I am a huge proponent of the concept behind the Net Promoter Score® (NPS)®. As you likely know the NPS® is calculated by asking customers:
How likely is it that you would recommend our company/product/service to a friend or colleague?
Respondents are given choices on a zero to 10 point scale. Those who indicate 9 or 10 are classified as promoters, 7 and 8 are referred to as passives, and respondents who answer 6 or below are viewed as detractors. Detractors are subtracted from Promoters leaving a Net Promoter Score®. While statisticians might obsess about the reduced predictive validity of an 11 point scale, I pragmatically see the core of this question as a key measure of customer experience.
Unlike Fred Reichheld (a man I respect greatly) and the genius behind the NPS®, I am not a proponent of relying on a single measure to encapsulate customer loyalty. (In essence, in his book The Ultimate Question, Fred has posited NPS® as the only customer relationship measure you would ever need.) Instead, I view NPS® as a well-validated predictor of repeat business and future spend. NPS®, when supplemented with questions about customer effort or the degree to which a brand fits the lifestyle of its customers, gets to the strength of emotional relationships (engagement) customers have with the brands they frequent.
In fact, I often see NPS® as a proxy for KPI’s like frequency of future visits and likely future spend. What I think is often misunderstood, at least in my experience, is “likelihood to recommend” is not a proxy for “will recommend”. This is a result of confusion between loyalty and advocacy. If I am a promoter (who gives your brand a 9 or 10 on likely to recommend) it means there is a high probability I will return and buy more from you. It doesn’t necessarily mean I will actually recommend you. Granted a loyal customer is more like to make referrals than a detractor.
Let me give you a couple of examples. There is a restaurant in my town to which I am 100% loyal. I would give them a 10 on a promoter question and can’t wait to spend money with them soon. That said, the restaurant is thriving. In fact, recently it seems to be so popular that I am having a hard time getting a reservation. Now let’s pretend you are a work associate and we are having a casual conversation about great restaurants in the area. I would be forthcoming about other restaurants but I’d hold back on “this gem”.
Here’s another example of how loyalty doesn’t result in referrals. Let’s assume you’ve incurred a death in your family and that the compassion, business ethics, and experience provided by the funeral director warranted a 9 on a promoter question. You would use the business again if a similar circumstance occurred but would you be likely to recommend the business to a friend if they lost a loved one? Unlike restaurant referrals, some business sectors are less prone to advocacy. Put differently, we are socialized to make referrals toward some types of businesses and not others.
So how do you turn loyalty into advocacy, irrespective of the business? The short answer is it takes conscious activation and gentle effort to drive advocacy. A longer answer will come in next week’s blog.
For now, hopefully, the “big ideas” of this week are that:
1.) a “likely to recommend question” predicts loyalty and future spend.
2.) loyalty and spend are foundational components to advocacy but,
3.) additional effort is needed to help your loyal customers become your advocates and your referral sources.