“If you don’t serve the

customer, then your job is

to serve someone who does.”

-  Anonymous!
Quoted by P. Kotler!

Net Promoter Score

A measure of Customer Satisfaction
Customer satisfaction

Depends on P&S delivering performance in terms of value relative to buyer’s expectation.

Research of Frederick Reichheld of Bain & Co

(the inventor of the net promoter score) shows -

increasing customer retention rates by 5% increases profits by 25% to 95%.
Why is Customer satisfaction is important?
-  customer acquisition costs are sky-rocketing,
-  must focus on building a customer experience and relation
-  to increase customer satisfaction.


1.  It’s a leading indicator of consumer repurchase intentions and loyalty
2.  Tracking customer satisfaction will help you improve the customer experience
3.  A point of differentiationduces customer churn
Jerry Gregoire, CIO of Dell Computers –
“The customer experience is the next competitive battleground.
4.  It reduces customer churn
Accenture global customer satisfaction report (2008) found that price is
not the main reason for customer churn, it is actually due to the overall
poor quality of customer service.
A drop in customer satisfaction is a key indicator that the client has a
foot out the door and is looking at competitors
Why is Customer satisfaction is important?
5.  Customer Satisfaction increases customer lifetime value

Customer lifetime value rises with higher customer satisfaction and good
customer retention.
Increase in CLV, increases the returns on your marketing investment.

Satisfied customer contributes much more revenue than other customers.
•  It reduces negative word of mouth
It’ Infoquest study found - a ‘totally satisfied customer’ contributes 2.6
times more revenue than a ‘somewhat satisfied customer’.

A ‘totally satisfied customer’ contributes 14 times more revenue than a
‘somewhat dissatisfied customer’.

6. Customer Satisfaction reduces negative word of mouth
•  s cheaper to retain customers than acquire new ones
McKinsey found
- unhappy customer tells between 9-15 people about their experience.
- 13% of unhappy customers tell over 20 people about their experience.
Why is Customer satisfaction is important?

7.  Customer satisfaction helps in benchmarking you against competitors

preempt defection risk

Stickiness is anything about a Web site that encourages a visitor to stay longer.
A Web site is sticky if a visitor tends to stay for a long time and to return
National Customer Satisfaction Index
Important additional indicator of health of an economy.
Qualitative evaluation of economic output (GDP is quantitative).

ACSI:
(200 firms, quarterly 250 interview across all major sectors including govt.)
Shows direct relationwith Market Value Added: Top 25 ASCI index firms have higher higher
market value.

4-6
ACSI:

Relationship between Customer Satisfaction
and Loyalty in Competitive Industries

Outcomes of Customer
Satisfaction
•  Increased customer loyalty
•  Positive word-of-mouth
communications
•  Increased revenues
•  Increased return to shareholders

4-9
Relationship between Customer Satisfaction
and Loyalty in Competitive Industries

4-10
Just One level lower score indicates a Sharp
drop in satisfaction, loyalty and WOM
likelihood Definitely Definitely
Overall
Satisfaction Will Would
with XYZ Repurchase Recommend
(% of customers) from XYZ
Very Satisfied XYZ
(64%) =96% =91%

44% 55%drop
All Somewhat drop
Custom Satisfied =52% =36%
ers (29%)

Neutral to
Very Dissatisfied
=7% =4%
(7%)
Source: Technical Assistance Research Bureau (TARP), 2007. 4-11
Customer Satisfaction
•  Consumer’s fulfillment response. Judgment that a Product or
Service provides a pleasurable level of consumption related
fulfillment.
•  A customer’s evaluation of a Product or Service in terms of
whether the it has met customer’s expectation.
•  Depends on time – it evolves over time of usage / experience cycle.

Relief

Pleasure Delight

Customer Ambivalence
Contentment Satisfaction (mix)

4-12
Customer Satisfaction Product &
Service
depends upon (Attributes,
features,
quality)

Other Consumer
consumers Emotions
(family (stable,
members/ specific,
coworkers - employee
say/ feel) Customer mood)
Satisfaction

Plus
•  Price Reason
•  Situational factors Perceptions Attributed
•  Personal factors of equity/
for success/
fairness
failure (or
(essential)
cause)
4-13
Ways of Measuring Customer Satisfaction

•  Use Survey Tools (online or offline)

•  Customer Satisfaction Metrics / customer support tools
•  Net Promoter Score
Video What is NPS
To measure Customer Satisfaction & measure the effect of Positive word of mouth
P-WOM and negative effect of N-WOM on sales Frank Reichheld (2003) designed-

Customers are asked

The first question is followed up with a second question “What is the

reason for your score?”

NPS is used to measure customer satisfaction and predict brand performance.

Second question creates opportunity for the firm to take action that would
improve customer satisfaction.
Why?
Using the NPS

Have to take action after calculating it. Otherwise useless.
Don’t just aim at raising a number.

1.  Collect Data Accurately, Authentically and Reliably – survey well for NPS - sample
appropriately, consistently, frame questions properly

2.  Close the loop

Fast cycle Follow through – take action on detractors and on promoters
Pass information to actioning team immediately.
Train and equip the team to take action.

3.  Top management must believe in NPS and importance of Loyalty
How serious is the top management?

Video Fred Reichheld on NPS
From Net Promoter Score to Net Promoter System
Video NPS, Bain & Company's Rob Markey: The Ultimate Question 2.0
15 MINUTES
Net Promoter
Score
Criticism of NPS

1.  Too Simple? But benefit is it is communicable in the companies and understandable by
all that makes it powerfully appealing.

2.  The NPS provides a measure of the propensity to produce Positive Word of Mouth
PWOM but contains no measure of negative (NWOM). Instead, it is suggested that
those who are unlikely to give PWOM will give NWOM.

3.  Reichheld (2006) states that ‘detractors are responsible for 80% to 90% of a company’s
negative word of mouth’, but he provides no evidence to support this claim. Those
who are unlikely to give PWOM on a brand may be disinclined or have little opportunity
to give any form of WOM.

4.  The Impact of WOM received is not assessed in the NPS. Reichheld’s measure is about
the inclination to give PWOM rather than about what WOM has been received by
recepient.

No clear evidence that NPS is superior to (ACSI) the American Customer Satisfaction Index.
(The ACSI Index was developed to provide information on satisfaction with the quality of
products and services available to consumers. Before ACSI, no national measure of quality
from the perspective of the user was available.)
Still NPS remains most popular customer satisfaction measure.
NPS vs ACSI (The American Customer Satisfaction Index.