Customer satisfaction is the foundation for success of any brand, and businesses constantly explore ways to measure and improve this. You may be familiar with Net Promoter Score, the worldwide metric for businesses to measure customer experience. Results for a Net Promoter Score come from software that conducts customer surveys, and a high score has a proven, direct correlation to growth. So, now you have your score, but what do you do with it? How do you improve your score? How do you maintain a high score?
New breakthroughs in this space are helping businesses turn these scores into proactive responses for business growth. Satmetrix, the leading provider of cloud-based customer experience software for companies worldwide, now offers businesses the tools to actually measure and respond to a brand’s sentiment across the entire social media space. With so many customers taking to Facebook, LinkedIn, Twitter, etc. to post their experiences with different brands, this software is becoming critical in measuring customer engagement.
Steve Baxter is General Manager, Global Mid-Market Solutions for Satmetrix.
Prior to joining Satmetrix, Steve was the founder of a software company that created a simple two-question Net Promoter Score software solution that introduced the concept to the franchising industry. He has worked with franchising companies for over six years, actively participates within the IFA, and is a member of the IFA’s FranPAC president’s council. Steve is an engineer by education and has been involved in software for the past 23 years.
Franchise Chatter (FC): Your company, Satmetrix, is the co-creator of Net Promoter. What does the Net Promoter Score mean and how is it calculated?
Steve Baxter (SB): Net Promoter Score is a simple numerical measurement which shows how likely it is that your business will demonstrate profitable growth. In order to determine profitable growth, research was done from 2000-2002 to develop methodology. We researched 11 questions and picked the “recommend” question because it had the highest correlation to revenue and profit, and in turn, growth.
In determining a Net Promoter Score, the first thing we do is find out which customers are “promoters,” or those customers who are willing to put their reputation on the line to recommend your brand to people who trust them. The responses actually categorize your customers into two other categories as well — passives and detractors. We establish this by asking one question: “How likely is it that you would recommend the company to a friend or business associate?” The customer responds using a 0-10 scale. Those who respond with 0-6 are detractors; 7-8 passives; and 9-10 promoters.
Next, we calculate the percentage in each category and “net” one off against the other by subtracting the percentage of detractors from the percentage of promoters. The result is your “Net Promoter Score.” The highest it can be is 100 and the lowest, -100. You use this score to benchmark yourself internally, from one quarter to the next; benchmark unit franchisees against each other and the brand average; and also against your competition. A key tenet of Net Promoter is 1) know your score, and 2) benchmark yourself against others.
FC: Why is it important for franchisors and franchisees to know and act on their Net Promoter Scores?
SB: I think most franchisors and franchisees would agree that customer feedback is important to the improvement of the business. What’s even more important is establishing or creating a system of feedback that allows companies to actually do something with the feedback to make cost effective improvements. Traditional surveys often fail because they’re too long, go to the wrong people, have low response rates, and don’t deliver actionable insights or even analysis by segment. The analysis needs to lead you to the place you need to be, which is a simple understanding as to whether or not what you are doing is working, as perceived by your customers.
NPS is a simple measurement based upon a customer’s total experience that notes whether they would put their reputation on the line to recommend you or not. If it’s going up, you’re doing well. If it’s trending down, you need to find out why, and fix it. We have found that loyalty leaders — those with the highest NPS scores in their industry — grow at a rate of 2.5 times faster than their “average” competitor.
FC: So that’s it? You just ask one question and you can improve your business to the point where you can become the industry leader?
SB: Not so fast. NPS gives you a score, a benchmark, but NPS isn’t just a score. It’s a discipline and a process embedded in the program. Just because you know your score doesn’t mean you know why you scored a certain way, and as your score starts to change, what is the cause of that change? Furthermore, as you begin to uncover why your score is what it is, you’ll also want to know what to change and how to prioritize the things that need changing.
Almost every company that starts off with Net Promoter using two questions (the “How likely is it you would recommend ______?” and “Why?” questions) moves to a more sophisticated version using up to 5-8 questions after a year or so, as they learn more about the concept and want to identify the drivers. Simply put, if all you have is a score and some text analytics to understand the customer’s reason behind the score, that’s not enough to help you determine what aspects of your business you should leverage, prioritize for improvement, or maintain.
Just because your customers are talking about “price” doesn’t mean to say that changing your prices either way will have any impact at all on their willingness to recommend you. What’s more important is why your customers are talking about price and the variety of actions you can take to change their opinions. New software with charts and graphs and in-depth reporting provide that type of insight.
FC: How is Satmetrix helping franchise brands utilize their Net Promoter Score to improve the overall customer experience?
SB: We’re doing two things. First, we’re helping franchise brands that are new to NPS gain an understanding of the core concepts and introduce the measurement across all their locations, so each franchisee can see precisely what’s working or not working and how they compare with their peers. We help them introduce a (tactical) closed-loop process whereby they can take action immediately when a customer responds with a negative comment; and then we introduce cross-functional reviews to change strategic processes based on alert trends.
We’re enabling their promoter customers to share their thoughts and recommendations on social media sites such as Facebook, LinkedIn, and Twitter. We’re giving them insight into precisely what is occurring within their business from the perspective of the customer. We’re then giving them the reporting tools to be able to spread the word throughout the business to every customer-facing employee to ensure everyone understands what is happening, what is wrong, and what needs to be done to improve the customer experience.
The second thing we’re doing is helping those brands that are already familiar with NPS go to the next level. As I mentioned before, those brands that have been using a two-question NPS system for a few years often reach a plateau, and what they begin to understand is that another year of implementing the same process will just mean twice as many reviews, twice as many social media posts, twice as many comments being analyzed, and the NPS score doesn’t move more than a point or two.
If the score isn’t increasing, you’re not improving the customer experience. Satmetrix helps these companies by taking them from this basic NPS approach to a more sophisticated and results-driven methodology while maintaining response rates. In fact, when we take people from two questions to 5-8 questions, the feedback isn’t just more informative, it’s also more statistically relevant.
To read Part 2 of this exclusive interview, please click here.