The customer is always right. Right? Well, 59% of companies take the time to measure customer satisfaction, so there must be something to it.
While it’s conventional wisdom that the customer comes first, it isn’t always clear exactly how you should go about putting the customer first. To get a little more insight, we broke out different methods for collecting feedback, with a particular focus on the increasingly popular Net Promoter Score℠ (NPS).
Keeping up with the competition
While most businesses measure customer satisfaction, there are a lot who don’t. Digging a little deeper, we found a big rift between companies of different sizes:
Whether it’s because they’re too busy or they don’t have enough customers to make a formal effort to measure customer satisfaction, the smallest businesses are much less likely to get feedback. On the flip side, about 80% of larger businesses measure customer satisfaction.
How do businesses measure customer satisfaction?
There are lots of ways to measure satisfaction—and no rights or wrongs. Given the many customer touchpoints that exist, there are times when an online survey makes a lot of sense. Other times, a focus group or one-on-one conversation is most likely to be productive.
Correspondingly, our results showed lots of methods are employed. In fact, 57% of the companies who measure satisfaction use more than one method.
In terms of how often companies measure satisfaction, it looks like they’re either constantly in contact with customers (60% measure satisfaction at least once a month) or prefer something more like an annual checkup: 29% report measuring satisfaction four or less times a year.
How does the Net Promoter Score work?
Calculating your Net Promoter Score is a simple and effective way of measuring customer satisfaction. Developed by Fred Reichheld, an NPS score is derived by asking your customers one question: How likely would you be to recommend our company to a friend or colleague?
The premise behind NPS is that companies who do a better job of developing fiercely loyal customers will tend to do a better job overall. It is technically a way to measure brand loyalty, but 86% of the people we surveyed consider it to be a measure of customer satisfaction.
Hair splitting aside, Reichheld’s research shows that companies with high NPS scores are twice as likely to be successful as companies with lower scores. Scores can range from -100 to 100. For companies who use SurveyMonkey to calculate their NPS scores, the average is about 45.
In this study, we saw additional indicators that NPS is a valuable—if underutilized—tool. Only 10% of our respondents had heard of NPS and just over 5% actually use it. However, 71% of those who use NPS say it is “very valuable” to their company (compared to 53% of respondents who use other methods).
We also used the NPS question to get Net Promoter Scores for various customer satisfaction methods:
At -44, the scores were fairly low across the board, but NPS was far and away the most popular method. It scored 20 points higher than the next highest method.
In terms of who uses NPS, we saw a strong slant towards larger companies. In fact, no companies with less than 10 employees said they use NPS (although almost a third of the smallest companies we talked to measure customer satisfaction in some way, shape, or form).
We also saw that most companies ask additional questions in their NPS surveys. Since the NPS question only asks whether someone would recommend a business, it doesn’t get at the specifics of why someone would or wouldn’t recommend you. All in all, it’s not too surprising businesses would want to supplement their NPS scores with more specific information about their customers’ experience.
So who is most successful?
Our findings echoed those of Fred Reichheld: 81% of companies who use NPS see themselves as very or extremely successful, compared 62% of those who don’t. The results were similar, but not quite as convincing when we looked at all companies who measure customer satisfaction as a group.
But how people define success can be a little arbitrary, so we asked businesses about something a little more quantifiable—profits. Once again, NPS came out on top, with companies who use NPS a third more likely to have growth rates more than 10% a year:
There was, however, one interesting wrinkle. Companies who use NPS were also most likely to have profits decrease by over 25%. This correlation could mean that troubled companies (who tend to be bigger if they use NPS) step up their efforts to understand what’s going wrong. But ultimately, it’s unclear what’s causing this low number.
Looking to the future, companies who measure customer satisfaction also tend to be much more optimistic about their profits next year. Any way you look at it, measuring customer satisfaction is good business. It’s even been shown to improve retention—even if you don’t act on the feedback you get!
Net Promoter Score and NPS are registered service marks of Bain & Company, Inc, Satmetrix Systems, Inc. and F. Reichheld.