Has Your Net Promoter Score System Reached its Limit?
For a number of years, the franchising industry has become increasingly focused on customer loyalty and retention. The most widely adopted customer loyalty metric today is the net promoter score. More than just a number, a critical component to a successful NPS program is the understanding gained from customer feedback and using it to improve your organization. In the pursuit of customer centricity, many franchise brands have implemented an NPS program to successfully effect change in their organizations and have experienced significant improvements as a result. Unfortunately, after initial gains, many brands reach a plateau and don’t know where or how to take their program to the next level.
This article reviews the three stages that many brands experience with their customer experience initiatives and offers five simple steps to guide your franchise toward improvement.
The first stage is a realization that your existing customer feedback system is no longer working. Your brand has spent years using the same system or perhaps experimented with a variety of methods, for example a call center, secret shopper, feedback cards and so on. There is feedback, but integrating it to take timely action is next to impossible.
The second stage is when your business decided to invest in a net promoter score software solution. For many this has meant implementing a basic two-question solution that asks, “1. How likely is it that you would recommend [your company] to a friend or colleague?” and “2. What went wrong, how can we improve or what do you like about us?” The benefits are visible immediately: your company is able to automate the survey process; can immediately identify which customers have a problem or issue; and now has the tools to track that someone in your organization followed up with the customer. Your business can stream all the reviews to your fan page. It can see the NPS score for all of your units right down to individual employees and the different products or services the business sells, analyzes the comments that are coming in and gets an understanding of what the customers think about each area of the products or services, and there is more information available now than was previously. Your company will spend about six to 12 months in this phase.
The biggest driver of response rates is the relationship your company has with your customer.
The third stage is when your organization realizes that nothing has really changed in the past year. The number of reviews on your Facebook page increases tenfold, but they’re all saying the same thing. Your NPS score hasn’t changed in months, but no one knows why. Your voice of the customer charts haven’t changed and no one can calculate the return on investment for improving any one of the areas even if they did. In short, your organization has hit the limit of your NPS initiative and the only thing that money will buy at this point is more of the same, and the same doesn’t improve your business.
So, what does your business do? The following is a step-by-step guide to take your NPS system to the next level and to continue to get a return on your investment.
STEP 1–Move from 2-questions to 5 to 8 questions.
“But wait,” you ask, “isn’t that going to reduce my response rate?” The answer is no and it may actually improve it. Survey fatigue arises in two-question NPS programs after the third or fourth time a customer is asked to respond because he’s already answered the same question two or three times. Some customers doubt that your business can actually get anything from such a short survey so they don’t bother to answer. The biggest driver of response rates is the relationship your company has with your customer, not two questions versus a handful of questions.
STEP 2–Stop focusing on customer comments.
When your business asks two questions, the only source of insight is the customer comments. These tend to be top-of-mind thinking and very specific to the customer’s latest transaction and not necessarily the relationship he had with your business. There is usually little correlation (or, more accurately, causation) between one theme and another. For example, if most of the comments are about professionalism and are predominantly negative and the next most popular category is price and these too are predominantly negative, it doesn’t follow that becoming more professional will reduce your customer’s sensitivity to price in the same way if you reduce the price. They will not become more accepting of your perceived lack of professionalism.
STEP 3–Introduce Root Cause Analysis.
Moving up to five to eight questions can accurately correlate how satisfied your customers are with various aspects of your products and or service and their willingness to recommend your company. This is a key point to any successful NPS initiative. To do this, ask pointed satisfaction questions on a 0-10 scale such as, “How satisfied were you with the price?” “How satisfied were you with our professionalism?” The responses are then tied to that customer’s willingness to recommend your brand and the result is an accurate list of action drivers that your business can use to implement change in your organization. More importantly, it gives your company the ability to prioritize the changes that will impact your score (and thus increase word of mouth and financial performance) and those that will have no impact whatsoever. A successful NPS program has to link the insight to financial performance, which leads us to Step 4.
STEP 4–Know the value of a promoter and the cost of a detractor.
Your brand will only be able to determine the likely return on investment from any changes made in the business when the value of a promoter is known and the cost of a detractor. From the results in Step 3, your company will be able to determine how many more promoters it is likely to generate as a result of improving each specific area of the business. When your company knows what that’s worth, it will help determine the budget for that improvement. However, there’s a law of diminishing returns, so one must also look at the effect that the amount of improvement will have on your customer retention rates. This is Step 5.
STEP 5–Introduce net present value and gain an accurate understanding of your customer retention rate.
Up until now, your company has been focusing on customer lifetime value and estimating your business at risk. However, your organization may have noticed that it’s at risk amount rarely comes down (and, if response rates increase, it actually goes up). This approach doesn’t calculate what your customer retention rate is and the financial impact of increasing it by 10 percent. Knowing how much to spend on increasing your retention rate is something that your two-question NPS approach will not provide, but it is an essential component of taking your NPS initiative to the next level.
The decision to adopt a net promoter score as your metric of how well your company is doing to promote customer-centricity and grow is a smart choice. Viewing net promoter as a discipline instead of just a metric is something that your business should embrace to maximize the potential of your investment. Adopting a crawl, walk, run approach is often sensible. For those that have been walking with a two-question solution and are ready to run and take it to the next level, follow these guidelines and your organization will be rewarded with results that true loyalty leaders can expect.
Steve Baxter is the general manager of global midmarket solutions for Satmetrix, Inc. He can be reached at 678-231-1951 or firstname.lastname@example.org.