Recently I mentioned a Harvard Business Review article entitled, “Stop trying to delight your customers” and I introduced the concept of a single item CES or Customer Effort Score. That score is calculated based on customer responses to a question that asks for a rating (on a 1-5 scale) based on how much effort customers must exert to get their needs met at your company. Also in that post I suggested that my next installment would compare the power of the CES for predicting customer loyalty to the more commonly used metrics of customer satisfaction (CSAT) and customer engagement (Net promoter score or NPS).
So let’s dive right in with an obvious truth, customer satisfaction measures have virtually no ability to predict customer loyalty. They can predict customer churn but not loyalty. If you ask your customers, “how satisfied are you with our service or our business?,” their answers will simply indicate whether customers think you are competent to perform your function. Low levels of satisfaction indicate that customers are not confident in the basic viability of your offerings. Good to excellent satisfaction scores simply mean you are competent and as such remain a contender for future business. So low satisfaction predicts attrition but high satisfaction does not predict retention.
Now on to a question that Fred Reichheld called “the Ultimate Question” in his book of the same name.
“How likely is it that you would recommend this company to a friend or colleague?”
As you probably know, that question produces a metric called the Net Promoter score, or NPS for short, which is calculated on a 0-10 scale using the following formula:
P — D = NPS
Where P is the percentage of customers who are promoters and D is the percentage who are detractors. But who is a promoter and who is a detractor? It’s as simple as:
- Promoters (score 9-10) the loyal enthusiasts who keep buying and referring others, fueling your growth.
- Passives (score 7-8) those satisfied but unenthusiastic customers who are vulnerable to competitors.
- Detractors (score 0-6) are the unhappy customers who can damage your brand and prevent your growth through negativity.
So in other words, the NPS equals the percentage of your 9’s and 10’s minus the percentage of your 0-6’
Bain & Company’s analysis of the NPS shows that businesses that achieve long-term profitable growth-have Net Promoter Scores two times higher than the average company. Additionally, NPS performance leaders outgrow their competitors in most industries-by an average of 2.5 times.
So head-to-head, how does the single item NPS score compare to the single item Customer Effort Score (CES)?
According to the authors of the Harvard Business Review “Stop trying to delight customers” article, “We evaluated the predictive power of three metrics—customer satisfaction (CSAT), the Net Promoter Score (NPS), and a new metric we developed, the Customer Effort Score (CES)—on customer loyalty, defined as customers’ intention to keep doing business with the company, increase the amount they spend, or spread positive (and not negative) word of mouth. Not surprisingly, CSAT was a poor predictor. NPS proved better (and has been shown to be a powerful gauge at the company level). CES outperformed both in customer service interactions.”
While I encourage the use of NPS and CES in varying applications with my clients, my next post will address why a single question can NOT unravel the mystery of customer loyalty. Until then, will you refer this post to a friend or colleague or tell me how much effort must you exert to get your needs met from my company?
More importantly, what are your customers saying about you when it comes to NPS and CES inquiries?
First of all, thanks for writing the books on Starbucks and The Ritz-Carlton. I found them to be both enjoyable and informative.
As a customer experience professional serving financial companies, I believe that Delight/WOW is far over-rated. Most customers are looking for a consistent and enjoyable interaction and to walk away with their needs met. Occasionally there is an opportunity for a WOW, but most transactions are fairly routine. It is tough to tell a teller to regularly go above and beyond when a customer wants to make a quick deposit and get on with her day.
I agree that there is no single metrics that tells the “whole” story. I prefer to look at several “outcome” measurements, such as Overall Satisfaction, Likely to Recommend and How Effective Were They at Meeting your Needs as well as basic “behavior” questions (in live interactions), such as “did the teller smile” and “did the representative use your name.” In combination they tell a much richer story than a single metric can (so I look forward to your next post on this topic).
Fundamentally CES seems to be a move in the right direction. In your HBR article you talk about the emotional side of the customer interaction, but it gets lost in the name “Customer Effort Score.” If companies make customer interactions easy and enjoyable the lift will show up in all the outcome metrics.
Jim
Jim, I love your take on “wow” and financial services. I think there is a place for wow after operational excellence occurs. Ease first. get it right, make it right – then wow! Again thanks for engaging and advancing the discussion.
Hi Joseph. Quick question for you – how is the Customer Effort Score calculated? Are you taking bottom 2-box (1s and 2s) or just bottom box (1s)?
Many thanks,
Justin.