Answering the Ultimate Question: How Net Promoter Can Transform Your Business

Interval Estimation for the 'Net Promoter Score'
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Then subtract the percentage of detractors from the percentage of promoters. Your net-promoter score provides valuable insights into how to get more promoters and fewer detractors. Uncover root causes of differences and share best practices from your highest-scoring groups. Use your score to send a clear message to managers and employees about the importance of promoters—and the dangers of detractors.

Consider these guidelines:. The CEOs in the room knew all about the power of loyalty. They had already transformed their companies into industry leaders, largely by building intensely loyal relationships with customers and employees. Now the chief executives—from Vanguard, Chick-fil-A, State Farm, and a half-dozen other leading companies—had gathered at a daylong forum to swap insights that would help them further enhance their loyalty efforts. Taylor and his senior team had figured out a way to measure and manage customer loyalty without the complexity of traditional customer surveys.

Every month, Enterprise polled its customers using just two simple questions, one about the quality of their rental experience and the other about the likelihood that they would rent from the company again. Because the process was so simple, it was fast. That allowed the company to publish ranked results for its 5, U. The survey was different in another important way.

In ranking the branches, the company counted only the customers who gave the experience the highest possible rating. That narrow focus on enthusiastic customers surprised the CEOs in the room. Hands shot up. No, Taylor said.

NPS Step 5: Customer Engagement Required - Net Promoter Score

By concentrating solely on those most enthusiastic about their rental experience, the company could focus on a key driver of profitable growth: customers who not only return to rent again but also recommend Enterprise to their friends. They tend to be long and complicated, yielding low response rates and ambiguous implications that are difficult for operating managers to act on.

Could you get similar results in other industries—including those seemingly more complex than car rentals—by focusing only on customers who provided the most enthusiastic responses to a short list of questions designed to assess their loyalty to a company? Could the list be reduced to a single question? If so, what would that question be? It took me two years of research to figure that out, research that linked survey responses with actual customer behavior—purchasing patterns and referrals—and ultimately with company growth. The results were clear yet counterintuitive. It turned out that a single survey question can, in fact, serve as a useful predictor of growth.

Defining success: How to implement a successful Net Promoter program

In fact, in most of the industries that I studied, the percentage of customers who were enthusiastic enough to refer a friend or colleague—perhaps the strongest sign of customer loyalty—correlated directly with differences in growth rates among competitors. By substituting a single question for the complex black box of the typical customer satisfaction survey, companies can actually put consumer survey results to use and focus employees on the task of stimulating growth.

But evangelistic customer loyalty is clearly one of the most important drivers of growth. By substituting a single question—blunt tool though it may appear to be—for the complex black box of the typical customer satisfaction survey, companies can actually put consumer survey results to use and focus employees on the task of stimulating growth. First, a definition.

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Loyalty is the willingness of someone—a customer, an employee, a friend—to make an investment or personal sacrifice in order to strengthen a relationship. For a customer, that can mean sticking with a supplier who treats him well and gives him good value in the long term even if the supplier does not offer the best price in a particular transaction. Consequently, customer loyalty is about much more than repeat purchases. Indeed, even someone who buys again and again from the same company may not necessarily be loyal to that company but instead may be trapped by inertia, indifference, or exit barriers erected by the company or circumstance.

Someone may regularly take the same airline to a city only because it offers the most flights there. Conversely, a loyal customer may not make frequent repeat purchases because of a reduced need for a product or service. Someone may buy a new car less often as he gets older and drives less. True loyalty clearly affects profitability. Loyalty also drives top-line growth. Obviously, no company can grow if its customer bucket is leaky, and loyalty helps eliminate this outflow.

Indeed, loyal customers can raise the water level in the bucket: Customers who are truly loyal tend to buy more over time, as their incomes grow or they devote a larger share of their wallets to a company they feel good about. And loyal customers talk up a company to their friends, family, and colleagues. Note that here, too, loyalty may have little to do with repeat purchases. But if she is loyal to the company, she will enthusiastically recommend a Honda to, say, a nephew who is buying his first car.

