OPTing In – The OnProcess Technology, Inc. Blog

Article: “Taking the Pulse of Your Customers” June 10, 2010

Article by Ken Bernhardt, Professor of Marketing at Georgia State University’s J. Mack Robinson School of Business
Link to article: http://robinson.gsu.edu/news/bernhardt/index.html

“Taking the Pulse of Your Customers”
by Ken Bernhardt
Taylor E. Little Jr. Professor of Marketing
and Special Assistant to the Dean
Robinson College of Business, Georgia State University
Atlanta Business Chronicle – June 4, 2010

Three years ago I wrote a column on a new book, The Ultimate Question: Driving Good Profits and True Growth, by Fred Reichheld, a consultant with Bain & Company. The book proposed the Net Promoter Score, which consists of one question that companies can ask to determine the strength of the company’s relationship with its customers.

The “ultimate question” is “How likely is it that you would recommend this company to a friend or colleague?” The scale runs from zero to 10 with zero being not at all likely and 10 being extremely likely to recommend. Those assigning a 9 or 10 are called promoters and those rating zero to six are called detractors. A Net Promoter score is calculated by subtracting the percentage of detractors from the percentage of promoters.

A number of companies have adopted the Net Promoter Score methodology. They have bought into the concept that a single question can be sufficient to understand how customers perceive your company’s product and service offerings. I personally think it is a worthwhile concept, but believe it is way too simplistic to rely on this measure alone to take the pulse of the marketplace. What are the problems with the Net Promoter Score (NPS) and what should a good system for taking the pulse of customers look like?

First, I believe that a named scale is better for most company executives, specifically the following scale: Definitely Will Recommend, Probably Will Recommend, Might or Might Not Recommend, Probably Will Not Recommend, or Definitely Will Not Recommend. Not everyone answering a “six” or “seven” means the same thing, but the answers to the scale I suggest as an alternative do mean the same thing to each respondent. What does a score of 72 or 78 mean? A score indicating 72 percent would definitely recommend your company is easy to understand as are changes from study to study. A Net Promoter Score can still be computed by subtracting the percentage of Probably or Definitely Will Not Recommend responses from the percentage saying they Definitely Will Recommend the company.

Second, the NPS measure does not answer the important question of whether or not a customer will come back. Retention is an increasingly important measure for most companies. Thus an additional question must be asked, “How Likely Are You To Purchase From This Company in the Future?” The scale for the answers should be the same as the scale recommended above, substituting “Return” for “Recommend.” All those responding they will probably or definitely not return should be asked “What are the reasons why you say you will not [definitely/probably] return?” This yields valuable information for corrective action to prevent customer leakage in the future.

Third, company executives should still measure customer satisfaction with their product or service. I prefer the question “How satisfied are you with your purchase from [company]?” The scale for responses should be Very Satisfied, Satisfied, Neither Satisfied Nor Dissatisfied, Dissatisfied, or Very Dissatisfied. Those dissatisfied or very dissatisfied should be asked the reasons for their dissatisfaction. The goal is to increase the percentage of customers who say they are Very Satisfied. Why the emphasis on Very Satisfied customers? A number of studies have shown that satisfaction is not a high enough bar – - many satisfied customers defect when an alternative becomes available. There is a high correlation however, between being very satisfied and being loyal.

Finally, it is important to measure attributes such as quality of the product, quality of the people, and delivering what was promised. For a service firm, these attributes might include knowledge of the people, responsiveness of the people, delivery of the service when promised, quality of the recommendations made, etc. The scale I recommend is “Excellent, Very Good, Good, Fair, or Poor.” The answers to these questions serve as a diagnostic tool, indicating where the company should put its emphasis regarding continuous improvement.

The combination of measuring overall satisfaction, perceptions of quality on important attributes, intention to return, and likelihood of recommending the company serves as a powerful dashboard of how the company is doing in the eyes of customers. Typically this is measured quarterly or annually. If the company has a large number of customers, a sample may be used rather than trying to get responses from everyone. The survey may be done by telephone, mail, or via the Internet – - the key is to use the same methodology and questions over time so that progress can be measured and goals can be established.

Ideally when customers have experience with more than one supplier in the industry, the company will also ask about competitors so relative measures can be obtained as well as absolute measures. If 60 percent of customers are very satisfied with your service but 80 percent are very satisfied with a competitor’s service you have a problem.

Too many companies pay too much attention to obtaining feedback from customers and not enough attention to getting feedback from former customers and noncustomers who are prospective customers. Ratings by customers are typically very high, giving the false impression that everything is wonderful. The more dissatisfied customers defect, the higher the ratings by current customers. Thus it is important to conduct research from lost customers to determine why they left so that problems can be fixed.

It is also important to conduct research to understand the needs of prospective customers. Their needs and attitudes may be very different from those of current customers. Assuming they are the same can be a big mistake.

So, it isn’t as simple as asking one question. Only with a comprehensive feedback system can a company truly take the pulse of the market. Failure to do this will result in suboptimizing the company’s growth and profitability. And as is always the case, the most important thing is what is done with the information. Failure to share the information throughout the organization and not acting on the feedback from customers happens way too often. It’s a journey, not a destination. Happy travels.