NPS, Good Profits & Increased Sales

Posted by Gary Lavin on Jul 22, 2015 6:15:00 AM

Could taking care of your customers mean you need less salespeople and is a focus on Good Profits all that is needed?

I was first introduce to good profits when I read the book The Ultimate Question. The book introduced me to the concept of the Net Promoter Score and tracking customer satisfaction.  The Net Promoter Score or NPS is essentially a measurement of how happy a customer is with your product or service.

However, tracking customer satisfaction is just the first step. Understanding how to improve your score and the impact that this improvement can have on your company's long term growth  and profitability is much more important.

The concept behind improved Net Promoter Score is actually quite simple: take care of your customers and they will love you, upset your customers and they won't like you.
Consider the example of charging a fee for a service a customer would expect to be included at no charge. Then sum up all monies collected from this fee and compare the result to the cost of retaining or acquiring a customer. Is losing that customer worth those extra fees? What about that customer giving negative reviews that cost you a future sale? Most companies don't do this type of data tracking but a few do and the results are quite staggering. Read the book to see how staggering.
So negative reviews might hurt sales, we just hire more sales people and train them better?
The sales team drives growth!  I'm a copier sales guy at heart. I started selling copiers 30 years ago and I have done all the steps from knocking on doors to building and motivating sales teams and putting marketing programs in place. Those in the copier industry may be familiar with the "Global Model" which essentially defines what a well run company looks like and by reviewing many dealer's numbers can calculate what ratios are possible for a well run company. Their numbers say that the cost to run your sales team is expected to be 25% of your total revenue. 14% for the Rep, 5% Manager and 6% Other. So the sales team drives growth but at a significant expense.
As a sales guy, I can tell you that a strong referral is the easiest business to get, hands down! We all also know that keeping an existing customer is much easier (and less expensive) than acquiring a new one. The impact of people saying positive things has a major effect on the sales process.
If you Google a restaurant you plan to eat at (or use Yelp etc.) and see one bad review, consider how many good reviews you need to offset that one bad one? So one person saying negative things about your company needs at least 3 or 4 fans offsetting it before people will buy from you. The impact of people saying negative things has an even bigger impact on sales.
So back to these unexpected and unwanted fees. These types of "Nickel & Dime" activities are known as Bad Profits. In other words the profits you make from these activities are not good for your company. Bad profits lead to negative reviews which in turn lead to tougher sales for the sales team. There are lots of bad profit examples out there, an airline charging you more for changing the ticket than the ticket originally cost, or a bank bouncing the largest check first so they can hit you for more bounced check fees. Perhaps in the copier industry a freight charge invoice for $5 that costs more to process? You know them when you see them, they upset you. Good Profits are the complete opposite where your activities cause people to love a product or service so much that they can't help but talk about it. Think Uber! How many sales people have had to call you to convince you to try Uber? None is the answer, the service just rocks so much that you love to talk about it!
The Global model says a well run company can keep the cost of the sales team to 25% of revenue. Think about what 25% equals in dollars and contrast that with what you are making from Bad Profits. It should be clear that what you are spending on the sales team is a lot more than what you are making from bad profits. If you reduced bad profits then could you end up with a company where no sales people were needed? Where your existing customer base did all the selling and you just needed a few customer service people to answer questions? Is that where Uber is at?

Good profits can simply be a really well run company with solid processes and great people motivated to do the right things. Apple is an excellent example of good profits: they focus on the customer having the best possible experience rather than on making a sale. Have you walked in to a store to be greeted by a sales person you instinctively want to avoid? Not at an Apple store. Could it be they just have great people or are they motivated correctly? Their products are definitely not cheap but you don't hear people complain about being "nickled & dimed." Google any other major corporation's name followed by Net Promoter Score and you will see lots of companies are tracking this. Although almost all large companies are tracking NPS to some extent, are they focused on Good profits? Just tracking your Net Promoter Score is not enough! Search Twitter for any #company and see if the @remarks are saying good things or if all the remarks are complaints? Today it's very easy to check for reviews. In the old days when I started selling copiers you could sell past your company's crappy service. However, that's getting much tougher to do as information is out there for all to see.

Perhaps getting rid of the sales team is not realistic and maybe there are some bad profits you must keep but certainly consider the direction you are heading. If it's towards more bad profits while technology makes sharing reviews even easier then you may end up in trouble.  I challenge you to look at all the services where your company charges an additional fee and ask yourself, are these Bad Profits?

Interested? Start by reading the book...

Gary Lavin

Partner at CEO Juice

Member of Satmetrix certification program for Net Promoter Score

 

Topics: NPS

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