You Only Have 3 Customers

Only one of them loves you, trusts you to buy what you recommend, buys more than the others  and sings your praises to all their friends. You wish all your customers were like this but on average, they are only about 20% of your customers. They are the 80/20 rule: 80% of your profits from 20% of your customers. But what about the other 80%?

In 2003, Bain and Company created a simple numerical rating system that places your customers into one of three groups using one question:

This industry standard, used by the many of world’s largest companies and also by small companies is the Net Promoter Score (NPS) and accurately identifies your customers as either:

  1. Promoter: Engaged, loyal, enthusiastic customers that actively promote you.
  2. Passive: “Satisfied” but perceive you as indifferent. Not loyal or referring you
  3. Detractor: Unhappy. Negative criticism to friends. Destructive on social media.

 

 

Promoters (Score 9 or 10)

Promoters are the best 20% of your customers. They are the apostles and evangelists actively and enthusiastically praising and referring you to friends, family, colleagues, business associates. They are your engaged ideal customers who are often pleasant for your employees to do business with.

sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

Passives (Score 7 or 8)

Passives are just “satisfied” and are as many as 50-70% of your customers. They could easily be promoters if they “felt” that you cared about more than just their money. They believe you are “indifferent” regardless of how pleasant or satisfied they “appear.” Passives may feel held hostage. In the health or contracted professional services it might more painful to find a new provider. Is that a good relationship? Think about finding a new doctor, accountant, IT provider.

IMPORTANT: Converting just 5% of Passives can increase profits as much as 75% because Promoters buy more, more often AND there is no cost of acquisition. They are already your customers. It costs up to seven times more to acquire new customers through advertising. The probability of selling to an existing customer is 60 – 70% as opposed to 5-20% for a new prospect.

Detractors (0 to 6)

Detractors are hopefully not more than 20% of your customers and account for nearly 100% of negative reviews. The effects of their negative criticisms are far reaching. They destroy your reputation on social media and put a heavy burden on your employee’s morale. Big customers are sometimes demanding and become detractors.  Their negative effects will far outweigh any profitability. Motivated detractors are actively engaged in destroying your reputation on social media and review sites.

Is NPS accurate and actionable?

Yes. NPS is a closed loop system building a roadmap of where to improve processes, people, products, pricing, etc, to and address customer’s concerns and pain points. Consistency and high response rates are key. 40% minimum for B2C and 60% for B2B. Surveying must be performed during and/or immediately after the customer experience/service when customers are most eager to reply. Non-responders are usually considered detractors.

Who should and should not use NPS?

You should if your company wishes to grow through referrals, increase growth and profits and discover any issues preventing or slowing growth. Yes, that’s every business but you should not use NPS if you can’t handle the truth from your customers because you WILL hear negative feedback from them. Bill Gates said “your unhappy customers are your best source of learning.” The upside is that you’ll get positive feedback, too. These are the things that set you apart and should focus on more.

Can you perform the NPS yourself?

Yes but there are advantages to outsourcing in addition to being cost effective for smaller companies.  72% of consumers will avoid conflict and may avoid offering negative feedback to a company member or account manager especially when surveyed face to face or on the phone. This is why a lack of feedback is not an indicator of happy customers. Your customers will speak more freely to an outside, unbiased agency making the survey more reliable. 

A survey from an unbiased agency is also not a sales call, which makes the customer feel like you actually care about more than just their money.

Measuring NPS success also requires measuring against at least five core Key Performance Indicators(KPI):

  1. Customer Lifetime Value
  2. Average Order Value
  3. Customer Retention Rate
  4. Customer Churn Rate
  5. Customer Acquisition Cost

How is NPS implemented?

Like any strategy, you must have a tactical plan with clearly defined goals, and responsibilities such as:

  1. Defining your goal for implementing NPS: I.e. Improve Processes; Improve Customer Experience.
  2. Who will be responsible for managing the program, collecting and reporting the data?
  3. From the data, identify and define opportunities for improvement. Some will have higher value or be simpler to implement. It may identify training needs or process changes.
  4. Communication to all employees is paramount. Communicate the implementation and all successes, especially small wins. This builds goodwill and begins building a customer driven culture.
  5. Staying the course. Measurable results take time.

