A Loyal Customer Spends More: Measuring Customer Loyalty Using NPS

[mandy]

Indeed, business leaders and investors are likely to hear more about NPS, and not just from GE. NPS is the culmination of more than 20 years of work aimed at developing a reliable measure of customer loyalty. The link between loyalty and growth should be obvious, though it never shows up on a financial statement. Loyal customers keep buying. They increase their purchases over time. They refer their friends and colleagues. They make suggestions and provide honest feedback.

Many studies have examined this "loyalty effect" and the results have consistently shown that companies with the highest customer loyalty typically increase revenues at more than twice the rate of competitors.

Before the advent of NPS, companies didn't know how to measure loyalty and therefore weren't able to manage for it. Conventional customer-satisfaction surveys aren't up to the job. Detailed analysis of individual customers shows that between 60 percent and 80 percent of defectors (disloyal customers) pronounce themselves "satisfied" or "very satisfied" just before they defect. Moreover, satisfaction data is impractical for driving daily managerial priorities and tradeoffs. To manage for loyalty, managers need timely, granular, and actionable data, the kind they see on their financial statements...

full article: http://ecommercetimes.com/story/kcTuzrfB...alty.xhtml