3 Reasons Why You Shouldn't Measure Customer Loyalty

Credit: Butler Street

Why is it that some companies measure client loyalty and some don’t?

In our experience, those that do generally achieve higher growth, enjoy more profitable business, and have a lower risk of account defection. When we ask companies that don’t measure loyalty whether or not their customers are at risk, invariably the answer falls into one of these three categories:

1. Ignorance is Bliss: If you don’t have data staring at you, forcing you to act, then you don’t have to take responsibility for the risk associated with poor customer loyalty scores. Nor do you have to ask hard questions like, “why are this sales representative’s customers scoring us so poorly?"  Executives are human, and it is easy to get comfortable if your job seems secure, your income level is where you want it to be, and the ship is running smoothly. Why bring a possibly negative event to the forefront when things are going so well?

2. Protectionism: Sometimes executives suspect there is a problem in the organization, but are unwilling to take action because it would force them to make changes they don’t want to make. We have all seen account managers who have made a great living over the years and generated large profits for the organization. And in many mid-market companies, strong relationships are built over many years between the people who have “been here since the beginning.”  But if we actually measure the loyalty of the customer base, we may find that some of our long term friends are in fact managing the riskiest relationships we have. It can be hard to evaluate or reassign people who have been with us for decades.

3. Misleading Data: We see lots of companies who run regular customer satisfaction surveys, and those who score well are often lulled into thinking that their customers are loyal. However, according to Bain & Company (creators of the Net Promoter System) customer satisfaction does not equal customer loyalty.  In fact, according to Bain, some 60-80% of customers who defect actually ranked themselves as “satisfied or very satisfied” on satisfaction surveys, just before moving the business to a competitor.

The Best of Print and Digital award is given to those companies whose customer loyalty scores (as measured by the Net Promoter System) are above 40. This award is sponsored in the Print and Digital industry by Butler Street, NAPCO, Printing Impressions and Print+Promo magazine. But the concept is universal. Customers who are loyal will stay with you when a competitor offers a lower price. They will work through operational challenges with you. And they will drive you to innovate. Measuring loyalty is really quite simple, as are the actions you can take to leverage the insight you gain by leveraging the Net Promoter System.

Surely there are other reasons why executives don’t measure the loyalty of their customer base - but none of them are rational. The Net Promoter System is a fast, easy, and practically free method to de-risk your business and unlock the growth potential of customers, and so there is really no excuse for not taking this simple step. To read about this year’s Best of Print and Digital winners and learn more about customer loyalty, view this article from the February, 2017 issue of Printing Impressions magazine.

Net Promoter, Net Promoter System, Net Promoter Score, NPS and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.