Job #1 in sales is to keep the clients you have, yet many advisors have no way of measuring their customer loyalty and are often blindsided by client defections. For example, what do Charles Schwab, American Express and Southwest Airlines have in common? All three companies were struggling in the early 2000s until they embraced the practice of measuring customer loyalty. The idea of measuring something as abstract as loyalty might sound counterintuitive. After all, we can quantify how many widgets are sold, but how do we measure the way someone feels about a company or an individual? Fred Reichheld, a customer loyalty expert, cracked the code with his influential research on Net Promoter Scores® (NPS).
Developed by Satmetrix, Bain & Company, and Reichheld, the NPS concept was first popularized through Reichheld’s book The Ultimate Question. In a little over a decade, the loyalty measurement tool has been adopted by more than two-thirds of Fortune 1000 companies.1
As American Express executive Jim Bush said about his company prior to administering NPS in a Bloomberg interview, “our service had become one of a back-office cost center, focused on reducing expenses and executing transactions. We were effective and efficient…but we were missing an opportunity to establish bonds with [our customers] and build more meaningful relationships.”2 In just three years, American Express saw a significant increase in customer satisfaction scores, greater efficiency and service margins, and 50 percent lower employee attrition in its US service centers.
NPS for Advisors
An NPS program is not relegated to Fortune 1000 companies. In fact, the system that is put in place benefits any company where customer service and customer loyalty are of primary concern to that company’s success. At Beacon, we implemented NPS earlier this year and saw immediate returns, with our Net Promoter Score increasing 50 percent from quarter to quarter.
We have seen the early returns on the system and are in the process of developing NPS for our advisors as well. We hope to launch by the end of the year or early 2017.
How NPS Works
Some surveys get lost in all the data, but the NPS concept is simple, boiling down all you need to know in one “ultimate” question and a short, open-ended follow-up.
“On a 0-to-10 scale, how likely is it that you would recommend us (or this product or service) to a friend or colleague? What is the primary reason for your score?”
Once you have your results, respondents are sorted into three categories: promoters, passives and detractors. Ultimately, we would like all of our clients to be promoters, “raving fans” who would tell everyone about our business, but that’s not realistic. At Beacon, we were thrilled to find a majority of promoters from our first survey, but where we were able to move the needle on our second survey was from the detractors, who were able to point out a few gaps in communication that we were able to quickly correct.
The 5 Key Components of NPS
A company needs to institute five components in order to maintain a successful NPS system.
1. A score keeping mechanism. For us, it’s the NPS system developed by Bain & Company, but there are others out there as well. The key is finding an objective methodology to measure loyalty.
2. A closed-loop process. At the heart of the NPS is the feedback you receive from the clients.
3. Root-cause analysis. It’s important to understand the feedback and see if a negative response was an isolated incident or if the problem is something fundamental to your business plan.
4. Action. Because of the system in place, you are able to follow up with the respondent and answer any issues they have with your service.
5. Commitment and Communication. The NPS doesn’t work unless you have a commitment organizationally. The system works because the people within your organization understand the commitment that is being made and the external clients understand that their questions and concerns are being heard and acted on.
Everybody in this business wants loyal customers. Everybody wants raving fans. Everybody believes in those things, but to actually have a system in place that can objectively measure that loyalty is, simply put, a game changer.
For more sales tips and ideas for your financial practice, contact us a 866.424.4825 or email Dan Baccarini email@example.com to let us know how we can be of help!