Sunday, March 12, 2006
Customer Satisfaction Rates Are Like So Last Week
Nobody doubts how important it is to get a pulse on how customers perceive your company, products and services — the sum total of these perceptions in the mind of the customer is the essence of a brand and directly impacts future growth. This is why an article on customer satisfaction surveys I tore out of Business 2.01 a few months ago caught my eye when I finally had time to go back and read it.
From my own experiences working inside companies I know that properly crafting a customer satisfaction survey to gain relevant, actionable metrics is frequently the bane of marketing departments with many other equally important priorities on the plate. How many questions to ask? How should they be phrased to avoid leading the response? And then how to quickly review the mountains of data received into process improvement guidance? Not to mention how easy it is to drink your own cool-aid when analyzing the results.
The article1 put me on to a new concept being popularized by Bain consultant Fred Reichheld: the Net Promoter Score. Throw away everything else on your customer satisfaction survey and boil it down to one key question: Would you recommend this company/product/service to friends and colleagues? The model says to collect responses from at least 60% of your customers and is based on a 1-10 scale with 10 being most likely to recommend and 1 the least likely. Scoring is such that:
- 9-10: These are your “Promoters” - Very satisfied customers who will promote your product or service any chance they get. They are users who actively market your product by getting behind it
- 7-8: They are your “Passively Satisfied” customers
- 1-6: Are the “Detractors” - fairly unsatisfied with you - Most likely to leave you for a competing product or service
Simple. Certainly the fewer variables there are to track in any benchmark the better, but more to the point, Reichheld’s research seems to show a strong correlation between a high NPS and high growth. For example, most U.S. Airlines show both low Net Promoter scores and low (or negative) revenue growth — with the exception of Southwest Airlines, long a poster child in high customer satisfaction. Apparently the average NPS of American companies is an abysmal 5-10%, but Amazon, eBay, Harley-Davidson, Vanguard, and Dell are some of the exceptional performers, operating at NPS efficiency ratings of 50 - 80% (and with the profits to show for it). Now what I’d really like to see is how well the NPS metric applies to the business-to-business sector where buying drivers are often more complex and the sales cycle is typically longer.
1Darlin, Damon. “The Only Question That Matters.” Business 2.0. Sept 2005. pg 50
Net Promoter Site
Satmetrix, the research company that co-developed the NPS with Fred Reichheld
Bain.com “Measuring Your Net Promoter Score.” Accessed 3/12/2006.
McGregor, Jena. “Would You Recommend Us.” BusinessWeekOnline. 1/30/2006