Why We Need to Care About Future Growth

Posted by Opinion desk on 28 May, 2012 / Features

By Jason Stewart , Co-owner and MD of HaveYouHeard

The Net Promoter Score is somewhat like Juan Smith in rugby, Banyana Banyana, or nurses in general… Highly effective, potentially very powerfully, yet highly underrated.

It was developed by the renowned measurement guru, Fred Reichheld, in conjunction with Satmetrix, with the initial goal being to identify a loyalty metric with the strongest possible link to financial growth.

After years of testing different customer loyalty measurement options, one golden question was identified as being the best indicator, including the customer’s probability to purchase and spread word of mouth. Here it is: “On a scale from 1 to 10, how likely are you to recommend Brand X to a friend?”

If a person rates their likelihood as a 9 or 10 out of 10, then they can be deemed to be a Promoter of the brand. People rating the likelihood as 6 out of 10 or less are deemed brand Detractors. A brand’s Net Promoter Score is then calculated by subtracting the percentage of brand Detractors from the total percentage of brand Promoters.

The score provides a clear indication of how efficient your company or brand is at customer delivery, as well as the future growth that can be expected. Simply put, the higher the recommendation rate, the more people will start purchasing. 

Ideally, therefore, we want to be performing at a level where 100% of our customers would recommend us, rather than the worst-case scenario of all of them not wanting to recommend us at all.

A company or brand sits somewhere in between the +100 and -100 scores. An incredibly good score sits anywhere between +50 and +80, with a point of reference being Apple (sitting at +67) – reflecting exceptionally high future growth rates.

Most brands, however, hover at around 10%, showing that there is very limited potential natural growth, with some brands even having a negative score.

The score also needs to be evaluated in the context of competitors including the relevant industry. Some industries are fraught with customer problems and others not, therefore it all adds up to influencing the amount of people willing to recommend you.

More importantly than gauging potential future growth, the Net Promoter Score helps shift our mindset into focusing on how we can turn existing customers into Promoters (since we receive higher growth rates from looking after existing customers rather than trying to lure new customers).

A company that has benefited greatly from this mindset is online retailer Zappos. They decided that rather than spend money on trying to acquire new customers, they would rather use that budget to improve the experience of existing customers by making delivery free and fast while providing a 12-month return policy.

Such an offering was unheard of at the time, and even today is little followed by other e-retailers. Incredible brand growth resulted. Such was the appreciation for the company that customers actually travel to the head office for company tours at what is essentially a call center and warehouse!

Merely asking the question, though, won’t make a difference. We need to be able to identify performance gaps that can be improved upon to make the brand in question stand out from a customer-centric point of view. Bringing the customer and their needs back to centre stage is the name of the game, and the entire organisation needs to be focused on this.

How important is future growth to you?  Whatever your answer might be, asking the golden question above will clearly indicate how your brand is perceived in the market and indicate what action might need to be taken to win over Promoters and ratchet up valuable sales in the process.

http://www.haveyouheard.co.za/

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