NPS Blog

Can a maniacal focus on customer loyalty ever be counterproductive?

It’s easy to answer the title question of this post with one word: no. Or another word: never.

Look at Apple’s retail stores, American Express, Vanguard and the other loyalty leaders. They’re relentless in their determination (1) to learn customer attitudes and behaviors through regular Net Promoter–style feedback mechanisms; (2) to contact dissatisfied customers, both to learn where things went wrong and to fix the problem when possible and (3) to build continuous customer-related improvements into their daily operations.

Vanguard, for instance, typically finds that its customers as a group are happy with the company’s services and remarkably loyal. Yet there’s no letup in sight. As any employee will tell you, Vanguard remains obsessed with cost, service quality and customer loyalty.

But there’s a more sophisticated response to the question as well. From a business point of view, customer loyalty is a means to an end. The end is profit growth and gain in market share. Greater loyalty produces good business outcomes because loyal customers stay longer, buy more and tell their friends and colleagues about you. Loyalty as measured by the Net Promoter Score is thus a leading indicator of profitable growth. As long as the growth follows, you aren’t wasting time or money on increasing loyalty.

To be sure, one can imagine circumstances in which a relentless focus on Net Promoter scores could be counterproductive:

  • Let’s say you pursue improvement in the lead measure—the score—without regard to the behaviors it is supposed to measure, such as staying longer or buying more. Scores often rise for reasons that have nothing to do with real changes in customer attitudes or behaviors. If all you’re focusing on is the score itself, you’re likely to find yourself a victim of gaming and other unintended consequences.
  • Or maybe you have run out of potential investments. There’s little you can do to generate more revenue, greater profitability or improvements in lifetime customer value. Personally, I have never encountered this situation. But it might arise in cases of monopoly, or perhaps in a situation where the time is so short (an approaching bankruptcy, say) that there is no long-term viability without radical measures in the short term.
  • A third possibility: you delegate pursuit of improvements in customer loyalty to a siloed department that operates without regard to the other priorities of the business. Naturally this department is going to focus relentlessly on the score to the exclusion of all else.

Experienced Net Promoter practitioners understand that the score is just a useful gauge, an indicator. They know that what really matters are the behaviors that underlie it, and they understand that the company needs to incorporate loyalty-building initiatives into its daily operations. That’s what ultimately leads to profitable growth.

This video captures Vanguard’s approach to loyalty:

 

 

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