Using Customer Feedback To Drive Growth

If you’re still using market-research mechanisms to measure customer loyalty or Net Promoter Scores (NPS), then you may prefer to read this article first. However, if you have real-time or near-real time customer feedback, rich in actionable and attributable information, or just want to plan ahead for NPS improvements, then read on…

Negative or Detractor customer feedback is a powerful motivating force to drive service improvement & recovery. Detractor comments and stories are often tangible, emotionally charged and point to significant company failings. What could be more natural or satisfying for a manager than to understand why these issues have arisen and implement fixes as quickly as possible?

Well, issue resolution and service recovery isn’t the wrong approach, it’s just incomplete. Converting detractors to neutral usually means addressing service failures. Moving neutrals to promoters often takes a more imaginative approach, understanding how to exceed expectations and really impress customers. And generating greater profits from loyalty is another step again. The value of loyal customers or promoters is well documented elsewhere, e.g.  Dell’s analysis that a detractor cost them $57 in lost profits, while a promoter generated $328. (Source: The Ultimate Question, Fred Reichheld).

Therefore, we recommend our clients take a balanced approach when tackling customer satisfaction or NPS improvements;

1. Address the issues contributing to detractor feedback & scores, both locally and systemically.
2. Focus on moving the loyalty curve to the right by addressing the customer, not just the tangible issues annoying detractors. (see diagram below)
3. Break down results and introduce improvements to the most valuable segments. All customers are not equal - where should investments be made in order to gain the strongest returns?

The first target achieves consistent, convenient service for customers and the second focuses on exceeding customer expectations and delighting. These targets are described in more detail in Figure 1. The third really makes the money!

Figure 1: Targets for raising NPS.

So what's the importance of segmentation? Using retail banking as an example, the top twenty percent of customers generally account for more than ninety percent of a bank’s profits.  Yet statistical sampling of NPS assigns one vote to each customer. So if you're sampling  customers randomly, about eighty percent of the feedback will come from customers who generate less than ten percent of all profits. This leads to addressing the highest priority issues of all customers, not necessarily the issues facing your most profitable customers. There is therefore a significant risk that time, resources and budget will be misallocated.

The introduction of a NPS closed loop feedback mechanism is therefore just the beginning of the transformation of an enterprise into a company with sustainable growth achieved through delivering what profitable customers want. Contact us if you would like to know more…