Episode 2 - Customer Love = Growth

Introduction

Welcome to this second episode of the Retention Blueprint. This newsletter promises to transform your retention impact in just 5 minutes per week, providing digestible retention content that adds value every time. This episode is about customer love. 

How to Measure Customer Love

It has been just over twenty years since Fred Reichheld and his team at Bain developed the Net Promoter Score (NPS). NPS is one of those unique phenomena that is widely but often incorrectly used.

If you are not aware, NPS is a simple question which asks:

Q1. How Likely are you to recommend us to a friend or colleague? 

0-6 is a detractor 

7-8 passive (they are happy but could jump ship anytime) 

9-10 is a promoter.

% Promoters - % of Detractors = NPS Score 

The problem is that NPS is often used to demonstrate to managers, leaders, the C-suite, and even investors that the function or business being measured is doing a good job because customers are happy. The problem is that NPS was never intended to be used as a barometer for whether someone is doing a good job or not; it is intended to be used as a barometer for customer happiness.

Nevertheless, we have all had conversations with customer service or sales agents where they encourage us to ‘remember only a 9 or 10 is a good score’. The wording of surveys, email subject lines, the choice to embed the survey in the email or not, and the implication that the result will impact the sender all make lots of NPS measurements completely unreliable and, quite frankly, useless.

To be a genuinely valid view of the customer happiness of a brand's high-value customer base, NPS needs to be conducted by a third party, double-blinded, validated, and competitively benchmarked (against all options in the market, not just direct competitors). Double-blind means the respondents are unaware of which company is sponsoring the survey, and the customers’ identities remain anonymous to the sponsor company.

When done correctly, NPS has repeatedly shown itself to be the best measure of customer happiness.

Customer Happiness Translates into Customer Retention

Forrester's research (1) has shown that loved customers generate 50% more revenue and 165% greater CLV (Customer Lifetime Value) profit contribution. Simply put, loved customers spend more and stay longer.

One of the best examples of a brand that has transformed its NPS score and customer relationships is T-Mobile in the USA (2). The impact of a customer-love approach on their business was phenomenal. Between 2012 and 2019, their NPS score went from around 5 to almost 40, and their customer base tripled (35m - 90m) (2). Some of the initiatives they implemented included:

• Simplifying plans, e.g. unlimited text and calling, with data as the only variable element 

• Removing contracts

• Making upgrades easier

• Offering no contract family plans

• Improving the network

• Offering free music streaming

• Offering in-flight calling and texting with Gogo

• Allowing for the automatic rollover of unused data

• Simplifying rewards program with no points breakage

• Ensuring advertising included all taxes and fees

• Creating service centres organised into teams of experts able to solve problems in one conversation 

• Contacting all detractors (tracked via experiential NPS) to work out what was wrong

• Giving employees latitude to delight customers

• Introducing a welcome program directly from the person who sold the product to the customer

T-Mobile undertook major, organization-wide initiatives to transform their customer relationships. To genuinely embody customer love, this principle must be deeply rooted in the organisational culture and driven by leadership. This involves adhering to, rewarding, and celebrating values and principles beyond soundbites. Customer love should shine through in how frontline employees engage with customers, how retention marketing programs are executed, and through the products and services designed for customers.

However, short-term profit-focused CEOs can be sceptical of organisation-wide customer-love initiatives, so it often makes sense to start small and build the case for change.   

One Small Ripple Can Cause a Wave of Change

There are opportunities for CX, CS, and marketing teams to make a difference through customer love initiatives and track their incremental impact on retention. Often provable, smaller initiatives can be the catalyst for more significant change. Below are three examples of customer love principles and associated tactics deployed by brands like Orange, Peloton and Amazon:

Be on the customers' side. Orange Mobile in Australia ran an ongoing rate plan health check program with existing customers. This notified customers that if they moved from plan X to plan Y, they could save Z. Comparing the cohort exposed to the program vs. those not exposed revealed a 57% reduction in churn. 

Solicit feedback and make adjustments. Following member questions captured via ongoing research about specific track names used in some workouts, Peloton created a love feature for tracks favourited by members. This feature allowed customers to sync the song to their Apple or Spotify playlists with one click.

Be human. Amazon recognises that when customers contact support, they are unhappy and require a speedy resolution to their issues. They frequently give no-quibble refunds and find quick solutions to complex problems. Agents are empowered to override policies to support customers in getting a first-time resolution to their issues.

Final Thoughts

Accurate NPS measurement is essential for gauging customer happiness and driving retention among the highest-value customers. Brands like T-Mobile demonstrate the impact of simplifying experiences and empowering employees. Proactive efforts, such as rate plan checks and easy problem resolutions, can be hugely valued by customers and testing initiatives like this are a great way to measure the impact of customer love initiatives and build the case for change. 

References 

(1) Forrester Research (2023), Delight The Right Customers To Build A Successful Business Forrester report; Base: 101,341 US online consumers (18+) who interacted with a specific brand within the last 12 months 

(2) Reichheld , F. (2020) Winning on Purpose. HBR Press.