Measuring Customer Loyalty and Customer Satisfaction
How to get it done in less than a day - An online implementation guide.
Most businesses are faced with a fairly straightforward question
today - How do I measure success? Obviously looking at the balance sheet every
month can give you some insights into how you are doing. However most of us know
that this is too late in the game to be pro-active in terms of how you react to
your customers needs.
We also understand that customer satisfaction and loyalty is
intrinsically coupled to the well-being and long term growth of the company. In
other words, the success of your company depends on how satisfied and loyal your
customers are. We are also aware of the fact that acquiring new customers is
about ten times more expensive than servicing existing customers. Very simply
put, loyal customers decrease acquisition costs and increase profitability.
The question always arises: "How do I effectively gauge the
satisfaction and loyalty paradigms?". It is not as difficult as you may think.
Amazingly, a single question can give you the insight you need:
"How likely is it that you will recommend [Product X or Company]
to a friend or colleague?"
Have them rate the answer on a 0-10 Scale. You can then categorize
the responses into three different categories:
These are your "Promoters" or your "Idea Merchants" - Very
satisfied and will trumpet your product or service any chance they
They are your "Passively Satisfied" customers.
They are the "Detractors" - fairly unsatisfied with you - Most
likely to leave you for a competing product or
Now the analysis is pretty simple. If you have 60-70% of your
customer base with a score between 9-10 you have a "word-of-mouth" sales force
working for you 24x7. They are happy with your product offering and are willing
to put their reputation on the line for you by recommending your product or
Another important measurement is the "Net Growth/Satisfaction"
score. This is the percentage of "Promoters" minus the percentage of
"Detractors" - this gives you a net indication of how many customers are
effectively "growing" your company.
Now the question is: "Why is this approach more effective than
traditional 'Customer Satisfaction Surveys'?" The answer lies in the statistical
phenomenon call "sample bias". Most traditional "Customer Satisfaction Surveys"
tend to be long, cumbersome and demand a lot of time and attention from your
customers. This leads to a very low "response rate" for your customer
satisfaction surveys. This low response rate in turn does not accurately
represent your customer base. For example, customers who are unhappy are not
likely to go through a long customer satisfaction survey.
The other problem with traditional satisfaction surveys is that
they are very difficult to analyze and produce ambiguous results - they are
hence not acted upon by upper management and dismissed.
On the other hand, if your customers get an email with a single
question embedded, the response rate to such a small survey will be much higher.
The higher response rate will eliminate the "sample bias" and you have the
relevant data that you need.
After all the title of the article
does say how to get this done in "under a day" - the world of online
self-service tools has paved the path for such technical implementation without
the hassle of servers, software installations etc. Although there are other
server based solutions available we will focus on 4 important factors:
- Self-Service - If you want to get a solution rolled out in 1 day you
should be able to use a point-and-click interface to create and deploy the
- Online and Web-Based - No software to install and no special
requirements. Should be able to create a survey using a Mac/Linux/Windows from
home or office or the beach!
- Integrated Analysis Tools - No need for third-party analysis programs