Since Customers Always Lie, Maybe You Need To Look For Answers Somewhere Else

Or maybe it’s Prospects always lie. Either way, I’m using it make a point. If you call all you customers and ask them if they will ever buy from you again, most of them will probably say yes, just to get you off the phone. Projecting what you feel will happen, is also a silly idea. You don’t know Jack! – you know your customer Jack? You don’t know him, that’s what I meant.

Things are constantly changing in the world and with customers. Knowing them today, doesn’t mean you’ll know them 6 months from now. If customer retention is important to you – and it should be – then you will want to head off any defections before they are already gone, right? So how do you do that? Well, in some places I’ve been, the theory seems to have been that sending out a monthly newsletter, with a permanent discount embedded, solves the problem. The problem is, you’re giving the discount to people that weren’t planning on leaving – silly boy. Do you get performance reviews by any chance? Just asking.

Since things are always changing, you need to have a set of measurements in place that will act as an early warning system. No, not a “we increased sales 3% last quarter” system. A system that will tell you how your customers are behaving. For instance, are they defecting? Do you know the characteristics of a customer that is about to say adios? Would you agree that it would be far less expensive and marginally more profitable to keep a customer you would have otherwise lost, or to replace that customer with a new customer and all the related acquisition costs? Simply put, which is more valuable, your prospects or your customers?

Vary rarely have a I seen a business that looks at business success in these terms. But isn’t it fairly obvious that a business that detects these patterns and learns ways to keep customers happy and buying, is going to be more successful – in good times and in bad? If not, I plan to write more about it, but you can find the genesis of my thinking here.

Asking your customers if they’re loyal

There are sure fire ways to find out more about your customers. Asking them if they are loyal isn’t one of them. Asking them if they would recommend you is problematic as well. I just read an interesting piece on Net Promoter Score that breaks down the few pros and the many cons. (I’ll be quoting liberally from this piece, so don’t check up on me).

The Pros – It’s simple and a way to unify staff toward a common goal. As the inventor Fred Reichheld proclaimed, “it would be 100% accurate in determining revenue growth” and it was the “the single most reliable indicator of a company’s ability to grow.”

The Cons – It’s an outcome metric that doesn’t include the process metrics that cause the outcome. Also, the question “would you refer” isn’t nearly as powerful as “have you referred”, just for starters.  The real problem is that when researchers recently began trying to reproduce Reichhelds original results, they found a low correlation between NPS and revenue. It also doesn’t tell management what’s working and what needs to change. Of course, Reichheld defends his research by saying the NPS forces executive management to focus on “creating happy customers.”

WHAT? This metric forces management to create happy customers? Let’s face it, this metric is unimportant and lazy. You can tell the mindset of the inventor by his lazy and patronizing response to critics.

Let’s just agree to move on to something more powerful. Guess what, it will be much harder work than sending out surveys every quarter and tallying the results – quality stuff always takes more work. I’m not suggesting that there isn’t a score that could be meaningful, but even when you drive to get to that number, it needs to in the context of what your doing to get there – so you can reproduce it, or so you can change if what you’re doing isn’t working. More on all that later, folks.