What Do Your Customers Really Think?


We talk to business owners a lot about how their business is doing – and most of the time that conversation centers around revenue or profitability. And while that’s great…your financial metrics are important but they really don’t tell the whole story. It’s possible (and actually fairly common) to have good financial metrics and have an unhealthy or risky business. That’s why the Value Builder approach is so useful – Value Builder looks at 8 key drivers of the value and health of your business. Financial Metrics are just one of those drivers.

Another equally important metric that you should be thinking about on a regular basis – especially when it comes to your ability to scale your business – is Customer Satisfaction.  Intuitively it makes sense that Customer Satisfaction is important – you might have a great business model, strong financials, a great marketing plan and strong operational metrics, but if your customers don’t actually like you or your product very much you’re not going to last very long.  Even if you’re just average in Customer Satisfaction you’re going to have a hard time growing the business.

But how do you know if your customers are happy? Most business owners assume their customers are satisfied – maybe that’s based on a gut feel they get from talking to the sales team, or it’s from anecdotal emails or online reviews. All of those things can be interesting feedback – but they don’t actually tell you, in a statistically valid way, what your Customer Satisfaction or Customer Loyalty really is.

How do you determine Customer Satisfaction?

How do you really quantify Customer Satisfaction? That’s the question that struck Frederick Reichheld back in the early 2000’s.  Back then, a lot of large companies were using really complex surveys or combing through customer retention data but there wasn’t an easy or conclusive way to look at Customer Satisfaction or Loyalty that correlated to growth and referrals. Through substantial research over the course of a couple of years, Reichheld and his team finally identified what he called The Ultimate Question – one simple question that strongly correlates to tangible business success and growth. Here’s the question:

“On a Scale from 0 to 10, how likely are you to refer this company to a friend or colleague?”

The answers to this question fall into 3 categories (also part of the statistical research). Answers between 0 and 6 are considered to be Detractors – people who aren’t going to say nice things about you.  Answers of 9 or 10 are your Promoters – those customers who love you and are actively out telling people how great you are. To pull it all together, Reichheld realized you needed a simple way to look at the data.  His solution is what’s known as the Net Promoter Score – a single number that can give you a strong, statistically valid answer (especially if you trend over time) of how your customers actually feel about you and your prospects for growth.

The Net Promoter Score is easy to calculate – it’s simply the number of Promoters less the number of Detractors.  Let’s say you survey 100 customers and 40 of them are Promoters and 15 of them are Detractors. Your Net Promoter Score is 25  (40 – 15 = 25).  If you want to learn more about Reichheld and his process for figuring this out – here’s a link to a great HBR article: The One Number You Need To Grow

What does this actually mean? What’s a good score?

Every industry is different (as an example, phone and cable companies don’t tend to score very well), but the overall average Net Promoter Score (NPS) is around 15. Really great companies (think Apple, Google, etc.) score in the 50’s or higher.  Eventbrite – the online ticketing platform is notable because they’ve focused their entire growth strategy around promoters and improving their NPS.  They score close to 90, which is a big reason why they’ve received a lot of venture capital money and strong valuations over the last few years.

How are you tracking customer satisfaction?

When’s the last time you formally pulled together actual data on customer satisfaction for your business?  If it’s been awhile…or more realistically if you haven’t actually done it – here are a few ideas that might be helpful:

* Use the Net Promoter Score concept and question – it’s easy, it’s used by most of the Fortune 500 because it works and you can quickly get useful data.

* Frequency of the survey depends on how often your customers buy from you. Generally twice a year makes sense unless your customers only tend to buy every couple of years or so (i.e. car buyers), then you probably want to cut back to shortly after they purchase only.

* Best practices with NPS are to survey anonymously – there are tools out there that can help you with that.

Most businesses these days are driven or at least strongly impacted by word of mouth. If you don’t have a good way to figure out what your customers are saying about you, then you’re flying blind and you’re at risk.

Do you use the Net Promoter Score or some other consistent approach to quantify your customer satisfaction? What would it take to start tracking it? What kind of response do you think you’d get? We’d love to hear your thoughts – share them in the comments below.

Shawn Kinkade  Kansas City Business Coach