May 17, 2013 by Speakers' Spotlight
What Does An Angry Customer Cost?
What is the link between growth and profits? Loyalty. Fred Reichheld―who The Economist has referred to as the “high priest” of loyalty― helps companies achieve superior results through encouraging employee, stakeholder, and customer loyalty. In a recent post on LinkedIn (below and in the video above, where he is seen with his colleague Rob Markey), Reichheld discusses what having an angry customer can cost a company:
The byproducts of happy clientele are obvious. Sales rise. Stores fill. Facebook “likes” stream in. These promoters recommend the companies they like to their friends.
The cost of detractors—a company’s “haters”—is less clear to many business leaders. For one thing, they may still do business with you — even though they don’t like it and they make sure their friends and your employees know they don’t. By the time their irritation is evident in traditional metrics—declining sales, failed product upgrades, defections to rivals—the cause of their discontent often has ballooned into a widespread problem.
Detractors are so dangerous for companies that the Net Promoter score — the measure of customer loyalty — weights them more heavily. When asked “How likely are you to recommend our product or service to a friend?” on a scale of zero to 10, those who offer ratings of six or less are deemed detractors. Promoters are only those who respond with a nine or 10.
Why? Detractors are detrimental to a company. They cost more to serve. They’re responsible for 80% of a company’s negative word of mouth, detailing their frustrations on Facebook and Twitter for the world to see. And negative referrals are often far more powerful than positive referrals. How many four- and five-star reviews do you need to see before you dismiss a one-star review on Yelp or Amazon? If someone you knew personally told you their dentist was terrible, how many positive recommendations for the same dentist would it take to get you into the chair?
Successful companies take detractors seriously. They get to the root cause of customers’ anger by listening to complaints, taking them seriously and fixing problems that might be more pervasive. For many customers, that’s where true loyalty begins.
Has a company ever so impressed you with its response to a complaint that it turned you from a detractor into a promoter?