Positive customer referrals are like gold dust
Positive customer referrals are either important or critical, leading to more sales and a strengthening of your brand. Negative referrals can do damage….
But how do you go about measuring your likely referral rate?
For most businesses, positive customer referrals are either important or critical, leading to more sales and a strengthening of your brand. Negative referrals can do damage (and are often outside our control or visibility).
As with most things, understanding and managing your likely referral rate requires that you have a way to measure it. So how do you go about measuring your likely referral rate? One way is to use the Net Promoter Score** (or NPS) measurement.
The general approach is:
- In a survey, ask “On a scale of 1 to 10, how likely are you to recommend our business to a friend or colleague”
- Consider ratings of 1 to 6 as “detractors”
- Consider a rating of 9 or 10 as “promoters”
- Ignore ratings of 7 and 8
- Calculate the percentage of detractors, as a percent of the total response (detractors / total responses X 100)
- Calculate the percentage of promoters in the same way
- Finally, subtract the detractor percentage from the promoter percentage – this is the NPS.
You will see that the NPS ranges from -100 to +100. An NPS of 0 and higher is good. 50 or higher is usually considered excellent.
Some surveys usefully reduce the answer range to 1-5 (1-3 being detractors, 4 being neutral, and 5 being promoters), but the calculations are the same.
NPS offers an understanding of how well, overall, you are servicing your customers, and it can form the basis of a customer satisfaction program. For negative NPS, you might follow up with detractors to discover why they are less than delighted with your business. You could be surprised to discover things that you thought were terrific, actually aren’t.
If the NPS is part of you ongoing feedback and improvement program, the survey should be repeated periodically to track performance.
As with many marketing techniques, there are alternative approaches. But if you are not currently assessing satisfaction, you may not know how customers are socialising their experiences about your business.
**Net Promoter Score is a trademark of Satmetrix, Fred Reichheld and Bain&Co.