The purpose of achieving satisfied customers is maintaining customer relations and a sale. And customer satisfaction is thereby also about creating customer loyalty.
In the last 5-10 years, a very simple measurement technique – Net-Promoter-score (NPS) – has spread everywhere. There are many people who can get something out of NPS-measurements. But NPS also has its limitations – especially for B2B-companies.
We will cover everything in the following but we will begin with our “message” somewhere else. At a motorcycle factory in Great Britain – at Triumph.
The essence of customer satisfaction and loyalty – data from Triumph
Triumph motorcycles sell through 700 dealers and their own shops in 35 countries. As in most businesses there is a tough competition for the customers and management is aiming to differentiate itself on customer service as a decisive parameter. On-going customer studies with several thousand customers are carried out to motivate the dealerships to provide an outstanding customer service. Plus use the studies to shape the elements of the customer service concepts.
Question 1: Will you definitely recommend the dealership to others?
- Customers with a bad experience at the dealership: 2% of them would recommend the dealership
- Customers with an acceptable experience at the dealership: 4% of them would recommend the dealership
- Customers with a good experience at the dealership: 24% of them would recommend the dealership
- Customers with a very good experience at the dealership: 75% of them would recommend the dealership
- Customers with an outstanding experience at the dealership: 97% of them would recommend the dealership
Question 2: Would you definitely buy a Triumph, if you were to buy a new motorcycle?
- Customers with a bad experience at the dealership: 25% of them would again buy Triumph
- Customers with an acceptable experience at the dealership: 25% of them would again buy Triumph
- Customers with a good experience at the dealership: 29% of them would again buy Triumph
- Customers with a very good experience at the dealership: 43% of them would again buy Triumph
- Customers with an outstanding experience at the dealership: 63% of them would again buy Triumph
The tables tells us many things but 3 important messages are:
1. A really good customer performance is in itself good marketing
2. In order for the loyalty effect to give a repurchase, it demands an outstanding experience.
It is for most people surprising that a “medium-good” customer experience is close to worthless.
3. If you want to use the customer measurement for action, additional questions have to be asked.
NPS - Net Promoter Score (net-recommendation-percentage)
- Practical completion
- Application and proposal
The NPS measurement was invented in USA by Fred Reichheld, Satmetrix Systems and Bain & Company. NPS is documented through studies that showed that NPS can be used to predict customer loyalty and thereby growth opportunities etc. – In Aalund’s view, NPS is most useful on consumer markets or B2B markets where there are no large customers and complex buying centres.
In the NPS concept, they have managed to boil previously complex satisfaction and customer models / analyses down to only 1 question.
“How likely is it that you would recommend our company
(or services) to a friend or colleague – on a scale from 0-10?”
An answer of 0-6 is a bad answer – and these customers are called “detractors”, whereas customers who give answers of 7-8 are called “passives”. Answers of 9 and 10 are classified as “Promoters”. Subtracting the percentage of answers that gave a rating of 0-6 from the percentage of people who gave a rating of 9 and 10, gives you the point score for NPS.
Net-recommendation-percentage (NPS score) gives an understandable overview of the company’s ability to maintain customers easily.
The loyalty (NPS) reads the customer’s need fulfilment + contact points + the overall experience.
NPS is good because it is firmly defined and very simple to execute. It is often a touch point measurement at every point of interaction that the customer has with our company. It can be triggered by events, such as a visit to the workshop. I.e. you direct the measurement at potentially all customers.
But can also be carried out through annual measurements – by total measurement – or sampling.
Another reason for the popularity of the NPS-method is that it is well suited for web based / smartphone surveys via customer database. Hereby it becomes cheap to carry out the survey.
You do have to stay alert regarding the low response rates of online surveys. Is the response rate around 15-25% it is inadvisable to use the results for anything. See the problem illustrated on Johns Blog post here
3 things we recommend:
1. There should be additional questions such as “why did you give this rating?”
2. It should be 1:1 answers; i.e. no anonymous respondents, so you can follow up on non-satisfied customers.
3. Most companies have the majority of customers in the category “passives”. Therefore it is not adequate to only ask those categorised as “detractors”. It is important to get a handle on the “passives” as they too can be lost. (see the Bump-model in the following)
An NPS-score can with the calculation method that is behind it, be within an interval from minus 100 to plus 100:
- A score of < 0 is a really bad result because there are more detractors than promoters
- A score of 0-50 is considered a good / OK score
- A score of > 50 is considered an outstanding score and is hard to achieve.
