What’s the most important thing to measure in business? Sales? Profit margin? Market share? Awareness? Brand perceptions? These are all good measures, but they can lead to behaviors that generate “bad profits” – price promotions, low-quality goods, rude service reps.
In the book “The Ultimate Question”, author Fred Reichheld suggests that companies should focus instead on a different metric in order to drive “good profits”.
What is this Ultimate Question? It’s this: would you recommend us to a friend?
Back in 2000, I was speaking with an executive at Sprint about their poor customer service. It was common for customers to be on hold 30-60 minutes, only to be treated rudely by the customer service rep, who did not hesitate to hang up the phone if the customer became too demanding. I asked “why don’t you hire more customer service reps, train them better?” His response: “Because, customers don’t care about customer service when they’re signing up for cell phone service.”
This is a perfect example of focusing on the wrong short-term things (acquisition) to the detriment of the right long-term things (loyalty).
Of course, Sprint could afford to be nonchalant in 2000. The cell phone market was on fire, their stock was trading at $60 per share. But today, the market is mature and their stock is trading at about $7 per share. In their last quarter, they lost $344 million and nearly one million subscribers. Sprint president Dan Hesse had this to say
“Hesse said the company is focusing on retaining existing customers rather than acquiring new ones. Improving customer service has been a high priority, and more marketing dollars are being spent on keeping subscribers”
Unfortunately, about 8 years too late for them. But not for you.
Net Promoter Score
When you ask customers if they would recommend your business to a friend, you can group customers into three categories
- Detractors: These customers will not help you grow your business, and will in fact try to hurt your business with negative comments
- Passive: You do not have a relationship with this customer, you just have a transaction
- Advocates: These customers will help to grow your business
“Net Promoter Score” is the percentage of Advocates minus the percentage of Detractors. Your role as marketer is to understand what drives customer perceptions, and keep fine-tuning your operation to move detractors to neutral and neutral to advocates. For example, here are the Net Promoter Scores of some of the best-performing companies.
79 Apple
74 Barnes & Noble
73 Google
49 Vonage
47 American Express
46 Adobe Systems
32 Wachovia
20 DIRECTV
10 Verizon (highest in internet service industry)
The suggestion is that by focusing on this single NPS metric, it drives the right sales and marketing investments to deliver a fantastic customer experience worth boasting about, and leads to repeat customers and positive word of mouth.
Would your customers recommend you to a friend? If not, what would you need to change, and how would that impact your long-term business health?
Posted by brucegab 
