Black Friday, Small Business Saturday, Cyber Monday, Giving Tuesday, and now…Turkey Thursday. Retailers are increasingly looking to the holiday shopping season (and the handful of discount days that set it off) to make up for sluggish months and to account for a considerable amount of their annual sales. But what’s the point at which these strategies stop paying off — when does the associated drop in customer experience over these periods start putting long term revenue at stake?
It should come as no surprise that given the environment of the holidays, some retailers see that NPS — Net Promoter Score (the likelihood to recommend a company, product, or service) — actually drops several points during November and December. This means that the number of “promoter” customers is decreasing in proportion to the number of “passive” or “detractor” customers. Though the larger crowds and their effects are often cited alongside lower satisfaction, there are also thousands of temporary employees hired for the holidays who aren’t necessarily trained to meet a company’s customer experience standards and therefore possibly contribute to lower NPS scores. Add on top of that the fact that many shoppers’ general stress levels reach clinical heights during the holidays and Retailers have a recipe for satisfaction issues that could have a lasting effect.
For some companies, the dip in NPS quickly recovers after the beginning of the New Year — but not all companies are constantly working to improve their customer experience and close the loop with frustrated shoppers. What if their NPS doesn’t recover after the craziness of Black Friday, and there’s some lingering after-effect — or the company proceeds throughout the entire year with their new score?
When looking at customer spending behavior, we see that detractors of a company spend less than passives and promoters. If passives spend 50% more and promoters spend twice as much as detractors (the actual differences will of course vary by industry and brand), then if a company with an NPS of 30 were to experience a 6-point drop, it would be looking at a potential loss of revenue of around 1.8%. Let’s put that number into perspective: Wal-Mart had $447 billion in revenue in 2011. A 1.8% loss would be over $8 billion. Demonstrated on this scale, a significant drop in NPS could clearly have a grave impact on revenue, but it also shows that even smaller drops in NPS could still have dramatic effects on a business.
