Your Business Advantage: Customer LoyaltyPosted: May 29, 2013
This month’s article is a bit of a departure from my normal focus on building leadership skills within organizations and individuals. Instead, let’s take some time to examine the customer experience and how we, as leaders, may foster long-term partnerships and customer loyalty.
When I was first introduced to the concept of customer loyalty, I wondered how it stacked up against customer satisfaction. For many years, we heard the cry proclaiming the importance of customer satisfaction. With the introduction of Fred Reichheld‘s The Ultimate Question and the Net Promoter Score, customer loyalty displaces customer satisfaction as the premiere measure indicating the likelihood of customer referrals and retention.
Simply put, customer loyalty is relational; customer satisfaction is transactional. Building relationships with your customers gains return business. Transactional satisfaction leaves a company at risk for comparison price shopping and the potential of customer retreat.
For those of you unfamiliar with the concept, the Net Promoter Score describes how likely one would be to recommend a brand or company or product or experience to a friend or colleague. Using a scale from 0 to 10, the respondent selects a number that then correlates to a “promoter”, “passive”, or “detractor” category. The percentage of promoters minus the percentage of detractors results in a Net Promoter Score. A score greater than 0 says that a company has more promoters than detractors. The goal, however, is for the Net Promoter Score to be closer to 100. (The higher the score – the more promoters – the more loyal customers.)
The Net Promoter Score follow-on question gets to the heart of the response, however. That question simply asks for the respondent to provide the reason for their score – the “why”. “What is the reason for the rating you just gave?” This answer is the TRUE voice of the customer.
To model the Net Promoter Score system, consider the following rating.
On a scale from 0 (not at all likely) to 10 (extremely likely), how likely would you be to recommend this customer feedback tool (the Net Promoter Score) to your friends and colleagues?
My response is a 10. (A response of 9 or 10 is defined as a Promoter; 8 to 9 is a Passive; 0 to 6 is a Detractor.)
What is your reason for this rating?
I have many reasons, but the top three are:
- The Net Promoter Score (also referred to as NPS) is useful for any size of company or applicable to any interaction. From one to multiple clients, the responses are valuable and provide direction toward improvement. The customer is speaking to what is important to him or her. And what is important to my clients is important to me as I grow our business relationships. I use this feedback tool with my coaching clients, with participants in workshops or strategy sessions, and as other customer projects end. I even used this feedback tool during my recent discussion about the NPS with local business owners.
- Loyalty trumps satisfaction. As we strive for those “returns”, let’s look to those who refer us to others as opposed to those who are just satisfied with the outcome. Satisfaction indicates that they may or may not return. Loyalty indicates that they are with you – partners over time. Loyal customers provide 80-90% of your referrals. Look at the companies and brands you refer. Aren’t those the companies and brands to which you are loyal? For me, Amazon, Nordstrom, and Publix are three that have certainly shown their loyalty to me over the years. I am definitely pleased to reciprocate and tell everyone I know.
- The answer to “why” allows you to rethink your business. The customers’ reasons for their ranking give you clues as to where your business improvements, modifications, or strengthening should occur. Using this data as your backdrop, ask what I/we should Start doing? Stop doing? Continue doing? Be honest with yourself as you examine the data that describe your customer relations. The customer is telling you something. Don’t let a degree of lofty self-importance get in the way of hearing what they are actually saying. Don’t let your defensiveness prevent you from moving closer to a level where customers will become loyal.
As you consider incorporating this tool into your customer feedback conversation, remember the voice of the customer is a gift. Ask for it. Ponder it. Act on it. And then communicate it back to your customers … both in words and in deeds. The result is the building of customer loyalty and the growth of your business. That is also the business of leadership.
“Do what you do so well that they will want to see it again and bring their friends.”
– Walt Disney