Just how important are delighted customers to business success? Find out what the research says as Jason Myhre, Eventide’s Director of Marketing, shares from The Ultimate Question 2.0.
I lived in San Francisco for almost two years recently, and this comes off of the streets in San Francisco. It's a sandwich board out in front of a restaurant that says, "Come in and try the worst gin and tonic that one girl on Yelp ever had."
Why am I telling you about Yelp? It turns out that Yelp is built off of this book: The Ultimate Question 2.0. This book was written by Fred Reichheld. The book makes a very bold claim. It says that there is one question, a so-called “ultimate question” that you can ask your customers, and the answer to that question will dictate how your business will perform going into the future. It says, on a scale of zero to 10, how likely are you to recommend our company to friends and family?
This is exactly Yelp's business model. It is built precisely off of this book. It's the same basic logic. You choose the score and you explain the score. From this so-called ultimate question, you get a score called the Net Promoter Score, and it works like this. You have the “how likely...” question, then, if you score a zero to six, you're very unhappy, right? You are not at all likely to go on and recommend this company to friends and family. If you score a seven or eight, a pretty good score, you are actually somewhat neutral. You are considered a passive in this methodology. You're satisfied but not enthusiastic. Only those who score a nine or a 10 on this question are extremely likely to go on and make a recommendation to friends and family.
The Net Promoter Score arrives from the breakdown of these customers. So you take the percentage of your happy customers, your promoters, and you subtract out your angry customers, your detractors. So it is a scale from, from +100 to -100. If you have an equal number of happy and unhappy customers, those are offsetting, right? So you get a score of zero.
Bain did a very carefully controlled study looking at over 150,000 customers and more than two dozen business sectors, and determined that using this net promoter scale from -100 to +100, again, an equal number of happy and unhappy customers equaling zero. The result was that the large majority of American companies had Net Promoter Scores of five to eight. Keep in mind a zero is an equal number of happy and unhappy customers. They're barely eeking out more happy customers, not than passives, but than angry customers. They found that some entire industries had negative Net Promoter Scores.
Significantly, in sector after sector, if you had one or two companies that had noticeably better Net Promoter Scores than their competitors, these companies enjoyed substantially superior rates of growth and profitability. The key takeaway from the study is that if you could improve your Net Promoter Score by 12 points on that 200 point scale, which is a 6% improvement, a very small improvement, just that amount of improvement, a 12 point increase or a 6% increase in Net Promoter Score, that translated into doubling a company's rate of growth and profitability into the future. You can see why this is considered the “ultimate question” because it's so powerfully predicting future business success.
This communication is provided for informational purposes only and expresses views of Eventide Asset Management, LLC ("Eventide"), an investment adviser. There is no guarantee that any investment strategy will achieve its objectives, generate profits, or avoid losses. Eventide's values-based approach to investing may not produce desired results and could result in underperformance compared with other investments. Any reference to Eventide’s Business 360 approach is provided for illustrative purposes only and indicates a general framework of guiding principles that inform Eventide’s overall research process. Investing involves risk including the possible loss of principal. Past performance does not guarantee future results.
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