Marketing Whims

In his Harvard Business Review article “The One Number You Need to Grow,” loyalty guru Fred Reichheld suggested that the best predictor of a firm’s top-line growth could be captured by the results of a single survey question: Would you recommend this company to a friend?

Statistically speaking, there may be a strong correlation between revenue growth and the percentage of a firm’s customers would recommend it to friends, but putting managerial focus and attention on this metric is a big mistake. Why?

First of all, because it doesn’t help explain WHY customers would recommend a firm. And second, because intention isn’t nearly as valuable as action (that is, how many customers actually DO refer the firm to friends and family).

An exec at one of the big banks told me about an interaction he had at his car dealer. He had taken his wife’s car in for repairs, and when he went to pick it up, the repair shop manager came out and said to him “if there’s any reason why you wouldn’t check off the ‘likely to recommend’ box on the customer satisfaction survey, please let me know before filling out the survey.”

Let’s say a bank changes its customer satisfaction measurement mechanisms to capture this “one number”, and learns that 10% of its branches score much higher than average and that 10% of branches score much lower than the average. What has it learned? Nothing. It isn’t actionable. And worse, instead of doing the things that earn a referral, its possible that branch managers are running around asking customers to say they’d refer the bank to friends and family.

Whim: Measuring likelihood of referral, without measuring the causes of referral intention, is a waste of time and money.

So what should financial firms measure? Customer advocacy. Not the likelihood that a customer will advocate for the firm, but the perception on the part of the customer that the firm is an advocate for the customer.

And while it’s certainly possible to boil that down to a single number, financial firms will find it a whole lot more valuable to ask customers to what extent do they believe that the firm:

• Lives up to the values it portrays in ads
• Has personnel that are friendly and helpful
• Listens to problems and concerns
• Provides unbiased guidance and advice
• Clearly explains its products and services
• Indicates when it’s a bad idea to buy their products
• Acknowledges the rates and promises of competitors
• Responds quickly to inquiries
• Alerts customers to account changes or issues
• Rarely or never make mistakes

With these metrics, execs can more clearly pinpoint improvement opportunities – for example, whether there are perceptions of service problems, sales issues, or operational improvement opportunities.

How is your firm measuring customer advocacy?

For more on this topic, please go to Marketing ROI: Whims From Ron Shevlin