Marketing that drives profits and growth

In a previous post entitled “Optometry Marketing through Customer Engagement” we highlighted the importance of customer advocacy in reducing the cost of customer acquisition through increased customer loyalty. Customer advocacy is an important measure that identifies ways to improve customer value and profitability. Obtaining customer advocacy can be achieved by exceeding customer expectations and increasing customer satisfaction. But how do we ensure that customers are satisfied to the point that they would advocate and promote our products and services? The answer is through an advocacy analysis.

Growth comes from the introduction of new products, innovations, but also from loyalty. Therefore, to ensure growth through loyalty, it is imperative that we understand how to measure and manage loyalty. Many companies tend to focus on measuring customer retention rate as an indicator of loyalty. Retention rates provide an indicator to profitability, but not to growth. Other companies focus on measuring loyalty through customer-satisfaction measures. Customer-satisfaction measures lack a reliably palpable connection to actual customer behavior and growth. The net promoter score (NPS) can be considered one of the best advocacy measures; it is the degree to which customers speak positively of a brand. The NPS was presented by Fred Reichfield in a 2003 Harvard Business Review article “The One Number You Need to Grow”.

In measuring the NPS companies ask customers “How likely is it that you would recommend [Company X] to a friend or colleague?”, and answers are presented on a scale of 0 to 10 where ten means “extremely likely” to recommend, five means neutral, and zero means “not at all likely”. The scale identifies three logical clusters of customers:

The “Promoters”, customers who have the highest rates of repurchase and referral, scored 9 to 10.

The “Passively satisfied” scored 7 to 8.

The “Detractors” scored 0 to 6.

The NPS reveals that customers are more likely to be discriminatory when asked to rate their “likelihood to recommend” rather than simply being asked to rate their “general satisfaction”. Therefore, customer-satisfaction measures cannot be used as growth measures. Moreover, monitoring NPS is easy and very insightful to companies, because it is thought that companies are more likely to change their strategy and behavior toward increasing customer loyalty when they have a negative NPS. In a sense, NPS is employed as a benchmark and actionable feedback to improve the business strategy.

NPS has become the industry standard before the Social Web. With today’s social media many start to think that NPS has become obsolete. It is true that social media is a more technology-based way of providing insights and measures, however, we should focus on what we are trying to measure: growth through loyalty. Social media provides a public opinion into how your social circle of friends feels about your brand or product. It is not a specific measure of customers who have bought your product and are potential for advocacy to new customers. A positive social media feedback provides insights into a good brand’s awareness but cannot be employed as an indicator of growth like the NPS. Your marketing research should rely on both insights from social media and NPS monitoring.