Brands frequently seek feedback from their customers asking how satisfied they are with their product or service, but satisfied customers are not necessarily loyal customers.
A better measurement of customer loyalty is the Net Promoter Score® (NPS). Also known as the Ultimate Question, the NPS question asks: “How likely are you to recommend [your company] to a friend or colleague?”
When implemented correctly, this single question can convert unhappy customers into lifelong customers, creating a consistent retention engine. Here’s how to use NPS® data to rev up this engine.
The Net Promoter Score
Let’s begin by better understanding the NPS® question.
Fred Reichheld, a Harvard Business School graduate, invented and began using the Net Promoter Score® in 2003 as part of his work with the Bain & Company consulting firm.
The answer to this loyalty question — “How likely are you to recommend [your company] to a friend or colleague?”– is a good indicator of whether your customers are likely to make future purchases and refer your product or service.
Answers are rated on an 11-point continuum ranging from “Not at all likely”to “Very Likely”.
Responses are categorized as Promoters, Passives or Detractors.
- Promoters (score 9-10) are loyal enthusiasts who will keep buying and refer others, fueling growth.
- Passives (score 7-8) are satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
- Detractors (score 0-6) are unhappy customers who can damage your brand and impede growth through negative word-of-mouth
To get from these numbers to the actual NPS® score, simply take the total percentage of Promoters and subtract the percentage of Detractors.
(Our NPS® Guide dives deeper into the background and specifics of NPS if you’re looking for more detail.)
Retaining Customers With Your Net Promoter Score
To grow your business you need to acquire new customers, but it’s even more important to retain your existing ones. It is, after all, far more cost effective to sell to your current customers than new ones.
Consider these statistics:
- It costs 5x more to acquire a new customer than retain one. (Source: Lee Resource Inc.)
- The probability of selling to an existing customer is 60 – 70% while the probability of selling to a new prospect is 5-20%. (Source: Marketing Metrics)
If those stats aren’t convincing enough, consider this one from Emmet and Mark Murphy’s study, “Leading On The Edge of Chaos”:
- A 2% increase in customer retention has the same effect as decreasing costs by 10%
Benefit From Negative Feedback
The truth is that we are far more likely to hear from unhappy customers than happy ones.
Typically, businesses hear from only 4% of their dissatisfied customers. The majority of dissatisfied customers just go away and never come back. (Source: “Understanding Customers” by Ruby Newell-Legner)
But with NPS® you can benefit from the dissatisfied customers that you do hear from by listening and acting on their feedback. Don’t make the mistake that many businesses make by not following up with the customer to let them know what actions you have taken to correct the situation.
Customers remember their last experience.
Following up after a bad customer experience is a golden opportunity where you can turn a negative experience into a positive one and possibly create some word of mouth marketing. Those who have their problems resolved are likely tell 4-6 people about their positive experience.
Sounds great. But before you can address their concerns you need to find out why these customers are dissatisfied. That’s where Net Promoter Score® questions can help.
The Ultimate Question
Always follow up your NP®S question with a qualitative question (an open text box that lets customers tell your their feedback in their own words) so you can learn where and how to improve your customer’s experience.
In his book, The Ultimate Question 2.0, Fred Reicheld states:
At the heart of the Net Promoter System is fast-cycle closed-loop feedback. This requires support from a robust operational infrastructure that can:
- Trigger feedback requests.
- Capture the response.
- Send them to the right employees.
- Track follow-up.
- Support data-mining and insight generation.
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Trigger the Feedback Loop
If you are using a CRM or marketing automation system you can trigger feedback based on an event such as a sales or support call. Simply create an automated event email that asks customers about their most recent experience and include a survey link in the email to collect feedback.
Capture Responses and Route Feedback
Advanced survey tools, such as SurveyGizmo, have an NPS® question type that automatically collects responses and calculates your score.
You can also set up an action that notifies your service team when you get a response that meets certain criteria. Maybe you want to personally speak with every single detractor. That would mean anytime someone provides you with a low score an email or CRM action should fire that notifies a team member to take action.
You can also route them back to your CRM or another party tool, such as a ticketing system, for tracking and follow up.
Track and Follow-up
Once the customer issue has been identified and addressed, you need to follow up with the customer to let them know what action(s) you’re taking.
This closes the feedback loop. Track your Net Promoter Score® consistently over time to see that the changes you made are having a positive long-term result.
Creating a Customer Retention Engine
Collecting customer feedback is just the first step to retaining customers. Acting on the feedback is the key to keeping lifelong customers.
Compechek Market Research has automated this process to avoid the paralysis that can come from having too few resources or too little time to act on data. They have developed a customer retention program called Ask, Listen, Retain (ALR), which uses the NPS® data and creates an actionable dashboard.
Compechek knows that the key to retaining customers is to understand the experience the customer had with the product or service to make the data actionable. They use a comment box below the NPS® questions that asks for more information.
This is how the ALR process works.
Ask: “What is the primary reason for the score you just gave us?”
Again, the answer to this qualitative question is key to turning a bad situation into a good one.
Listen to the feedback. Take the feedback from this question seriously. Learn from it and act on it.
And don’t forget to close the feedback loop by letting your customers know that you have heard them and are taking actions to correct the problem.
Retain customers. Closing the feedback loop builds customer trust. It shows your customers that you care. This will leave a positive lasting impression that your customers will remember and share.
The ALR system works because it:
- Rapidly addresses critical situations
- Holds personnel accountable
- Makes it transparent who is responsible
The ALR tool allows customers to rapidly address critical situations. The reporting dashboard turns customer opinions into actionable items and holds the appropriate personnel accountable for resolving the issue and notifying customers.
Because the tool makes it transparent who is assigned to the issue, it is easy to hold people accountable. A diary logs actions taken to resolve disengaged clients.
The data can be rolled up or drilled down so that it can be reported in a format that makes it easy to disseminate amongst all levels of management. A detailed report of customer-related issues allows management to make strategic decisions to further improve customer service and brand loyalty.
Earn Lifelong Customers
The NPS® question is a great way to measure customer loyalty, but a score won’t increase customer retention. You need to act on the data and close the feedback loop.
Regardless of which tools you are using to collect and track customer satisfaction, you need to show value, trust and transparency in order to retain customers.
Start collecting feedback so you know where you need to make improvements. Be transparent and admit mistakes. This will build customer trust.
Show your customers that you value them by acting on the data. Impress them by following up to close the feedback loop. That is how you retain customers, and create brand loyalty where your customers market for you!