Customer Frequency – one true measure of success

dissatisfied customers

Every day I ask myself, “Are our customers, or clients as we call them, really satisfied with our service?” Are they promoters of our products and services? Do our clients really value this type of service or are we just spending unneeded resources and maybe the right answer is to cut services and reduce prices? Every business I know has this same question, and yet not many of them effectively measure this.

In his book “How to Measure Anything”, Douglas Hubbard discusses that you can measure anything intangible if you just ask the right question. What I am going to talk about is how you can measure client satisfaction without spending a lot of time or money and how to act on the information received.

The importance of client satisfaction is simple. The more your customers come back, the more money you make. As a quick example, if a customer visits your establishment once a month and spends $25 each time you generate $300 a year from this customer. If you can get that same customer to come to your establishment twice a month, you have just doubled your revenue. If you could get all of your customers to double their frequency, you have just doubled your business and did not have to spend a dime on generating new revenue.

The key measurement for any location manager’s success is visits per customer. This is probably the most important measurement but very few companies seem to measure it. Why not?

For many business-to-consumer companies, getting this information is difficult. People believe they need a system that captures everyone who buys from them, tracks how many times they have bought and, once they have figured this out, determines why they keep coming back. In the end, it is just easier to hope and pray that they are doing everything right.

In “How to Measure Anything” Hubbard talks about the validity of using a small sample size to gain a larger perspective. His theory is that the error rate in a small sample is not significantly different than obtaining a large sample size or tracking 100%. Based on this, it is not difficult to implement a program where you can request your customer-facing people to ask five people a day how often they frequent your establishment on average. You can assume that these people are probably representative of your entire customer base. I recommend that you keep asking this so your data gets better over time. This tells you how often people visit your location. Ask yourself if you believe you are better or worse than similar establishments. If better, you are doing great and you need to figure out what makes you great. If worse, you need to go to work.

Next, determine their level of satisfaction. You need to determine if they are a promoter, a detractor or neutral. Remember, a detractor may visit you because they have no other viable option. Once a new option presents itself, they are gone.

“The Ultimate Question”, by Fred Reichheld, states that there is only one true question to determine client satisfaction: “On a scale of 0-10 with 10 being the highest would you recommend us to a friend or colleague?”

A 9 or 10 earned means they are a promoter—6 or below means, they are a detractor. Anyone who gives you a 7 or 8 is a passive. Ask one other question depending on their answer:

  • If they are a 9 or 10 ask them why they like you so much.
  • If they are an 8 or below ask them what you could do to get them to be a 9 or 10.

Take this information and compare it to the number of times they visit your establishment to determine if the 9’s or 10’s frequent your place more often. My guess is you will find a direct correlation. Then determine if there are similarities regarding what they like. Michael Porter (renowned strategist) would say this is your value proposition; it is what differentiates you from the rest of the market. Focusing on this is what will make you better.

For the detractors or neutral people, determine if there are areas you want to change. Be careful making these decisions, because you could make changes that cause you to lose your promoters and still not satisfy the detractors. This would be the worst of all situations.

Do this exercise consistently throughout the year, and it will help you to stop guessing why business is good or bad and give you concrete areas to focus on.

You truly can measure anything, but you only need to take the time to measure what is important. A bunch of data is just a bunch a data. If you don’t take action on your findings, then everyone’s time is wasted and you won’t be any better off than when you started. Integrate these items into your daily tasks to ensure you don’t lose sight of your customer satisfaction goals.

By Greg Thiesen, CEO of Red Book Solutions

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2 responses to “Customer Frequency – one true measure of success

  1. Excellent post! Couldn’t agree more.

  2. Pingback: How do you measure sales success! « Patrik Olson Consulting

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