The ONE Number You Need to Know

BY DR. MARK MURPHY, DDS, FAGD

For several years now I have been talking about customer satisfaction and customer loyalty, and now customer engagement. The Pankey Institute, (with whom I have been associated with for more than 30 years) taught us very much about surveying our customers and understanding the role of employee loyalty and engagement.

In 2004, I read an article in the Harvard Business Review by Fred Reichheld that really took a look at survey data gathered over a long period of time and summed it up in a single, focused question.“How likely are you to refer your friends of colleagues to do business with us?”

That question is scored on a 0 to 10 scale with 9 and 10 being the true promoters of your business model. Scores of 7 and 8 turn out to be passive promoters and are completely dropped from any of the calculations. And then the 0 to 6 scores are considered negative and called detractors. Although they may be doing business with you, these are people whose lack of encouragement (in fact even discouragement) of other people from using your services acts to detract away from your growth development and good profitability of your business.

This ultimate question yielded three types of client customer interactions and relationships. It can be used to define what is called a net promoters' score. That is to say, that we take the percentage of promoters of your business subtract the detractors and we get a result that represents our net promoter score. Across all businesses the data that has been gathered form thousands of company’s net scores, stands just below 10 percent promoters as an average. 

When you first ask this kind of question in a brief 5 to 10 question survey, whatever score you get is a starting point. This starting point then can be used so that you can define, design, and execute strategic plans and initiatives to improve the likelihood that your clients and customers will become raving fans. People who enjoy doing business with you so much would feel comfortable leveraging their relationships and recommend a friend to you. That is a true and significant measure of satisfaction loyalty - trust really. 

One of the interesting discussions that Reichheld has in his book besides net promoters' score is that concept of good profits and bad profits. Reichheld talks about companies not being able to tell the difference between good and bad profits and as a result, often become hooked on bad profits. These kinds of profits can choke true growth and prevent the company from reaching the greatness of which it is capable. Examples include when a customer feels mislead, mistreated or ignored. Bad profits don’t really show up on the books in terms of being recognized as a different type of income, but they are the profits that are made at the expense of customer relationships. Bad profits often produce detractors. These are people who are still doing business with us, but cost the company far more that other liabilities on the balance sheet.

The alternative would be developing good profits. Good profits are earned when a company delights its customers such that they are willing to come back for more and tell their friends and colleagues. Amazon.com, for example, could easily afford to advertise more than it does. Instead, it channels its investments into free shipping, lower prices and service enhancements. Founder and CEO Jeff Bezos has said if you build a great experience, customers tell each other about that. Southwest Airlines doesn’t charge for luggage or flight changes, instead they offer passengers a credit that can be used any time in the next 12 months. Also, they have replaced the industry's segmented pricing structure with a transparent two tier pricing policy. Not to mention when you fly Southwest you always seem to have fun.

We mentioned earlier that net promoters' scores across the United States hovered just under 10 percent, but here are some net promoters' score stars: Home Bank, Harley Davidson, Costco, Amazon, Chick-Fil-A, Ebay, Vanguard, SAS, Apple, Cisco, FedEx, American Express, Dell, and Electronic Arts are all example of companies with net promoter score above 50 percent. That is an incredible feat. 

I think in our businesses, the dental laboratory service and manufacturing industry, we have an opportunity to use net promoter scores to help us identify the right kinds of customers and the right kinds of business policies that enhance customer experience. If we build a great experience for our clients, customers, and doctors, I believe they will tell their friends and we will grow. In fact, in every article I have ever read, the number one source for new customers in the dental laboratory profession has always been existing customer referrals.

Let's develop strategic plans and initiatives that support and enhance the customer experience and create more promoters.