Reichheld, Bain Consulting and Satmetrix. Net Promoter was first introduced by Reichheld in an HBR article entitled “The One Number You Need to Grow“, and was later the topic of his book “The Ultimate Question“.
At the heart of the methodology is the idea that customer loyalty can best be predicted by the answer to a single question – “How likely are you to recommend (company name) to a friend or colleague?“. Respondents answer on a scale of 0 (not at all likely) to 10 (extremely likely). Based on the response to this question, respondents are categorized as Promoters (9-10), Passives (7-8) or Detractors (0-6). A company’s Net Promoter Score is simply the percentage of Promoters minus the percentage of Detractors.
Net Promoter is unique amongst loyalty measurement systems in several respects:
- Net Promoter calls for a census-approach, advocating sending the survey out to all customers with the ultimate goal being an obscene response rate of >60%. This differs from traditional thinking, which advocates sampling the customer population.
- Net Promoter surveys tend to be very sparse. Reichheld argues that loyalty surveys should consist of just two questions – the “ultimate question”, and a single text response field to capture additional customer comments.
- Proponents of Net Promoter view it as a holistic framework. It is not just a survey – it is a set of business processes that surround the survey. “Closing the loop” with respondents and engaging the entire organization are considered vital components of a successful Net Promoter program.
There is considerable controversy around Net Promoter, much of it based on valid criticism. There is substantial data that indicated that the Ultimate Question may not, in fact, be the ultimate question when it comes to predicting customer loyalty. That said, I’ve found it to be a good-enough metric coupled with an exceptional framework that makes it easy to kickstart a customer-centric revolution within most organizations.
Further Reading
The Ultimate Question by Fred Reichheld
Answering the Ultimate Question by Richard Owen and Laura Brooks, PhD.
A Tale of Bad Profits
May 15th
In his book The Ultimate Question: Driving Good Profits and True Growth, Fred Reichheld introduced the concept of Bad Profits as such:
Too many companies are addicted to bad profits—profits that come at customers’ expense and drain the value out of customer relationships. Whenever a customer feels misled, mistreated, ignored, or coerced, then profits from that customer are bad. Bad profits come from unfair or misleading pricing. Bad profits arise when companies save money by delivering a lousy customer experience. Bad profits are about extracting value from customers, not creating value.
Bad profits often boost short-term earnings; in the long run, they burn out employees and alienate customers. They also undermine growth by creating legions of detractors—customers who sully the firm’s reputation and switch to competitors at the earliest opportunity. Bad profits choke off a company’s best opportunities for true growth, the kind of growth that is both profitable and sustainable.
When people first hear about Bad Profits, they normally nod their heads in agreement. After all, the excerpt above reads like motherhood and apple pie – of course you don’t want to boost short-term earnings at the expense of long term customer value.
But if everyone so readily agrees that Bad Profits are undesirable, why do they exist? I don’t believe that anyone starts out trying to create Bad Profits. They are often born out of good intentions coupled with misaligned priorities and a lack of accountability to the customer.
I was recently chatting with the owner of a local company that repairs office hardware such as copiers, computers and whatnot. We got to talking about customer loyalty, and he mentioned that his company was currently experiencing an exodus of customers. When I probed further, he told me the tale of how a bad profit was threatening the future of his company.
Up until about a year ago, he had three managers in his company – a Sales Manager, a Customer Service Manager who oversaw the Field Technicians, and an Office Manager. Customer loyalty was high and revenues were respectable. Then the Customer Service Manager left the company.
The Sales Manager was well respected, and since he also had employees in the field, the Field Technicians were moved underneath him. On the surface this was a sensible, well intentioned decision.
But the Sales Manager’s priorities, goals and compensation were still highly stacked towards generating additional revenue. With the absence of the Customer Service Manager to hold him accountable, it did not take long for him to begin viewing the Field Technicians as another arm of his sales force.
And so began the installation of a Bad Profit. Field Technicians were quickly required to sell additional products and services when they went on service calls. The thinking was that since they were already in front of the customers, they might as well try to sell something.
At first this appeared to be a brilliant plan. Additional sales started pouring in from the Field Technicians, and the Sales Manager looked pretty clever for a couple quarters. That is, until clients’ service contracts started expiring. Suddenly contracts that they had held for years were not being renewed. Customers began migrating to other providers because their trust, satisfaction and loyalty had been depleted in the name of bad profits. Unfortunately, the company is now so dependent on this revenue that weaning the business off of the Bad Profits will be a long and painful process that may or may not be successful.
The worst part about Bad Profits is that once your company allows them in, they are very difficult to eliminate. To prevent Bad Profits you must constantly stay on guard against misaligned priorities, question ideas that seem too good to be true, and ensure that someone in your organization has the responsibility (and the authority) to act in the best interests of your customers at all times.
How Marriott made me a rabid Promoter for the price of a bottle of water
May 11th
I am, as they say in customer loyalty circles, a Promoter of the Marriott chain of hotels.
Last year alone I spent over 60 nights in Marriott hotels, enough to earn my gold status for the next two years. I’ve referred countless friends and colleagues to various Marriott locations. I even set up a corporate rate for Volusion, which has resulted in well over 100 additional nights. Most hotel chains would love to have a customer like me – and the truth is that Marriott won my lifetime loyalty for the price of a bottle of water.
You see, I wasn’t always a one-hotel chain guy. I used to be equally loyal to three different chains. One night I was staying at a Courtyard by Marriott that I had stayed at twice before. I have a regular routine that I follow – shortly after checking in, I will go to the closest store and pick up a couple bottles of water (depending on how long I am staying) to bring back to the room. This trip was no different.
However, when I returned to my room, I discovered that the room I was in did not have a mini-fridge. It wasn’t that big of a deal, and I had all but forgotten about it until I received Marriott’s post-stay customer survey.
I filled out the survey as I normally did – Marriott routinely earns high marks from me. The last question of the survey asked what they could have done to make my stay more enjoyable. I put a short comment about how I was bummed at the lack of mini-fridge because I like to keep some water in the room.
The next day, I received the following email from the General Manager of the property:
Thanks so much for taking the time to complete our survey regarding your recent stay – we appreciate your feedback. I am glad to see that you enjoyed your stay and I just wanted to respond to your comment about not having a fridge in the room. We have about 24 rooms that do have refrigerators (I see that you had one on your stay before this one) but if one of those rooms is not available, just ask us for one and we will be happy to put one in your room. We value all of our guests, especially our rewards members and want to do everything we can to ensure we provide a great room and a high level of service. I hope the next time you are in town, you will stay with us again and I will ensure you have a fridge in your room.
I was suitably impressed. However, I was really blown away the next time I stayed at that same location. During check-in the desk agent informed me that they had ensured that I had a room with a mini-fridge in it. When I arrived in my room there was a bottle of water already waiting for me with a hand written note from the hotel manager.
One of the most important components of any customer feedback program is the final step – closing the loop. It’s where you let the customer know that you have heard and understood the feedback that they provided. This Marriott GM performed one of the most effective close-the-loop activities I’ve ever seen, and all it took was a simple survey, some basic CRM functionality, and 10 minutes of the manager’s time.
Whenever someone asks about the return on investment for Customer Feedback programs, I always cite this example. The tangible benefit to Marriott has been over 200 nights (around $26,000.00) from me, my company and people I referred. Not too shabby for a $2.00 bottle of water.