The tendency of loyal customers to bring in new customers—at no charge to the company—is particularly beneficial as a company grows, especially if it operates in a mature industry. In such a case, the tremendous marketing costs of acquiring each new customer through advertising and other promotions make it hard to grow profitably.

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Because loyalty is so important to profitable growth, measuring and managing it make good sense. Not only does their complexity make them practically useless to line managers, but they also often yield flawed results. The best companies have tended to focus on customer retention rates, but that measurement is merely the best of a mediocre lot. Retention rates provide, in many industries, a valuable link to profitability, but their relationship to growth is tenuous. Furthermore, as I have noted, retention rates are a poor indication of customer loyalty in situations where customers are held hostage by high switching costs or other barriers, or where customers naturally outgrow a product because of their aging, increased income, or other factors.

An even less reliable means of gauging loyalty is through conventional customer-satisfaction measures. Our research indicates that satisfaction lacks a consistently demonstrable connection to actual customer behavior and growth. This finding is borne out by the short shrift that investors give to such reports as the American Consumer Satisfaction Index.

In general, it is difficult to discern a strong correlation between high customer satisfaction scores and outstanding sales growth. Even the most sophisticated satisfaction measurement systems have serious flaws. I saw this firsthand at one of the Big Three car manufacturers.

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The marketing executive at the company wanted to understand why, after the firm had spent millions of dollars on customer satisfaction surveys, satisfaction ratings for individual dealers did not relate very closely to dealer profits or growth. When I interviewed dealers, they agreed that customer satisfaction seemed like a reasonable goal. In this book, Owen and Brooks tell how based on a variety of real case studies' to actually embed Net Promoter discipline in organizations of all types. Get A Copy. Hardcover , pages.

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Sort order. For a customer, that can mean sticking with a supplier who treats him well and gives him good value in the long term even if the supplier does not offer the best price in a particular transaction. Consequently, customer loyalty is about much more than repeat purchases. Indeed, even someone who buys again and again from the same company may not necessarily be loyal to that company but instead may be trapped by inertia, indifference, or exit barriers erected by the company or circumstance. Someone may regularly take the same airline to a city only because it offers the most flights there.

Conversely, a loyal customer may not make frequent repeat purchases because of a reduced need for a product or service. Someone may buy a new car less often as he gets older and drives less. True loyalty clearly affects profitability. Loyalty also drives top-line growth. Obviously, no company can grow if its customer bucket is leaky, and loyalty helps eliminate this outflow.

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Indeed, loyal customers can raise the water level in the bucket: Customers who are truly loyal tend to buy more over time, as their incomes grow or they devote a larger share of their wallets to a company they feel good about. And loyal customers talk up a company to their friends, family, and colleagues.

Note that here, too, loyalty may have little to do with repeat purchases. But if she is loyal to the company, she will enthusiastically recommend a Honda to, say, a nephew who is buying his first car. The tendency of loyal customers to bring in new customers—at no charge to the company—is particularly beneficial as a company grows, especially if it operates in a mature industry.

In such a case, the tremendous marketing costs of acquiring each new customer through advertising and other promotions make it hard to grow profitably. Because loyalty is so important to profitable growth, measuring and managing it make good sense. Not only does their complexity make them practically useless to line managers, but they also often yield flawed results.

The best companies have tended to focus on customer retention rates, but that measurement is merely the best of a mediocre lot. Retention rates provide, in many industries, a valuable link to profitability, but their relationship to growth is tenuous. Furthermore, as I have noted, retention rates are a poor indication of customer loyalty in situations where customers are held hostage by high switching costs or other barriers, or where customers naturally outgrow a product because of their aging, increased income, or other factors.

An even less reliable means of gauging loyalty is through conventional customer-satisfaction measures. Our research indicates that satisfaction lacks a consistently demonstrable connection to actual customer behavior and growth. This finding is borne out by the short shrift that investors give to such reports as the American Consumer Satisfaction Index.

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In general, it is difficult to discern a strong correlation between high customer satisfaction scores and outstanding sales growth. Even the most sophisticated satisfaction measurement systems have serious flaws. I saw this firsthand at one of the Big Three car manufacturers. The marketing executive at the company wanted to understand why, after the firm had spent millions of dollars on customer satisfaction surveys, satisfaction ratings for individual dealers did not relate very closely to dealer profits or growth.

