Better get a handle on your word-of-mouth referrals (both the good and the bad)
As the saying goes, bad news travels faster than good news, and we're not just trying to spook you here.
As many of you now, the Net Promoter Score (NPS) has been the gold standard used by businesses, professional service firms and trade associations to measure customer recommendations and loyalty. According to Temkin Group research, five out of six companies (83%) asked their customers the Net Promoter question: “How likely is it that you would recommend (this product/service/brand) to a friend or colleague?”
But, according to new research from ForeSee, a more equitable method of deleting “detractors” from the measurement equation provides, a better, more real-world gauge of the word-of-mouth recommendation quotient. ForeSee has collected more than 2 million survey responses over the last two years to research and develop a more accurate and precise way to measure both word-of-mouth promoters and detractors.
WoMI measures both likelihood to recommend and likelihood to detract from a specific brand by adding a second question: “How likely are you to discourage others from doing business with this company?” By measuring both positive and negative word of mouth, business leaders gain a next-generation metric that, when viewed within the context of the customer experience ecosystem of metrics, provides actionable insights that can help leaders improve key business outcomes, including word of mouth, says the report.
The report suggests that a system that significantly advances the measurement of the customer’s experience with primary benefits for businesses operating in today’s high-speed, word-of-mouth-driven culture would include:
- Any measurement with one simple value that can be used to rally stakeholders (executives, employees, Wall Street, board members, etc.) around their customers’ experience and across an organization
- An understanding of the difference between True Detractors and True Promoters to eliminate the risk of alienating customers who aren’t legitimate detractors
- Adding a second question to understand what drives negative word of mouth as well as positive word of mouth to allow companies to take proactive measures to fix issues
While the two-week government shutdown earlier this month caused a short-term dip in consumer confidence and housing prices, just keep the long-term view in mind. The major market indices remain at or near their all-time highs; and with the Fed’s continued stimulus program expected to keep interest rates near historical lows for the time being, the forecast for equities and overall household wealth should be robust. Remember, housing prices are still up about 13 percent over this time a year ago. As the Fed said in a statement yesterday, the economy continues to grow “"at a moderate pace" and exhibits growing underlying strength.”
On the business front, more than two-thirds of S&P 500 companies (68.7%) are beating analysts’ earnings estimates, according to Thomson Reuters data, which is comfortably above the historical average of 63 percent. Only about half of companies are beating topline revenue forecasts, Thomson Reuters reports, but to us, this just means companies are being more productive with the capital and talent they have at their disposal. Another positive indicator, the Commerce Department announced Tuesday that businesses increased their inventories by almost half a percent in the latest reporting period (August), a sign that they expect stronger demand for their products.
While testimonials, endorsements and “likes” are great, nothing beats a word-of-mouth referrals from a satisfied client or customer. On the flip side, nothing’s more dangerous in this viral communication age than a negative review shared by electronic, phone or face-to-face interaction. Make sure you not only have a great handle on your core competencies—but your core incompetencies as well.
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Tags: Net Promoter Score, Word of Mouth Index, WoMI, Foresee, Temkin Group