Optimizing Your Process:
Customer Loyalty Index
How Can You Increase Customer Loyalty?
Before you can improve a function or a result, you have to be able to measure it. To improve customer loyalty, you first must be able to measure it, and then determine where to focus your efforts to improve it. Like any process, to increase throughput (more loyal customers), you must know where the constraint to customer loyalty is located.
We believe the best measure of customer loyalty is based on the research done by Fred Reichheld of Bain and Company. His research has demonstrated convincingly (at least to us) that a useful measure of customer loyalty can be created using an index tied to a single question based on willingness to refer. The question:
On a scale of 0-10, what is the likelihood you would recommend a friend or colleague to our company (product or service as appropriate).
The index is scored (based on responses from U.S.-based people)* as follows:
- Scores of 9 or 10 are positive
- Scores of 7 or 8 are neutral
- Scores of 0-6 are negative
The index is calculated by taking the % of positive scores and subtracting from it the % of negative scores. The index can range from +100% (all scores are 9 or 10) to
-100% (all scores are 0-6).
The obvious objective is to increase your score by increasing the number of 9s and 10s and eliminating all 0-6 scores. How to do this is the purpose of our second recommended question. That question is:
If you could get us to do just one thing which would improve that score, what would you have us do?
By asking enough people this second question, Pareto's Law (the 80/20 rule) will show you where to focus your efforts to improve willingness to refer, which is a proxy for loyalty.
We believe you can conduct these surveys yourself. If you need help putting this system and process in place, let us know. If you would prefer to have an unbiased third party conduct this survey for you, we can do that as well.
If you need more information or want to talk about moving forward, feel free to call us at 800.947.0140 or email us.