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We've
worked with several
clients recently
who woke up one
morning and were
shocked to realize
how many customers
had defected to
competitors without
a word of complaint.
Their
question for us:
How could we have
seen this coming?
How could we have
headed this off?
This
week we give you
the one question
(really!) that tells
you how loyal your
customers really
are to your business,
plus the top four
things you need
to know about using
this tool.
1) So What's
The One Question?
"On a scale from
0 to 10,
how likely is it
that you would recommend
us
to
a friend or colleague?"
Customer
satisfaction surveys
often overestimate
customer loyalty.
On average, at least
80% of the responders
will say that they're
satisfied.
And yet we know
that many of them
will switch to a
competing business
over the course
of a year.
Fred
Reichheld, a customer
loyalty expert and
author of "The Loyalty
Effect" and "The
Ultimate Question",
has boiled down
years of thinking
about this problem
into this single,
crucial question.
Here's
how you interpret
the response:
|
If the response
is: |
The customer
is: |
|
9 - 10 |
A promoter,
who is loyal
to your
business,
makes it
a point
to keep
buying from
you and
to tell
others about
your business |
|
7 - 8 |
A passive
customer,
who is satisfied
but not
enthusiastic
about their
relationship
with you.
They see
no reason
whatsoever
to tell
others about
your company.
Competitors
can easily
win their
business.
|
|
0 - 6 |
A detractor,
who is unhappy
and feels
stuck in
a bad business
relationship.
The less
happy, the
more likely
that they
criticize
your business
to others
and warn
against
it by pointing
out the
shortcomings. |
2) What Does
The Score Mean?
Once you've asked
the question, calculate
your "net promoter
score" (NPS) by
deducting the %
of detractors from
the % of promoters.
For example:
You survey 100 customers.
30% answered 9 or
10. 40% answered
0, 1, 2, 3, 4, 5,
or 6. Your
net promoter score
is 30% - 40%, or
a negative 10%.
It's the "net" of
your promoters less
your detractors,
in other words.
If your business
has a negative score,
you've probably
got customers leaving
the business as
quickly as you can
find new ones.
Simply pick a handful
of responses and
start talking to
your customers about
what's missing.
Owners
and managers in
the business should
have these conversations.
Don't delegate this
to junior sales
or service reps.
A
defensive, argumentative
or otherwise inappropriate
response to a "detractor"
customer can backfire
very quickly.
These conversations
aren't about selling
or justifying or
winning back customers,
but about listening
and learning so
that you can start
taking action.
If you have a
positive score,
pick a handful of
high-scoring responses
and start talking
to these customers
about what they
find so remarkable
about your business.
Then, look for ways
to systematize that
magic so that it's
not lost as you
grow. And
trust us, if your
score is positive
- you WILL grow!
While it's beyond
the scope of this
article, we'd also
encourage you to
work with your finance
director to quantify
just how much more
profitable your
most loyal customers
are in your particular
business.
It's not terribly
difficult to do
and it really helps
focus your efforts
when you understand
the bottom-line
impact.
If you need help
doing this, give
us a call at 877-851-0098
and ask for Leslie.
She's a former CFO
and loves this stuff!
3) Why Does Loyalty
Matter So Much?
Loyal
customers are your
most profitable
customers, even
in large businesses
with thousands of
customers, where
you might think
every customer is
the same.
Here's
why:
1) A loyal customer
who frequents your
business is likelier
to buy more and
different services
from you over time.
For
example, a loyal
customer starts
with Yoga I, then
Yoga II, and also
eventually buys
a yoga top, a yoga
mat, and some custom
yoga-themed jewelry.
She also usually
picks up an energy
bar after class.
Other customers
simply sign up for
the class and then
drop out of sight
once it ends.
2) They know your
business and your
product line, so
you save selling
effort and time
when they buy.
Say
your business specializes
in high-tech products
for body composition
analysis, metabolic
analysis, biofeedback,
software, AEDs and
other advanced tools
and equipment.
Loyal
customers think
of you first - but
only when they need
to buy this kind
of equipment.
They don't waste
your time asking
whether you carry
treadmills or elliptical
trainers, because
they're very familiar
with your product
line and they know
that's not your
focus.
And
you'll find that
you don't have to
jump through as
many hoops - reference
checks, product
demonstrations,
competitive comparisons
- because they already
know and trust you.
3) They also save
you selling effort
by telling other
people about your
business.
An
enthusiastic and
spontaneous recommendation
is priceless.
And because
they know your business,
the referrals they
send you are fully
qualified prospects
- they're usually
a great fit for
what your business
does.
Potential
customers who visit
your business because
of a personal recommendation
are extremely likely
to turn into paying
customers.
And you'll usually
find that the sales
process is shorter
and easier than
it is with, say,
walk-in customers
or those who respond
to an ad, for the
reasons we outlined
in #2 above.
For
example, perhaps
your wellness center
offers a weight
management program.
Prospects who heard
great things about
it from a friend
are much quicker
to join.
4) Loyal customers
are less likely
to choose strictly
based on price.
The
intangible emotional
value of the relationship
they feel with your
business is intertwined
with the rational
factors - features,
advantages, benefits,
and price - that
support their decision.
In fact, loyal customers
often rationalize
to themselves about
why paying a higher
price is the right
decision.
We
have a small neighborhood
health club here
in Dallas that charges
roughly $120/month,
at the top of the
market. It's
got the basics,
nothing special
in terms of the
equipment or facility.
But its members
love the personal
attention and service.
They don't buy based
strictly on price.
4) Why Does
This Question Work
So Well?
This
question probes
two dimensions of
customer loyalty.
First,
it taps into the
rational aspects
of customer decision-making.
Do your customers
think your wellness
business offers
the right store
hours, equipment,
programs, products,
expertise, knowledge,
and customer service
at the right prices?
Second,
it taps into the
emotional aspects
of customer loyalty
- critically important
in health and wellness
businesses.
Do your customers
feel that you treasure
their relationship
with your business,
that you treat the
relationship with
care, that your
business really
listens to them,
and that you share
their values?
5) What Should We
Do With This Information?
First,
avoid the trap of
bad profits.
We wrote about this
a couple of weeks
ago in
"Is Your Wellness
Business Addicted
To Bad Profits?"
These
business practices
produce vast quantities
of detractors very
quickly. People
who feel trapped
or taken advantage
of make sure that
everyone else they
know hears about
it.
Second,
as you start understanding
what motivates your
most loyal customers,
turn your owner
or founder's vision
into a system.
Many wellness businesses
were created by
a passionate founder
with a real vision
of how he or she
wanted to help improve
people's lives.
However,
as businesses grow,
that focus on customers
often gets lost
as the owner becomes
less hands-on in
the business.
That's often when
customer loyalty
starts ot suffer.
Everything
you do - hiring,
firing, and rewarding
employees, adding
new products, your
customer service
policies, and more
- should be done
with a view to how
you can preserve
the vision of the
business as it grows.
That will strengthen
customer loyalty.
If
you want to read
more, read Reichheld's
two excellent books:
The Customer Loyalty
Effect and
The Ultimate Question.
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