Net Promoter Score and Your Business

During recent coaching sessions, the subject of Net Promoter Score (NPS) came up.  My clients wanted to learn what NPS is and how it might benefit their businesses.  Thus, I thought this is a good time to share a few ideas about NPS. What Is Net Promoter Score? Simply put, NPS is a very simple, direct, relatively easy, and effective method to measure your customer’s (client’s, patient’s) loyalty to your business and the likelihood they will refer your business to others.  In other words, how healthy is your customer experience and your customer relationships?  It was developed by (and a registered trademark of) Fred ReichheldBain & Company, and Satmetrix Systems. Net Promoter Score was introduced by Reichheld in his 2003 Harvard Business Review article “One Number You Need to Grow”.  NPS can be as low as −100 (everybody is a detractor) or as high as +100 (everybody is a promoter).  An NPS that is positive (i.e., higher than zero) is felt to be good, and an NPS of more than 50 is excellent. Why is NPS Important? Time after time in measuring conversion rate (as per the ActionCOACH 5-Way formula) by lead type, it is obvious that referral leads have the highest conversion rate of all lead sources.  Therefore, it is extremely important for your business to deliver a great customer experience (GCE).  A great customer experience will result in a high NPS.  A high NPS will enable your business to have a robust and consistently effective referral system.  The formula is

GCE -> HNPS -> NewCustomers -> Revenue -> Profit

Many successful ActionCOACH clients have achieved completely referral based businesses, with the ability to add as many new loyal customers as they can serve.  An added bonus to a referral based business is lower customer acquisition cost and higher lifetime customer value. How to Develop Your Net Promoter Score At its core, NPS is derived from a single question customer survey.  The question is

On a scale of 0 to 10, how likely is it that you would recommend our company/product/service to a friend, family member or colleague?”

Those who respond with a score of 9 to 10 are called Promoters, and are considered likely to exhibit value-creating behaviors, such as buying more, remaining customers for longer, and making more positive referrals to other potential customers. Those who respond with a score of 0 to 6 are labeled Detractors, and they are believed to be less likely to exhibit the value-creating behaviors. Responses of 7 and 8 are labeled Passives, and their behavior falls in the middle of Promoters and Detractors.  The Net Promoter Score is calculated by subtracting the percentage of customers who are Detractors from the percentage of customers who are Promoters. For purposes of calculating a Net Promoter Score, Passives count towards the total number of respondents, thus decreasing the percentage of detractors and promoters and pushing the net score towards zero. There are a variety of thoughts within the NPS consulting industry as to:
  • When to survey, and how often?
  • Types of surveys – relationship vs. transactional
  • Additional questions (if any), how many, what should they be?
  • How many people should be surveyed?
  • Format of the survey
There are many resources available to enhance your understanding and implementation of NPS.  This blog was based upon a great web article by Christian Reni ( https://customergauge.com/news/how-to-calculate-the-net-promoter-score/ ). If you wish to build your business on a solid foundation of raving fans who are both very loyal and who consistently refer new customers, NPS is an essential part of your toolkit.  My colleagues and I at ActionCOACH can assist you in building and implementing this important business building strategy.

Deliver What Your Customer Values

I am a picky eater; I tend to frequent restaurants with menus that have items and preparations that I like.  In addition, I prefer restaurants that are flexible, and I’ve walked out of more than one after hearing “Sorry, no substitutions.”   My wife, not so much.  She has a very brave palate and is always willing to experiment with the new and unusual.  So imagine our delight when we found a restaurant in the Stockbridge, MA area many years ago that had a menu that appealed to both of us. The restaurant was very successful and always crowded.  We appreciated the reasonable cost, the dependable quality of the food, and the reliable service.  The place was a home run for us and for the other residents and visitors to the Berkshires. A few years went by and for reasons that are unknown to me, the owner hired a new chef who promptly – and completely – changed the menu.  For some people this would be an adventure.  However, to my wife and me – and judging by the decline in customers – this was business suicide.  I know we are not returning when my wife tells me that she has trouble finding something to order.  Gone were our favorite dishes.  Gone were the selections that catered to the bland eater and the daring.  Worse, they instituted a “no substitutions” policy.  We kept checking the restaurant’s website hoping that the owner and chef would come to their senses and revise the menu.  No such luck. As you can probably guess, the restaurant closed within a few months of this change. In business, there are thousands of examples like this.   A successful business sells a product, then ostensibly to entice another customer base, creates a product that is not of value to the targeted new customer and worse, alienates the long time patrons.  Ultimately, the business fails. So, what is the lesson here?  As a business owner, you MUST understand three things about your offering:
  1. You MUST understand what your customers value, not what you value. Oftentimes, they are very different things.
  2. You MUST understand all aspects of your offering, not just the obvious. For example, the obvious offering of a restaurant is the food.  Patrons also value the service, flexibility, décor, parking, dress code, cleanliness, consistency, reputation and variety, to mention a few.
  3. You MUST understand that every customer will value something different from other customers. Joe will value the food, but Mary will value the ambiance. And they seldom value the same aspects that you value.
Failure to fully understand your customer’s value proposition and consistently deliver that value is a recipe for disaster.  Yes, it’s important to grow, to improve, and to innovate your product base to give people options and to attract new customers.  However, if you consistently deliver great value to your customers you will be blessed with many raving fans. If you would like to increase the value your company offers to your customers to accelerate your growth, my colleagues and I at ActionCOACH are ready and able to assist you.

