Why Customer Excellence?

There is little doubt that happier customers lead to a more profitable business. But, some would argue that making customers happier or more engaged is not worth the cost and effort. Today, I want to give you clear examples showing how increasing your customer engagement will dramatically improve your bottom line.

Customer excellence, customer engagement, customer satisfaction can all be tricky to measure. There are plenty of systems out there, but there is one system that has taken the incredibly complicated world of customer measurement and turned it into a single question – it is the Net Promoter Score (NPS).

NPS asks one simple question – “How likely is it you would recommend this product or service to a friend?” Based on the answers to the question, customers are lumped into one of three categories – Promoters, Passives or Detractors. You would expect a promoter to be a more profitable customer, but you will be amazed at exactly how much more profitable they are.

When Philips electronics implemented NPS they found that in markets where their NPS was the highest, their growth was 8% higher than their average competitor. If their NPS was in the middle of the pack compared to their competition, their growth only beat the average by 2%. In segments where Phillips’ NPS lagged their competition, their growth was 5% lower than the segment average. Those are huge differences!

In an analysis of the North American banking sector, Bain (the consulting firm that started NPS) found that promoters were significantly more profitable customers. In fact, they found the following about clients who were promoters:

  • Promoters give their bank 45% more of their household deposits than detractors,
  • Promoters buy 25% more products than detractors, and
  • Promoters buy a more profitable mix of products.

When Bain determined the lifetime value to the banks of promoters versus detractors they found that a promoter client was worth roughly $9,500 more to a bank than a detractor. In fact, they found that detractors actually had a negative lifetime value. That higher value does not take into effect the value of secondary referrals of additional customers or the decreased costs or serving promoters. Which would make promoters even more valuable!

Dell was able to prove that its promoters were worth $328 more than their average customer and detractors were worth $267 less than the average. British Gas was able to decrease bad debts by 90% and increase growth rates by 30% as they moved their NPS scores from 45% to 75%. And there are many more examples of the positive return on investment of increasing customer engagement.

Engaged and happy customers are truly worth the effort. There is no other factor that can profit your business more than loyal and engaged customers.

Are you convinced? I hope so. Next week we’ll dive into how to drive customer excellence throughout your organization.

Thank you for being a part of our values driven community!

Image courtesy of http://en.wikipedia.org/wiki/Pacific_Southwest_Airlines

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