Measuring and knowing who your customers are is vital to company growth. There are other methods in addition to NPS that I will discuss in other posts. Whatever method you use,  it’s crucial to remember that in order to manage or change anything, you must measure it. Customer Happiness is no exception.

How A.S.K. can help

I love what I do and am passionate about helping companies grow. I can help you find the data you need to transform “Passive” customers into Promoters. I am so sure than I can help you that I offer a money back guarantee. Let’s start with a conversation to chat about how I can help you. I’ll buy the coffee. Send me a quick note at gerry@askcxp.com or call me at 617-275-2276.

10 Game Changing Survey Questions

The only way to know why your customers love or dislike you or know how to give them exactly what they want to make them happy (not what you “think” makes them happy) is to ask them.

How you ask them is crucial.

Some surveys are for marketing and sales and are important. Improving the customer experience requires questions targeting exactly that. They are designed to find out how to convert a “passive” customer into a “Promoter. A Promoter is a customer who loves doing business with you and is actively engaged in promoting you to friends and family.

Here are 10 questions to ask every one of your customers.

These are not “sales” questions asking for leads or referrals. They are to help you give the customer an even better experience and show them that you care enough to do so.

Give them an outstanding experience and you won’t have to ask them for referrals or leads. They will come just come to you.

Use some or all and tailor them to fit your company.

1) How did you hear about us? A friend?

This seems like a marketing question but what you’re measuring  is whether or not  a friend referred them. Relates to NPS score

2) What problem does our [service/product/program] solve for you or help you with?

Knowing which problem your product is solving for your customers can help shape your marketing message.

3) What do you like most and what do you like least about our [service/product/program]?

Take a cue from your customer feedback and re-align marketing to promote the features they value most.

4) What’s the one thing we should never stop doing?

Find out what your customers really value about you and your company.

5) What made you choose us over [the other /my competitors]

Discovering a product or service “differentiator” is a competitive intelligence that can pay huge dividends.

6) What do [the other /my competitors] do better than what we do?

Your customers can give you insights about your competitors’ strengths to further differentiate yourself

7) What’s the most recent example of how we have exceeded your expectations or not met your expectations?

Inc. Magazine suggests that instead of just asking your customers how satisfied they are with you, make the questions specific and over a recent time frame so that their feedback will generate actionable information.

8) What one thing could we do/change that would make you love us? Being FREE is not an option 🙂

9) Do you have any questions/recommendations for us?

If you get even one response, that could mean that other customers may have the same thoughts but not voicing it.   Address it with your customers if possible because absence of feedback is inaccurate.

10) The one MANDATORY QUESTION: How likely would you recommend us to your friends and family on a scale from one to ten. Ten being the most likely.

This is your Net Promoter Score® (NPS®) question to gauge if they are “engaged” customers that promote you. Nines and tens are engaged customers. Six and under are potential viral threats.

Plan to use this data to improve your customer’s experience and address any issues that come to light. If you don’t plan to make any changes, it will annoy customers that you wasted their time.

Here some stats to motivate you to make talking to your customers a daily operation:

  • Loyal customers are worth up to 10x as much as the value of their 1st purchase
  • The likelihood of converting an existing customer into a repeat customer is 60-70%
  • Increasing customer retention by just 5% could increase profits 25-95%
  • It costs 7x less to retain customers than acquire new ones

If you need help with talking to your customers, we can help. We love talking to customers and helping you improve their experience. And that makes you more money.

– Please read my other posts for ways to help improve your company’s customer experience and share it if you’ve found it helpful.

==================================================

About the Author

Gerry Criscenzo, founder of Advanced Service Knowledge is passionate about delivering an exceptional customer experience.  He has over 30 years experience managing customer facing teams in very demanding customer service  industries such as automotive services, IT Services and Home Remodeling/Contractor Services. Gerry is available for consulting, keynote speaking and training.  Read more