When I was a kid growing up in Brooklyn, my mother always told me “actions speak louder than words.” I would say, “OK” and then forget about it until the next time she mentioned it.
One day a kid in my class picked a fight with me and I overpowered him and said “Give up?”. He said “yes” and, while I still held him, I asked “promise never to start a fight with me again?” He again said, “yes,” so I let him go and he ran home. The next day he snuck up to me from behind and again jumped on me. I again overpowered him, and this time I had to threaten great bodily harm to extract a promise of truce. That is when I learned the true meaning of “actions speak louder than words.” His word was meaningless!
What does this have to do with loyalty you ask?
According to Satmetrix – “Net Promoter Score (NPS®) is the most popular and proven metric for measuring and acting on customer loyalty data.” The NPS is based on the answer to this question: “How likely is it that you would recommend our company/product/service to a friend or colleague”?
In other words, people are asked to indicate their intent to recommend the company/product/service to others. Like the kid who promised to never bother me again until he did.
In 1999, I was fortunate enough to read a wonderful book by Mark L. Feldman and Michael F. Spratt titled “Five Frogs On A Log.” The book is about mergers and acquisitions and is scary. The title comes from a child’s riddle:
Five frogs are sitting on a log.
Four decide to jump off.
How many are left?
Because deciding and doing are not the same things.
My conclusion is that when looking at customer referrals as a measure of B2B loyalty, which is a trailing indicator of growth, it is best measured by looking at actual outcomes – how often did your company receive a recommendation from a customer. There are two ways to gather the required data:
- Every time the company gets a lead that was not the direct result of company actions (direct mail, cold calls, unsolicited RFQ), ask how the prospect heard about your company. To be more direct, ask “Did any of our customers recommend us to you?”
- As part of your ongoing retention activities, ask your current customers “during the past 12 months, have you every recommended us to a friend or colleague?”. If they answer in the affirmative, ask “who?” If they answer in the negative, then follow-up with “did you have a chance to recommend us and decide not to?” If they say “yes,” ask why and take corrective action. Also, ask if they warned the other company not to do business with you.
If you ask the NPS question as part of your customer feedback process, then you should have enough information to compare intent and actual actions. Be prepared to be surprised. Every time I go through this exercise with my clients, I find that most of the NPS promoters have not recommended you. Follow up reveals that the usual reasons include no opportunity, he did not feel your company was a good fit for his friend’s needs, she would have liked to but she worked for the government and was not allowed to recommend any company, etc.
Also, I find that many detractors will still recommend your company. Sounds weird to me but when I follow up, I hear things like “I was unhappy with your company when I took the survey but overall you guys do a great job”, “you are the best fit for them and would make things work”, or “there is really no other choice so I recommended you but warned them about what to watch out for”.
As part of your company’s Balanced Scoreboard, I recommend you report Net Recommenders monthly; that is (actual recommendations) – (had an opportunity and did not recommend + specifically told them not to consider you). It is also useful to continue asking the NPS question to find out what your company is doing well (from the promoters) and what is very broken (from the detractors).
As in many cases with sales, value, customer experience, and loyalty, it’s all about the outcomes! Fortunately, for me, I learned this lesson early in life and so now it seems obvious. For those of you not fortunate to have learned this as a kid, I hope you will take this post to heart and apply it in your daily activities.