Craig Durosko: How Net Promoter can help increase your referrals

How do you measure how satisfied your customer is and then create goals around it? You need a new measurement.

February 01, 2012

I love referrals. Who doesn’t? Why do you get referrals? You provide a good experience for a client and they tell a friend, colleague, etc. So how do you measure the experience the client had?

You will need a starting point, a goal for improvement and a way to track your improvement. Sure, you can measure how many referrals you are receiving and as a percentage of overall leads. How do you measure how satisfied your customer is and then create goals around it? You need a new measurement.

We are always striving to improve our client experience. It is difficult, if not impossible to track your progress if you can’t measure their experience. A few years ago we started using a third party survey company that interviews our client. We can create a custom survey to get specific measurements and use have standard questions so we can measure against other remodelers, or even peer groups such as NARI or other Remodelers Advantage companies.

There was one particular question in the survey that is really insightful: “Would you refer (your company) to a friend or colleague? Yes or No.” This was great. We could see how many people said they would refer us. Often this is a pretty high score, in the 90 percent range, and some companies even have 100 percent.

After the initial set up of this, I was introduced to a book, “Answering the Ultimate Question: How Net Promoter Can Transform your Business” by Richard Owen and Laura Brooks, PhD. It was there that I saw how powerful a simple question could be and produce great changes in your organization. How you ask that question was just as important.

In this book they explain the importance of finding out who your raving fans are. They call them promoters. There are also passively satisfied clients, and then your detractors.

There is a system to measure and track these so you can affect change in your company. On a scale of 1-10, 10 being the best: promoters are your 9s and 10s, passives are your 7s and 8s, and detractors are your 1 through 6s.

Promoters are the type of clients that ask for more business cards because they are passing them out, they are talking about how great you are at their parties, they are talking about you at work. They can’t imagine hiring anyone else when they remodel next.

Passives are the ones you did a good job for, they got what they paid for. They will answer they will refer you when asked, but they are not promoting you while they are out, they might not use you next time they remodel and they are not as loyal to your brand.

Detractors are obviously someone that feels they did not get the service they expected. They might be talking about you at the office and neighborhood parties, just not positively.

Here is where the NPS gets powerful. Minimizing the detractors is where there is obviously an opportunity and it is important. The real gold mine is converting the passives to promoters. You probably finished many projects last year and the clients may not be promoters.

So the first step is how to measure, track and then create plans on converting anyone you can to promoters. I can share with you how we are gathering the information.

We changed the question on our client survey to “How likely are you to refer us to a friend or colleague,” with answers on a scale from one to four. We then have converted that rating so that four is a promoter, three is a passive and ones and twos are detractors.

Then, following the guidelines of the Net Promoter Score, we subtract the percent of detractors from the percent of promoters. (There’s no credit for the passives.) Now we can measure how likely someone is to refer us, track our progress, and create plans for improvement or monitor it.

Besides the original book, another great resource we use to introduce NPS to our organization is produced by Harvard Business Review: “The One Number You Need to Grow” by Frederick Reichheld. You can buy a download of it at http://bit.ly/s36h5T.

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