When I interviewed dealers, they agreed that customer satisfaction seemed like a reasonable goal. But they also pointed out that other factors were far more important to their profits and growth, such as keeping pressure on salespeople to close a high percentage of leads, filling showrooms with prospects through aggressive advertising, and charging customers the highest possible price for a car.

In most cases, dealers told me, the satisfaction survey is a charade that they play along with to remain in the good graces of the manufacturer and to ensure generous allocations of the hottest-selling models. The pressure they put on salespeople to boost scores often results in postsale pleading with customers to provide top ratings—even if they must offer something like free floor mats or oil changes in return. Dealers are usually complicit with salespeople in this process, a circumstance that further degrades the integrity of these scores.

Figuring out a way to accurately measure customer loyalty and satisfaction is extremely important. For a while, it seemed as though information technology would provide a means to accurately measure loyalty. Sophisticated customer-relationship-management systems promised to help firms track customer behavior in real time.

But the successes thus far have been limited to select industries, such as credit cards or grocery stores, where purchases are so frequent that changes in customer loyalty can be quickly spotted and acted on. So what would be a useful metric for gauging customer loyalty? To find out, I needed to do something rarely undertaken with customer surveys: Match survey responses from individual customers to their actual behavior—repeat purchases and referral patterns—over time.

I sought the assistance of Satmetrix, a company that develops software to gather and analyze real-time customer feedback—and on whose board of directors I serve. Teams from Bain also helped with the project.

http://tf.nn.threadsol.com/hoket-what-is-the.php We started with the roughly 20 questions on the Loyalty Acid Test, a survey that I designed four years ago with Bain colleagues, which does a pretty good job of establishing the state of relations between a company and its customers. We administered the test to thousands of customers recruited from public lists in six industries: financial services, cable and telephony, personal computers, e-commerce, auto insurance, and Internet service providers. We then obtained a purchase history for each person surveyed and asked those people to name specific instances in which they had referred someone else to the company in question.

The data allowed us to determine which survey questions had the strongest statistical correlation with repeat purchases or referrals. We hoped that we would find at least one question for each industry that effectively predicted such behaviors, which can drive growth. We found something more: One question was best for most industries. As part of our research into customer loyalty and growth, my colleagues and I looked for a correlation between survey responses and actual behavior—repeat purchases, or recommendations to friends and peers—that would ultimately lead to profitable growth.

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Answering the Ultimate Question: How Net Promoter Can Transform Your Business [Richard Owen, Laura L. Brooks PhD] on zeburyjodofo.tk *FREE* shipping on. Fred Reichhelds book The Ultimate Question, that question being, How a company, introducing a quantitative measure (the Net Promoter Score) for Answering the Ultimate Question: How Net Promoter Can Transform Your Business.

Based on information from 4, consumers, we ranked a variety of survey questions according to their ability to predict this desirable behavior. Interestingly, creating a weighted index—based on the responses to multiple questions and taking into account the relative effectiveness of those questions—provided insignificant predictive advantage. The top-ranking question was far and away the most effective across industries:.

Other questions, while useful in a particular industry, had little general applicability:. These findings surprised me. One result did not startle me at all. Making customer loyalty a strategic goal that managers can work toward requires a scale as simple and unambiguous as the question itself. The right one will effectively divide customers into practical groups deserving different attention and organizational responses. It must be intuitive to customers when they assign grades and to employees and partners responsible for interpreting the results and taking action.

Ideally, the scale would be so easy to understand that even outsiders, such as investors, regulators, and journalists, would grasp the basic messages without needing a handbook and a statistical abstract. And not only did clustering customers into three categories—promoters, the passively satisfied, and detractors—turn out to provide the simplest, most intuitive, and best predictor of customer behavior; it also made sense to frontline managers, who could relate to the goal of increasing the number of promoters and reducing the number of detractors more readily than increasing the mean of their satisfaction index by one standard deviation.

But the real test would be how well this approach explained relative growth rates for all competitors in an industry—and across a broader range of industry sectors.