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Perspective

The Mother Of All Questions
TalentSprint's Santanu Paul explores the science behind word-of-mouth and the key to retaining customers

A recent ugly spat with customer care at the earth’s biggest store reminded me that despite lofty claims to the contrary, caring for customers really isn’t common. It didn’t help that shortly thereafter; my wife and I had another bruising episode with customer care at India’s smartest cab service, after it had dispatched to us India’s dumbest cab driver. These back-to-back episodes were a throwback to an old French saying “the more things change, the more they stay the same”. For all the corporate sloganeering about why the customer is king, and how a customer in hand is worth two in the pipeline, the fact remains that most organizations haven’t really evolved much at all. Faced with difficult customer situations, many folks at customer care still do not take accountability to solve real problems. Instead, they rush to protect their own hindquarters and try to pin blame on their customers.

If your company routinely ignores customer requests, or blames them for having problems with your product, consider it a suicidal strategy. Unhappy customers self-segregate into three groups – annoyed, angered, and aggravated. Annoyed customers simply stop being loyal, snuffing out perhaps a long and silent allegiance to your brand. Angered customers tell their near and dear ones about how you dealt with them. In an era where most retail purchasing decisions are based on what we hear from our friends and families, the ripple effects are large. Aggravated customers wreak havoc by telling the whole world about how they feel. Watch singer David Carroll’s music video titled United Breaks Guitars and imagine you were involved in running that airline. You would likely want the ground beneath to part and swallow you up.

Some of the most exciting research and insightful commentary on the science of customer loyalty comes to us from Fred Reichheld, an alumnus of Bain & Company, by way of his elegantly titled book, The Ultimate Question. It used to be fashionable to believe that customer loyalty is an abstract and elusive concept, hard to manage and impossible to measure. Reichheld changed that forever. Through research spanning many decades and multiple companies, he showed that customer loyalty, just like revenue and profit, can be (and indeed must be) systematically measured, managed, and improved. More fundamentally, he demonstrated that customer loyalty is directly proportional to word-of-mouth power, that holy grail of marketers. Icing on the cake, he even showed us how to measure the word-of-mouth power of any organization.

At the heart of his elegant customer loyalty framework lies a metric called Net Promoter Score (NPS). To compute NPS for your organization, select a random sample of one hundred customers and ask them the 'mother of all questions'. 'On a scale of 1-10, how likely are you to recommend us to a friend or a colleague?’ Once you receive the responses, divide them into three buckets. In the first bucket, place the responses that are either a 9 or 10, and label that bucket promoters. In the second bucket, place the responses that are either a 7 or 8, and label it passives. In the third bucket, place the remaining responses that are 0 through 6, and label that as detractors. Once done, toss aside the passives and focus only on the promoters and detractors. Your Net Promoter Score or NPS = (promoters - detractors). So, in effect, if your mix of promoters/passives/detractors is 50/20/30, your NPS = 50–30 = +20. If it is 20/10/70, your NPS = 20-70 = -50. If it is 35/30/35, your NPS = 0. The calculation is a piece of cake.

What could NPS, this astonishingly humble metric that can range anywhere from +100 to -100, possibly tell you? A whole lot of stuff, apparently. For starters, promoters are customers who love your organization so much that you might as well think of them as your sales ambassadors. They are the ones raving about your products to their friends and on social media, spreading a positive word of mouth, unbidden by you. Detractors are their exact opposite. They are publicly airing grievances against you, their hostile rants serving as a negative word of mouth. The passives are neither excited nor disillusioned; they are simply unmoved to contribute any word of mouth at all. In essence, NPS quantitatively captures the net word of mouth power of your organization. If your NPS is well above 0, it means a majority of your customers are happy and willing to give you strong referrals for free. If it is well below 0, a majority of your customers are disgruntled and dissuading others from doing business with you.

And that is not all. It turns out that NPS is a strong leading indicator of profitable growth. This makes intuitive sense. As NPS rises, thanks to the strong tailwind of referrals and repeat sales, more customers come in easily through the door even as the unit economics of doing business keeps improving. This is a virtuous cycle of profitable growth. On the flipside, as NPS falls, referrals and repeat sales start to grind down, and businesses can enter a vicious cycle of decline and decay. What makes NPS potent is the way it accounts for and accommodates extreme customer responses at both ends of the spectrum. Instead of dismissing exuberant or abusive customers as inconvenient outliers, it factors their voices into the calculation and dispenses with lukewarm customers instead. It ditches the ‘average’ in favor of the ‘spread’.

One of the best things to do with your baseline NPS data is to put in place a living and breathing plan to sustainably improve it. The essence of such a plan lies in leveraging promoters, activating passives, and defusing detractors. Promoters must be thanked, recognized, and pressed into active referral duty to find new customers. Passives should be awakened, engaged, and converted to promoters with high touch actions. Detractors need to be acknowledged, pacified, and morphed into passives, to ameliorate their negative word of mouth.

Some years ago, I broke my favorite pair of sunglasses and took it to a neighborhood eyewear store for evaluation. I had not purchased it from them, so they were under no moral or business obligation to help. Yet, they empathized with the situation and eventually restored it to as good as new. Elated, I offered to pay for their diligent, painstaking work. To my amazement, they refused! It had been a learning experience for them, they said. I have not patronized any other eyewear store ever since. There is no earthly reason to. It is unlikely anyone at that eyewear store has even heard of the mother of all questions, much less read a book about it. Mercifully, it is not getting in their way of accumulating promoters by the legion. Amen.

Santanu Paul is Co-Founder and CEO at TalentSprint and reachable at santanu@talentsprint.com and @SantanuXPaul

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