The
One Number You Need to Grow
The CEOs in the room knew all about
the power of loyalty. They had already transformed their companies into
industry leaders, largely by building intensely loyal relationships with
customers and employees. Now the chief executives—from Vanguard, Chick-fil-A,
State Farm, and a half-dozen other leading companies—had gathered at a daylong
forum to swap insights that would help them further enhance their loyalty
efforts. And what they were hearing from Andy Taylor, the CEO of Enterprise
Rent-A-Car, was riveting.
Taylor and his senior team had
figured out a way to measure and manage customer loyalty without the complexity
of traditional customer surveys. Every month, Enterprise polled its customers
using just two simple questions, one about the quality of their rental
experience and the other about the likelihood that they would rent from the
company again. Because the process was so simple, it was fast. That allowed the
company to publish ranked results for its 5,000 U.S. branches within days,
giving the offices real-time feedback on how they were doing and the
opportunity to learn from successful peers.
The survey was different in another
important way. In ranking the branches, the company counted only the customers
who gave the experience the highest possible rating. That narrow focus on
enthusiastic customers surprised the CEOs in the room. Hands shot up. What
about the rest of Enterprise’s customers, the marginally satisfied who
continued to rent from Enterprise and were necessary to its business? Wouldn’t
it be better to track, in a more sophisticated way, mean or median statistics?
No, Taylor said. By concentrating solely on those most enthusiastic about their
rental experience, the company could focus on a key driver of profitable
growth: customers who not only return to rent again but also recommend
Enterprise to their friends.
Enterprise’s approach surprised me,
too. Most customer satisfaction surveys aren’t very useful. They tend to be
long and complicated, yielding low response rates and ambiguous implications
that are difficult for operating managers to act on. Furthermore, they are
rarely challenged or audited because most senior executives, board members, and
investors don’t take them very seriously. That’s because their results don’t
correlate tightly with profits or growth.
But Enterprise’s method—and its
ability to generate profitable growth through what appeared to be quite a
simple tool—got me thinking that the company might be on to something. Could
you get similar results in other industries—including those seemingly more
complex than car rentals—by focusing only on customers who provided the most
enthusiastic responses to a short list of questions designed to assess their
loyalty to a company? Could the list be reduced to a single question? If so,
what would that question be?
It took me two years of research to
figure that out, research that linked survey responses with actual customer
behavior—purchasing patterns and referrals—and ultimately with company growth.
The results were clear yet counter intuitive. It turned out that a single survey
question can, in fact, serve as a useful predictor of growth. But that question
isn’t about customer satisfaction or even loyalty—at least in so many words.
Rather, it’s about customers’ willingness to recommend a product or service to
someone else. In fact, in most of the industries that I studied, the percentage
of customers who were enthusiastic enough to refer a friend or
colleague—perhaps the strongest sign of customer loyalty—correlated directly
with differences in growth rates among competitors.
Certainly, other factors besides
customer loyalty play a role in driving a company’s growth—economic or industry
expansion, innovation, and so on. And I don’t want to overstate the findings:
Although the “would recommend” question generally proved to be the most
effective in determining loyalty and predicting growth, that wasn’t the case in
every single industry. But evangelistic customer loyalty is clearly one of the
most important drivers of growth. While it doesn’t guarantee growth, in general
profitable growth can’t be achieved without it.
Furthermore, these findings point to
an entirely new approach to customer surveys, one based on simplicity that
directly links to a company’s results. By substituting a single question—blunt
tool though it may appear to be—for the complex black box of the typical
customer satisfaction survey, companies can actually put consumer survey
results to use and focus employees on the task of stimulating growth.
Taken from
http://hbr.org/2003/12/the-one-number-you-need-to-grow