In the previous post we delved a bit deeper into the importance of customer retention. After all, what could be cooler than letting your existing customer bring in new ones? It’s all about the right word of mouth advertising…
People are social creatures and wherever they go they talk to each other. Research form the US has found that, on average consumers tend to talk about purchases and future purchases 120 times a week. Word of mouth is not without reason one of the most powerful forms of advertising out there, cause it’s what people already do. Being able in any way to influence this conversation regarding your company, would give you a tremendous advantage to your competitors.
Word of mouth is not exclusive of B2C. On the contrary, research has shown that word of mouth plays a major role in B2B purchase decisions. The study Driving Word-of-Mouth Advocacy among Business Executives from Morton Worldwide found that 53% of buyers (business decision makers) let themselves be influenced by referrals of colleagues and friends. In comparison, only 26% indicate to be influenced by advertising.
Satisfaction in numbers
Word of mouth both includes satisfied as well as dissatisfied customers. Happy customers tell approximately 8 potential customers about your business. In contrast, dissatisfied customers share their experience with your company with 22 others on average. Adding this up means that a dissatisfied customer could potentially cost your business 30 new customer. Just quickly calculate your company’s costs of acquiring a new client and the difference between a satisfied and dissatisfied client in terms of money, and see what it means for your business. “Could these costs have been avoided altogether?”, the top management might ask himself.
Why did you leave me?
Companies lose approximately 50% of their customer every 5 years. As the acquisition of a new client generally is 6 times more expensive than keeping an existing one, the number one question you should be asking yourself is: Why do customers leave or stay with a company?
Reasons customer give for why they stick around are often related to the quality of the product or the familiarity with a brand. The service share is very small. However, service is the biggest reason customers become disloyal and leave your company. Put differently, we buy from a company because it makes quality products or we want to be associated with it, but we will leave it if we feel service has failed us.
A popular misconception
The idea that unhappy customer complain, is one of the most popularly-held misconceptions. A variety of studies suggests that the vast majority (60%) of dissatisfied customers never complains. In fact, 80 percent of these non-complainers will leave for your competitor without any warning, simply because they feel that filing a complaint is just not worth the hassle.
Knowing this, you should undertake to make it as easy as possible for customer to share any dissatisfaction. That is step one in delivering a better experience: Being aware of what’s going on. With Starred you can lower this threshold by simply including the link to your feedback form in your email signature.
Nurture your promoters
Now I would like to shift to the other side of the spectrum; extremely satisfied customers, also called super promoters. Super promoters tell their colleagues and friends about your business, which generates leads and thereby grows your company. Did your know that customers who have joined your company through such a referral, appear to be more loyal than those who’ve come in via regular advertisement campaigns? How does that work?
You see, referrers are good matchmakers; they know your company and your potential customers and can thus make a well-founded match. Online ratings and reviews can have a similar effect, as it makes prospects more aware of what they can expect of your company.
The number one question that exposes whether someone recommends your company to others, is the increasingly popular Net Promoter Score (NPS). It reads: On a scale of 1 to 10, how likely is it that you would recommend us to a friend or colleague?
The illustration above sends a clear message: Your company should at the very least thrive for an NPS score of 9. Be smart, make enthusiastic customers an integral part of your marketing department. See below some of the useful aspects of a good NPS score:
An NPS growth of 12 points means a doubling of revenue growth.
Enthusiastic customer pay their bills in time
Enthusiastic customer are fun to work with. They complain less and give compliments, which in turn motivates your employees.
Enthusiastic customer give constructive feedback on how you can improve your business
Another way to look at the NPS score strategically is by number of detractors. They will tell negative stories about your company. In case you have a lot of those, think twice about spending a lot of money on a sweeping advertising campaign, cause you may find the poison of your detractors to spread much more fiercely!
Frankly, I believe mediocre service has been around for too long. The Net Promoter Score clearly demonstrates that scoring a 6 is misleading; in the world of client satisfaction it is an epic fail. Instead, recognize excellent service as a smart investment; nurturing your promoters can bring your company a long-lasting competitive advantage.
Enjoy you day!