2016 Business Excellence Forum – Blinding Flashes of the Obvious Part 2

More BFOs from Day 1 of the 2016 BEF, Troy Hazard continued. Troy told a story about car salesman who had sold him a luxury car in Australia where he lived before moving to the USA a few years ago. The salesman asked how often he traded cars in, Troy answered about every 4 years. The salesman began contacting Troy about every 6 to 8 weeks, by mail, email, telephone, you name it – when Troy moved to USA permanently the salesman continued kept in touch.  After about 4 years the salesman called to say it’s time for a new car.  Troy told the salesman that he permanently moved to US and salesman continued to stay in touch.  On a family visit back to AU, Troy dropped into the dealer and asked the salesman why he continued to stay in touch, answer … “I sold more than 100 cars to your friends.”  The business question to ask yourself is; How is my business staying in touch with our customers, members, advocates and raving fans? (See the following section – day one BFOs from Brad Sugars – The Ladder of Customer Loyalty). Next, Troy urged us to always have absolute clarity of where the money/profit comes from.  His example was an electrician who repositioned to being a Total Energy Solution. Troy also told us about one of his companies that had five salesmen.  Following a typical bell curve, at one end of the curve was a salesman who was only doing about $60,000 in commissions and was way below quota.  In the middle were three salesmen at or slightly above quota, earning $100,000 to $125,000 in commission income.  At the other end of the bell curve was a salesman who was pulling in about $275,000 in commissions.  Troy then threw a trick question at us, asking who he fired.  Most guessed the $60K salesman.  In fact he fired the $275K salesman, explaining that he was disruptive, not a team player, stealing leads from the others, didn’t embrace the company culture, etc.  The business question here is who on your team is not fully engaged with the mission/vision/culture of your business?  By the way, he also fired the 60K salesman. The final BFO from Troy Hazard was very simple; Change or Die, one change at a time!   Our next speaker was Brad Sugars, the founder and chairman of ActionCOACH.  Brad opened with the statement that “Profit comes from REPEAT BUSINESS.” Next Brad presented the ActionCOACH Ladder of Customer Loyalty. IMG_7935 small The first rung of the ladder is Suspect – a target or an ideal customer.

Suspects are moved up the ladder to Prospect via marketing.  Prospects have taken some action; responded to an ad, visited your store, called to ask buying questions, etc.  The BFO here relates to the ActionCOACH 5 Way Formula, “if the Conversion Rate is low, the Target is WRONG!”Prospects are moved up the ladder via sales to Shopper. Shoppers have made their first purchase.  The BFO that Brad mentioned here is “the 2nd purchase is 10 times more important than subsequent purchases.”

Shoppers become Customers when they make that all important second purchase.  This is where you begin to build a relationship with your customer.  Have a consistent point of contact and establish genuine know-like-trust in the relationship.

As you develop stronger and stronger relationships with Customers they can become Members.  Members will develop a sense of belonging.  The sense of belonging must be enhanced by superior, personalized customer service and continued relationship building.  The BFO here is Great Customer Service starts with doing business with those you want to do business with (see Target above).

Continued relationship building and consistent superior customer service will result in your Members moving up to Advocates.  A major BFO here is every customer defines customer service differently, that is why building strong relationships is the KEY.  Advocates will refer their friends and network to your business.

If you consistently deliver exceptional customer service and continue to build relationships, your Advocates will become Raving Fans.  Raving fans will refer all of their friends and their networks to your business.

Whew, this wraps up my BFOs from only the first day of the 2016 BEF.  Stay tuned, there is much more to come.

Creating Raving Fans – Define Customer Value

Recently I was at a presentation about creating raving fan customers. After mentioning that he is a raving fan of a rather unsuccessful local major league baseball team, the speaker asked the audience – who wanted customers that identified with their business the same way that raving fans dedicate themselves to their favorite teams? That question got me thinking about how a sports team with a multi-season losing record can earn and keep their extremely loyal fans. My conclusion is that, just like all businesses, the definition of the product of a sports team goes way beyond the obvious. In addition to win/lose record, their product includes: · Their history · Their records · Their players · Their managers and coaches · Their venue · Their customer service department (ticketing) · Their uniforms · The food and other amenities available at their venue · The overall atmosphere at their venue · And much, much more. The point is – are you on top of the complete definition of your product? Here is a hint; the definition of your product includes a lot of intangibles that reflect what your customers (clients, patients, team, vendors, etc.) value about their experience with your business, not simply the physical product or service you deliver. If you don’t know what your audiences value about your products or services, one way to find out is to ask them.  Many of their replies will surprise you.