The score-level is often determined by the business you’re in. But within the business it is a matter of being at the top. Though you of course always want the score as high as possible.
Application and suggestions
1. In the B2B market you should only (exclusively) use NPS, if all the customers are small or relatively homogenous, as we know it from the consumer markets.
- Said in another way: If 20% of your customers deliver 80% of you contribution margin, then you can settle for web based interviews for 80% of the customers but the rest of the customers must be handled by telephone interviews. An expanded interview compared to the simple NPS-question.
2. There must always be 1 elaborating question, due to the fact that the NPS-number in itself does not bring you further in your work towards getting loyal customers.
3. If you use web based customer surveys, the response rate often dramatically falls to 6-25% as opposed to 60-80% in telephone surveys. Beyond that, the experience is that like the response rate, the valuable open answers drop dramatically in both the extent of the answer as well as the number of open answers given when doing web based interviews.
4. Make a test measurement first. Mange business people find it uninteresting to answer simple questions regarding satisfaction.
5. Even though the NPS-method looks simple you can risk ending up with an NPS-score that is wrong or a score the effectively gives no input for further developing customer satisfaction. Use therefor an advisor or supplier for quality assurance / inspiration before you begin.
B2B companies’ customer satisfaction measurement
1. A while ago we discussed customer satisfaction measurements and the communication of results with a Swedish industrial company with 10.000 customers worldwide. The company had both small and large customers who were all measured on an NPS-like basis using a web survey. The response rate varied from country to country from 7-16%. It did not result in an order for us, since it had been done the same way for years and they wanted the tracking to be maintained. Furthermore the survey could be carried out without a significant budget due to the fact that the internal time consumption was not registered. – It was recognized that the survey was uncertain and did not differentiate between large and small clients. But they were not willing to spend money on a new setup. In our opinion (and partly also the company’s) the collected and reported results were so uncertain and non-representative that they should not be used for any form of decision. In the worst case they would give a false image of the company’s customer situation.
2. One of Aalunds customers is a producer of semi-finished products for food companies worldwide. The company has 300 clients who purchase products for 4-6 billion DKK or 60-80% of revenue. The remaining revenue is divided between a few thousand customers. In this company they have chosen that the top-segment are to be interviewed per telephone once annually.
The themes are:
- Basics like product, price etc.
- Performance in cooperation
- People / chemistry
- Strategic match, short and long term
- NPS (the full customer experience)
The respondents are:
- The purchase centre consisting of multiple persons at every client
- Other central persons on touch point level (e.g. reception of goods)
- Non-anonymous interviews
- Involving the customer
- Problem tracking
- Defining the problem
- Identifying opportunities
- Base for action here-and-now and strategy
- Securing the relation to major central customers
3. The Bump-model – the road to better customer satisfaction
One of Aalunds customers – a bank – could not understand, that despite good customer satisfaction measurements, they were losing customers. It is not enough to have one number for customer satisfaction. You have to go deeper into understanding the business aspect of it.
Our surveys have shown, that even in a good partnership small bumps can occur, like wholes in a road.
If the customer’s satisfaction level is below 9-10 there is a great risk that 2-3 small bumps in the partnership can trigger a customer loss.
The figure below shows three unidentified bumps that triggered a customer loss for the bank.
”Why was a good customer satisfaction not enough?”
The example shows:
1. That at least once a year and preferably every 9 months you should scan the partnership for a “bump”.
2. That you should gear your organisation / customer contact persons for the identified “bumps” to be fixed immediately, because 2-3 accumulated “bumps” can trigger a customer loss.
Customer satisfaction and customer loyalty is a central part of running a professional business. It is about the system that you build around the measurement; the measurements information value and validity; the reporting of results; about the way the organisation is designed to continuously and pro-actively to work with further developing customer relations and loyalty.
The economic effect of the effort is substantial and can be measured relatively easy. E.g. on a reduced loss of customers, internal market share at clients and additional sales.