Corporate America has begun to understand the importance of customer loyalty — and its resulting customer-retention, share-of-wallet and customer-referral benefits. As a result, Net Promoter Score (NPS) tools have popped up all over the place.
A Net Promoter Score is a market-research metric that is based on a single question to your customers:
“On a scale of 1-10, how likely are you to recommend our product/service to another person?”
The company’s NPS then is calculated by subtracting the percentage of detractors (6 or lower) from the percentage of promoters (9 or 10). A score can range from -100 to +100, with anything above 0 considered positive.
The simplicity and elegance of the model is both a blessing and a trap. Like all business models, some companies do this well, and others not so well. We would like to help distributors apply this model better.
Here are the traps to avoid when implementing an NPS program.
No clear objective for why the company is implementing an NPS program
An objective for an NPS program should always include the following:
- To gain an understanding of the loyalty of our customers
- To understand our customer’s perceptions of their experience with you
- To understand how loyalty is influenced by the customer’s experiences with you (both positively and negatively)
NPS is about understanding the customer’s perspective and using that understanding to improve the customer experience. It is not about executing the survey in a way that gives you the highest possible score.
Overdependence on the score
So many things can go awry when a company decides to execute an NPS survey. If they consider a high initial score the goal of the survey, it is tempting to attribute too much value to the NPS score.
While a relatively simple calculation, nuances can be missed. For example, take two businesses with an identical NPS – let’s use 25 for this illustration.
- Company A has 55% promoters, 5% passives (rank of 7 or 8), and 30% detractors.
- Company B has 25% promoters, 75% passive, and 0% detractors.
Two businesses with the same score, but very different relationships with its customers.
Treating NPS as an event
If a company is looking at an NPS survey as a one-time event to be run again when the management team has time (these companies rarely find the time to rerun this), the results will have little to no impact.
NPS is a metric that needs a basis for comparison – to other businesses in your industry, to your previous scores or its relationship with other key metrics in your business. You want to increase the number of promoters over time and reduce the number of detractors.
Letting bias in
Here is an experience that I would guess at least some of you have had. You just bought a new car. The salesperson gives you a short survey to fill out (intended to get your perception of the customer experience).
He prefaces this by saying: “It is important that I get all 5s on this survey (the survey has a 1 to 5 scale). If you are going to give me something less than a 5, please let me know so that I can correct it right now.”
The salesperson is motivated (maybe financially incentivized) to get all 5s in the survey. The customer feels pressured to provide a 5 score for all the survey questions. The dealership and manufacturer get no candid and honest feedback and lose the opportunity to identify improvements to their selling and delivery processes. All of this is lost in the desire to get a good score.
When executing an NPS or customer loyalty survey, be careful how you gather the data:
- Ensure that customers maintain their anonymity.
- Make sure your process does not have customers filling out a survey in the presence of a salesperson.
- Do not incentivize salespeople on individual customer NPS scores.
Not getting at drivers of loyalty
A customer’s willingness to refer friends and associates is a strong indicator of their experience and their relationship with your company. It is important to understand the drivers of that loyalty– what are the elements of the business that are most important to them, such as the products, delivery or service. And how do they perceive your performance in in those areas? This provides real data and an economic justification as the basis for selecting and making strategy and process changes in your organization.
Measurement without action
After customers have invested their time to respond to a survey, it is important to tell them and show them that you are listening to their feedback and taking action to improve the customer experience.
It is also important to allow enough time for any business process changes to settle in and make an impact on the customer experience before remeasuring.
Insensitivity to survey fatigue
This is manifested in two ways:
Frequency of surveying – Don’t send too many requests to customers to complete surveys. I once heard an executive at a large manufacturer say that one of their customers’ biggest complaints was that they ask them to complete too many surveys. We all know what happens when customers feel like they are surveyed too often – more non-responders, survey abandonment and carelessly completed surveys.
Burdensome survey length – A market research analyst interviews the management team and drafts the survey instrument. Then he sends it for review to the management team. The manager’s eyes light up.
“As long as we are talking to customers, I would really like the answers to a couple more questions. What’s one more question to a customer taking the survey?”
After the management review, the 12-question survey instrument becomes 30 questions. In today’s market, customers are asked to complete a fair number of surveys. One of the tenets of survey design is make the survey as long as it has to be and as short as it can be to get the job done. Burdensome surveys get abandoned part way through.
Customer loyalty/NPS systems done right can lead to a significantly better customer experience, which leads to better growth and profitability. The ROI is clear. So, get your program in place – set your objectives, execute a well-designed survey, implement change in the business based upon survey results and watch the business grow.
Mark Peck is the founder and former owner and CEO of Apexx Group LLC, a marketing and sales firm that focused on helping its client’s drive breakthrough revenue growth. In his 40 years of management consulting experience, he has helped hundreds of distributors grow their businesses. His sales and marketing models and programs have generated over $1B in incremental sales for his clients.