Do you really want to know what your clients think? NPS, client loyalty and success!
In our last blog, we discussed that an increase in loyalty will lead to an increase in profits. The next step is to gain an understanding of your clients’ loyalty and it may be easier than you think!
Bob Hayes, author of Lessons in Loyalty, breaks loyalty down into 3 measurements: retention, advocacy and purchasing:
“Different business growth models exist, but they all share one common premise; the primary factor responsible for driving business growth and company value is customer loyalty – the degree to which customers experience positive feelings for, possess allegiance to and exhibit positive behaviours toward a company.”
Bob E. Hayes, Lessons in Loyalty.
In this blog, we will focus on ‘advocacy’ for success; in particular, measuring customer satisfaction and the propensity to recommend.
Net Promoter Score & advocacy
Net Promoter Score (NPS) is based on the theory that if a client is truly pleased with a supplier, they will recommend them to friends and colleagues. It measures the level of satisfaction based on the response to the question:
“How likely is it that you would recommend (Insert your firm name here) to a friend or colleague?”
NPS is considered to be the industry standard by leading customer service oriented companies; these brands are also using NPS to support their customer service objectives. They include Apple, American Express, Amazon and accounting firms including PwC, KPMG, Deloitte and BDO.
The NPS equation
In analysing the response to this question, firms can gain the knowledge of which clients are:
- Promoters – A firm’s strongest allies
- Passives – Need extra attention to become promoters
- Detractors – Require immediate attention – probably the largest opportunity to convert to Promoters (or exit your firm).
NPS is a simple calculation. The percentage of Detractors is subtracted from the percentage of Promoters to calculate the NPS score for our firm. NPS = Promoters – Detractors.
For the purposes of the calculation, the Passives group is ignored. The firm’s NPS could be as high as ‘100’ or as low as ‘-100’. A score of zero (0) is considered to be a reasonable score (i.e. the firm has as many Promoters as Detractors). Leading customer service oriented organisations are scoring 70 or more.
Perhaps the most compelling reason of all is to improve your understanding of your clients. After all, you invest a lot of energy and resources into acquiring clients;
- Retention: You don’t want to lose ‘good’ clients
- Advocacy = Growth: Clients are a huge source of referral. In our experience, the primary source of growth is referrals, with as high as 95% of growth attributed to this source.
Take, for example, your own clients in your professional services firm. Ascertaining if your client is a ‘promoter’, ‘passive’ or a ‘detractor’ will enable you may find out if you are or are not meeting client expectations (rather than working on the assumption that if they are still with us, they’re obviously happy). Being able to label them, is a starting point for your strategy of ‘what to do next’.
NPS can provide a warning sign that you are not managing your clients effectively. It is a tool to take action:
- For you to work on your client relationship
- Change internal delivery processes and / or
- Stimulate innovation i.e. Reassess whether your services are actually meeting client needs and develop new ones to make sure that you are.
It is also, reflective of your client’s satisfaction and an opportunity to ascertain their propensity to recommend – and then ask them to do so. Your ‘promoters’ are a great source of referrals, testimonials, innovation and cross selling.
Loyalty – Retention – Advocacy and Success
When your client is a Promoter; they are less likely to go elsewhere for services. Retaining ‘good’ clients and minimising attrition is imperative to sustaining firm growth. Bain and Company research suggests it costs at least 6-7 times more to acquire new clients than it does to retain current clients – another reason to ‘ask’ the question!
Advocacy and referral is obviously a bonus. Imagine if you gained referrals from just your top 5% of clients and the impact that it would have on your firm’s bottom line. It is evident that referred prospects are the most valuable as they are already primed for sale Often the referrer has identified you as the solution to the issue experienced by the prospect, providing a credible reference for you.
Using NPS to turn your ‘blue sky’ target into a client is a powerful way to understand your clients and grow your business.
For those firms that do not have the resources to implement NPS; client satisfaction surveys can be effective when used consistently. These surveys can also support your client relationships, provide opportunity for testimonials and measure your clients propensity to recommend.
Firms may hire independent consultants to conduct client satisfaction surveys that will identify areas for improvement or opportunities. If you have resources in-house; marketing and business development staff may also have the skills to develop a simple survey to ask your clients to rate your services. Immediacy is important. To proactively grow your firm, it’s best to gain feedback upon completion of an engagement. If a large or ongoing engagement, gain feedback at milestone intervals.
Even requesting to conduct a ‘testimonial’ interview with a client can be a good indication of satisfaction and offer opportunities for cross – referral and / or new client referral.
The Thought Leadership Initiative have supported clients with the rollout of NPS, client satisfaction surveys and testimonial support. When doing so, we find that it also supports your firm to develop key account management processes.
Client loyalty and advocacy has a direct correlation with your client experience and relationship. We will investigate this in our next ‘just a thought’ blog – ‘Key account management – not another round of golf’.