Extracting Top Line Growth from Customer Satisfaction

The connection between satisfied customers and profitable growth is not surprising, yet extracting top line growth from customer satisfaction is not intuitive. Many companies spend significant time and resources in complex surveys and statistical analyses that do not yield expected changes or improvements to revenue growth. However, one simple and effective method to determine the efficiency of a company’s growth engine is to calculate the company’s Net Promoter Score (NPS), a methodology developed and espoused by loyalty guru Fred Reichheld (1). NPS is especially relevant in today’s more challenging economic environment when the tendency might be to forego customer surveys. This methodology offers a cost effective way to identify issues and develop targeted initiatives to improve top line growth.

Reichheld, an author and director emeritus of Bain & Company, developed the NPS system in the early part of the decade through an extensive number of customer surveys meant to determine which questions had the strongest statistical correlation to behaviors that can drive profitable growth. Starting with 20 questions on his Loyalty Acid Test (2) and with information from over 4,000 customers across six industries, Reichheld discovered the “right question” as an indicator for profitable growth to be:

“How likely is it that you would recommend [company X] to a friend or colleague?”

Reichheld developed a scale from 0 to 10 which would measure responses, with 10 being most likely to recommend. He then categorized responders into promoters (scores of 9 or 10), those passively satisfied (7 or 8) and detractors (0 to 6). The Net Promoter Score is the percent of promoters less the percent of detractors.

The benefit of using NPS is in its simplicity and effectiveness, and over the years many companies, including GE and others, have become leading evangelists. Customer loyalty is unquestionably important to growth, and elevating awareness to how a company performs on this measure can target management time, resources and attention. High loyalty reduces customer acquisition costs, can increase recurring revenue and provides opportunities for cross-selling and up selling. The base NPS score allows management to dig further and understand why NPS scores are low. This followup is a necessary part of the process and allows a better understanding for significant ways to improve both growth and profitability.

Asking the right question is revelant to every organization and who is asked is equally important. In certain industries the customer is identifiable, but in B2B companies there may be multiple constituencies who influence the sale in various ways. Regardless of methodology and even how many people are targeted for feedback, the value of customer outreach is clear. In gathering information, there are a few key considerations that will improve feedback and more importantly the execution on actions that tie outcomes to profitability within your organization. When it comes to customer surveys:

Keep it simple – whatever method used to tap into the pulse of your customers – make sure it is clear, simple and easy to implement. A simple one question survey can yield valuable information and with email and online tools, the costs are not high and can be implemented even when budgets are tight (in more challenging economic conditions such information can be especially valuable). Appropriate follow up and further analysis can take place once detractors and/or problems are identified.

Make it timely – current information is the most relevant and reliable. Getting customer feedback as close to the experience as possible provides timely information and allows immediate attention if necessary. In B2B situations, measuring customer satisfaction in intervals during a longer project or system implementation is helpful in order to identify red flags or problems brewing. Ask often and consistently to get accurate timely results.

Follow up and act – more important than the measure used is the ability to get the right information to those who can act on it. Vulnerable or unhappy accounts are the ones requiring immediate outreach and attention. In fact, unhappy customers whose problems/issues are addressed and successfully resolved can become the most loyal promoters. For any effort to be effective, you need ownership throughout a business unit or function. Make the number transparent throughout the organization and set goals and objectives that are achievable. Reward positive progress.

Not surprisingly, companies with the most efficient growth engines such as Amazon.com, eBay, Costco, Dell and others have NPS efficiency ratings of 50 to 80%, and even they can improve. Establishing a baseline and then looking at it in context to other industry participants can help you develop ways to improve performance and profitable growth. For more information on how to develop a successful and actionable customer feedback process and for suggestions on experts who can assist you, please contact your GA team.

1. Reichheld, Frederick. “The One Number You Need to Grow.” Harvard Business Review, May 2003.
2. http://www.loyaltyrules.com/loyaltyrules/acid_test_customer.html