In our Value Builder series we explore the eight key factors potential buyers review when looking to acquire a business – maybe yours!
How to Gauge Customer Satisfaction With One Simple Question
“If you build a great experience, customers tell each other about that. Word of mouth is very powerful.” – Jeff Bezos, Founder and CEO of Amazon.com
We all know that satisfied customers lead to business growth. However, what many businesses do not know is how to ensure their customers are satisfied.
It’s imperative to measure both the extent to which your customers are satisfied and your ability to assess customer satisfaction in a consistent and rigorous way. Acquirers will be aware of such consistency, as it is an important aspect of their purchasing decision.
Most business owners know intuitively how satisfied their customers are, but as their companies grow, some owners lose touch with their customers. Being able to objectively measure the satisfaction level of your customers is essential to maintaining their loyalty.
While many business owners use some sort of customer satisfaction survey, according to Fred Reichheld, author of The Ultimate Question, most of these surveys do a poor job of predicting the likelihood of a customer either repurchasing from you or referring your company to a friend.
Determined to find a better way to quantify how well a company is serving its customers, Reichheld and his colleagues at Bain and Satmetrix, developed the Net Promoter Score methodology, which is based around asking customers a single question that is predictive of both repurchase and referral: «On a scale of 0 to 10, how likely are you to refer our company to a friend or colleague?»
Reichheld discovered that when customers answered this question with a 9 or 10, they were statistically more likely to repurchase from the company, refer it to others or do both – so much so that the companies that scored well on this measure were more likely to grow than were lower-scoring companies.
Not surprisingly, the news that a researcher had actually discovered a way to predict growth triggered Fortune 500 companies around the globe to latch on to the methodology. Today, companies such as Intuit and Southwest Airlines use the Net Promoter Score as a way to quantify their customer experience. More important, many acquirers – both strategic and financial – use the Net Promoter Score methodology as a way to evaluate their business units and potential acquisitions.
Once you are able to treat and evaluate your customer metrics on the same level of importance as financial metrics (revenue growth or return on equity) you will begin to see a higher level of customer loyalty. Not only will these customers be loyal to your product or service, but they will also speak highly about your company to their friends. Word of mouth marketing is not only great for your company’s long-term profitable growth, but for your reputation through building trust. What’s the best way to accomplish that? Using one simple question – How likely is it that you would recommend this company to a friend or colleague?
A complimentary Value Builder questionnaire available from The Osborne Group will provide an assessment of the current potential sales value of your company. The questionnaire is part of a system developed by internationally recognized small business expert John Warrillow with results based on findings from over 17,000 companies. Your answers will help determine what drives up, or undermines, your company’s value and steps you could take to increase its value.
In our upcoming blogs, we’ll examine other Value Builder factors and their impact on your company’s worth. Follow us here for the series:
