With today’s business climate, customers have a great deal of choices. What makes a customer choose your brand? What makes that customer loyal to your business? How can you improve your service to keep your customer? Finding the answers to these questions and creating a strong customer experience is now a prominent business objective and resides in the realm of (….drumroll) Customer Experience Management (CX).
Two metrics are essential to measuring and monitoring customer responses to products/services. There are:
- Customer Satisfaction (CSAT) and
- Net Promotor Score (NPS)
These metrics are part of a multidimensional construct that includes the customer’s emotional, behavioural, cognitive and social responses to a company’s products/services – instead of just focusing on the company’s perspective of customers.
While both these metrics have inherent benefits, the key to either of these being useful, meaningful and effective, is the CX project’s research design. To properly design a CX measurement project, it is essential to clearly understand these two metrics in order to use them to their maximum benefit.
Customer Satisfaction (CSAT)
“Overall, how satisfied are you with (brand name)?” – ever heard that one before? This is a typical way of measuring customer satisfaction which is often a key measure of whether you’re fulfilling and meeting business strategies. Customer satisfaction also provides a company with a strong predictor of customer retention, customer loyalty and product/service repurchase.
Let’s delve a little deeper:
CSAT is one of the most commonly surveyed constructs in CX and is concerned with:
- The attitude customers have regarding a specific company and their products/services.
- Customer’s expectations of what the product/service should be.
The surveys developed to provide a company with an understanding of the above points usually require multiple questions that address satisfaction with different dimensions of the products/services. Therefore, customer satisfaction measurement can include measures for overall customer satisfaction, as well as with specific product and service attributes (cool, right?).
Net Promoter Score (NPS)
“Do unto others what you would have them do unto you” – our parent’s weren’t the only ones that were firm believers of the Golden Rule. NPS developers were big supporters of it too! But without a systematic feedback mechanism, the Golden Rule is self-referential, simplistic and unreliable for decision making.
… and so began the search for a metric that provided the missing link between the Golden Rule, loyalty and sustainable growth. Almost thirty years ago, Bain & Company started investigating this loyalty effect. The NPS question is simply testing whether a company is observing the Golden Rule.
NPS isn’t just another way to measure customer satisfaction. It is a flexible and open source system. It’s also ultimately a business philosophy developed by Bain and Co & Fred Reichheld and is predominantly used to track the loyalty, engagement and enthusiasm of a company’s customers.
It is more useful to benchmark internally against past NPS scores than only relying on benchmarking. Continuously driving positive change in a business and improving change management processes is where the most value lies in NPS.
The zero-to-ten scale
The ultimate question associated with NPS made its first appearance in the Harvard Business Review in 2003. The Question?: “On a zero-to-ten scale, how likely is it that you would recommend us (or this product/service/brand) to a friend or colleague?” – you may have been asking this question the entire time, only phrased differently: “Have we treated you right, in a manner that is worthy of your loyalty?”.
Using the zero-to-ten scale is strongly recommended based on the practical and empirical advantages we have witnessed.
When presented with the ‘zero-to-ten scale question, it was found that customers tended to fall into one of three well defined groups:
- Promoters (score 9&10)
- Passives (score7&8)
- Detractors (0-6)
Basically, NPS = %promoters – %detractors. This number provides companies with a super simple metric that is powerful and easy to understand – informing progress and improvement efforts.
So you’ve categorised customers into the above groups and now you’re done. Right? Wrong – Categorising customers into the above groups is only part of the NPS process. The zero-to-ten question has led to the development of a management system.
The management system has 3 central components:
- Categorising customers into promoters, passives and detractors (check!)
- Creating an easy to understand score based on the above categorisation (check!)
- Produce more promoters and fewer detractors. Success and progress should be framed in the above groups, with the aim of motivating all company employees to behave in the appropriate manner.
NPS turns into a system from a score when the company systematically and regularly learns from the scores and related feedback to drive improvements and change.
Three fundamental elements are essential to NPS for this system to happen consistently:
- Promoters and detractors must be categorised thoroughly in a timely, transparent manner. Communicating comprehendible and relevant feedback allows employees to adapt their performance and track results
- It’s crucial that companies develop closed-loop learning and improvement processes which are built into daily company operations in order for NPS to accomplish anything.
- Creating more promoters and fewer detractors is a company-wide mission that starts at the top and is central to a company’s strategy.
Your company shouldn’t be focusing on how much it costs (in terms of economic trade-offs) to build high quality relationships with your customers. Instead, you should be asking:
- What is the magnitude of benefit that results from these quality relationships?
- How does the benefit measure against the cost?
Don’t do cartwheels based on a high NPS… Yet.
An important word of warning from the authors regarding NPS is that a high NPS is not the real objective of the NPS system. A high NPS by itself does not guarantee a company’s success and although profitable natural growth can’t be achieved without loyalty – other factors play an important role.
Measures to take before doing cartwheels:
- Relevantly benchmark your company against other similar businesses. The relevant benchmark is always local competitors, whose scores are identically affected by local idiosyncrasies.
- Distinguish between a customer’s satisfaction with a specific interaction or transaction and their loyalty to the overall company relationship. Tracking NPS at each interaction enables managers to spot trends or emerging problems and helps identify which departments and employees are doing the best job of turning customers into promoters and reward them accordingly. Combining this data with the broader NPS data would allow managers to summarise results by customer segment, customer profitability and type of inquiry/service problem.
The zero-to-ten scale best practices:
- Avoid using the happy-face-sad-face colour coding scale. It tends to be manipulative and affects judgement
- Ensure that biases in the research are minimised. It is often necessary to educate employees and customers on the ethics regarding the feedback system in order for them to appropriately reply and manage it
- Make the research process reliable and consistent to accurately compare branches, regions or competitors.
While it is important to understand the above metrics and how they work.
Aiming for a high score at face value is not the point – you end up like the kid who got a gold star just because you threw a tantrum instead of colouring inside the lines. The key to a high score is actually being worthy of one through incredible customer experiences. Poor metrics should inform decision making to deliver improved business outcomes which will make you worthy of not one, but two gold stars.
- Lemon, K. N., & Verhoef, P. C. (2016). Understanding Customer Experience Throughout the Customer Journey. Journal of Marketing: AMA/MSI Special Issue. Vol. 80. 69-96.
- MaritzCX (Comp.). (2016). Customer Experience Maturity Leads to Financial Gain: Insights from the Landmark MaritzCX CXEvolution Study. [Whitepaper].
- Reichheld, F. & Markey, R. (2011). The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World. Harvard Business Review Press.
- Smith, S.M., Passey, J. & Albaum, G. (2010). An Introduction to Marketing Research. Qualtrics.