Mike Rossi and Steve Deckert, who are both from Sweet Tooth (a provider of customer loyalty programs currently running on over 1,000 Magento installations) gave a fascinating talk on customer loyalty programs.
They opened the talk with some facts and figures; there are currently over 2 billion (yes billion) customers signed up to loyalty programs in the US, this equates to over 7 per person.
Mike went on to discuss the various merits of using customer loyalty schemes as a cost effective way to build brand loyalty and encourage repeat purchasing, given the up-take in the US and around the world it clearly works, although not all schemes will be effective.
One of the key points was how a loyalty scheme can help build brand promoters, this lead neatly on to what was for me the most interesting part of the talk - Steve explaining the Net Promoter Score:
Net Promoter Score
Net Promoter Score was created by (and is a registered trademark of) Fred Reichheld, Bain & Comany and Satmetrix. Fred introduced it through a Harvard business review article "One Number You Need to Grow" in 2003.
The basic idea is this - create a customer survey based around one simple question:
"How likely are you to recommend to a colleague or a friend?"
The answer should be a number between 1 and 10, with 1 being 'Never' and 10 being 'Always'.
Then follow this question with one further question:
"Why did you rate as you did?"
This is a message box where the customer can type whatever they want.
The answers to the first question should then be put into three groups:
- 1 – 6 are your detractors - unhappy customers
- 7 – 8 are passive - satisfied customers
- 9 – 10 are your promoters - your brand advocates who will refer others
Your NPS is calculated as follows:
NPS = % of promoters - % of detractors
A negative number means you have a problem and you can use the answers to the second question to understand what this is, whereas a positive number is what you're looking for - the higher the better, for example Apple's NPS is 78% (source Do Opposites Attract? by Fred Reichheld).
The advocates say that NPS is directly related to company growth, however there are also those that disagree. My view is that it is likely to be correlated, certain for an agency like GPMD recommendations are our life blood and I would argue that a high NPS would indicate a greater likelihood of growth - time to put out a survey I think.
Find out more about the Net Promoter Score.
Customer loyalty on e-commerce
Mike then continued and made some suggestions for e-commerce operators:
- Use customer loyalty programs
- Outline any significant differentiators (price or uniqueness)
- Deliver the unexpected - for example reward the customer on their birthday – without advertising it
There was a great example of good customer loyalty where an Amazon customer had placed an order which was delivered to his parents house, who then used UPS to forward it to him overseas, unfortunately UPS lost the package. He contacted amazon to see if there was an easy way to place the order again without doing it manually, their response was to refund his order in full.
He was stunned and posted a screenshot to Reddit as an example of great customer service, it received 500,000 views on Reddit - great marketing and the cost to Amazon was $25.13! Read the full story here.
Mike stressed the importance of multi-touch points and ensuring that customers receive the same experience whenever they touch your brand, be it payment methods, returns or your language.
All in all a great talk.