Customer loyalty and retention are the holy grail in sales—and in all areas of business, for that matter. Loyal customers are how successful businesses are built. Not only is it easier to sell more to existing customers, it is financially prudent to do so. Some companies have increased their profit by as much as 100 percent by focusing on retaining an additional 5 percent of customers. Since it costs about five times more to acquire a new customer than to retain an existing customer, companies are well served to focus on retaining existing customers and making them into advocates for their brand (Chang, 2006). In other words, “Customer acquisition is an investment, but customer retention delivers profitability” (Maser, 2009).
Follow-Up, Feedback, and Fans
Earlier in this chapter, the five elements of follow-up were discussed including getting feedback from customers. This concept is so important, it’s worth drilling a little deeper into it. It is loyal customers who buy more from you in the form of more products and services more often. Companies that focus on creating customer loyalty usually invest in developing an effective customer feedback loop, a formal process for gathering, synthesizing, and acting on customer feedback.
The most successful customer feedback loops are simple, focus on understanding what is important to customers, and empower front-line employees. Employees who interact with customers on a day-to-day basis, such as salespeople.(i.e., those who interact with customers on a day-to-day basis, such as salespeople). For example, Charles Schwab, an online investment services company, has a process whereby managers review customer feedback daily from comments on the company web site, transactions, and other communications with the company. Managers and sales reps respond personally to negative customer comments. Cheryl Pasquale, a branch manager, says she looks forward to customer calls to follow up on complaints or less-than-positive comments. She feels she has an opportunity to turn “critics into fans” (Markey et al., 2009).
There are several different types of customer feedback loops that companies use such as mystery shopper programs, customer satisfaction surveys, and other measurement tools. Some of these methods are expensive, require elaborate reporting, and take a long time to compile and act on the data (Markey et al., 2009). Simply asking customers what they think can defeat the purpose if companies don’t act quickly on the feedback. It raises customer expectations that action is going to be taken (Brooks, 2010).
Power Selling: Lessons in Selling from Successful Brands
One Simple Question
Successful companies have found that customers can be more than customers; they can be advocates, supporters, promoters, and fans. It’s these passionate fans that not only spend their money with these companies but also tell their friends and ultimately their friends’ friends to patronize the company. The mutual admiration of brand and customer starts with the culture of the company. Those companies that not only listen to their customers but also engage them in communities, new product development, and other improvements are the ones that have a maniacal focus on the customer.
In another example, it’s no surprise that Zappos, the dominant online shoe and apparel retailer, has a maniacal focus on the customer when you listen to CEO Tony Hsieh talk about his philosophy of customer service. Zappos has grown to be a billion-dollar business in just ten years. Although shoes have a notoriously high return rate due to fit problems, Zappos offers free shipping both ways to encourage purchases. Hsieh’s vision for the ultimate experience in customer service is clear throughout the company (try calling their 800 number for customer service and experience Zappos’ unique telephone greeting).
Zappos Gets It
Hear CEO Tony Hsieh talk about why Zappos is a fan favourite.
Many companies have found that Net Promoter Score (NPS), compiled results of customer responses to the question, “How likely are you to recommend this product or company to a colleague or friend?”, is the ideal customer feedback tool because it is simple, keeps the customer at the forefront, allows frontline employees to act, thereby closing the customer feedback loop (Markey et al., 2009).
Net Promoter Score is based on asking customers the ultimate question: “How likely are you to recommend this product or company to a colleague or friend?” The response is based on a ten-point scale and categorizes responses as follows:
- Promoters – Loyal fans of a brand that are most likely to share their good experiences with their friends and be a brand advocate; those who respond to the NPS question with a score of 9 or 10 (customers who answer with a 9 or 10). These are customers who are advocates or loyal fans who will willingly tell their friends to do business with the company.
- Passives – Satisfied customers of a brand who are at risk of tying a competitive brand; those who respond to the NPS question with a score of 7 or 8 (customers who answer with a 7 or 8). These are customers who might be categorized as satisfied, but do not enthusiastically support the company. They are vulnerable to competitive offerings.
- Detractors – Unhappy customers that are likely to share their bad experiences via word of mouth or social networking; those who respond to the NPS question with a score of 0 to 6 (customers who answer with a 0 to 6). These are customers who are not happy and are likely to pass along stories about their bad experiences to their friends via word of mouth or social networking.
A company’s Net Promoter Score is determined by taking the percentage of promoters (scores of 9 or 10) and subtracting the percentage of detractors (scores of 0 to 6) (Net Promoter, n.d.). For example, assume that Widgets, Inc., received the following ratings:
Promoters (score of 9 or 10) = 60%
Passives (score of 7 or 8) = 30%
Detractors (score of 0 to 6) = 10%
The Net Promoter Score for Widgets is calculated as follows:
60% − 10% = 50%
Promoters − Detractors = Net Promoter Score (NPS)
The premise of Net Promoter Score is simple and elegant. The answer to one question says it all. Customers are then asked why they would be likely or unlikely to recommend the company (Markey et al., 2009). If the customer is not a promoter after their experience with the brand, they are at risk either to try another brand or become a detractor of the brand. As you can see from the formula, customers that are passives (scores of 7 to 8), reflect poorly on the brand’s NPS. Being satisfied isn’t enough; a brand’s goal is to have promoters or fans. This process quickly lets front-line managers and employees identify where problems exist and allow them to act quickly to respond and fix them (Net Promoter, n.d.).
Net Promoter Scores vary by industry. The Net Promoter Score web site includes a comparison by industry. Some companies that use Net Promoter Score are American Express, Southwest Airlines, FedEx, eBay, Harley-Davidson, and Dell.
“12.2 Customer Satisfaction Isn’t Enough” from Selling For Success 2e by NSCC and Saylor is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.