Know Your Number

Jared Howell, Co-founder


“Who thinks they can beat me at investing $100,000?”

This is the challenge that my business professor at Kellogg gives to every student that comes through his class. Every year, he says, a few overly confident business students take him up on the (virtual) $100k challenge, and yet after 20 years of doing this, not a single student has beaten him.

What’s his secret? He shared it with the class: he invests only in businesses that score top marks in the American Consumer Satisfaction Index. He looks at the top 20 companies in the index, finds one that had an off day or is undervalued, and buys the stock.

He taught me this very important lesson: companies that have great customer satisfaction almost always significantly outperform others.

Unfortunately, most businesses in America, and particularly small businesses, don’t have a good handle on how their customers really feel or how customer satisfaction can change based on the employee or technician providing service.

As a business owner, you need to know how satisfied your customers are at the end of every day, ideally with a specific, numerical measurement that you can track over time. The “number” we like to use at O3 is called the Net Promoter Score®. It uses a very simple question to assess whether each of your customers is a Promoter, a Detractor, or a Neutral. A promoter is someone who likes what you do and is likely to tell someone else about your business. They are your most loyal customers. A neutral customer is indifferent. Your business doesn’t make a large impression on them one way or the other. Neutral customers are at risk of taking their business to your competitors for better timing, price, or convenience. A detractor, on the other hand, not only leaves your business, but often ensures that none of their friends, colleagues, or family uses your business, either. The ripple effect of a detractor’s influence can erode a business if not corrected.

A company’s Net Promoter Score® is the difference between the ratios of its promoters and detractors. The score ranges from -100 to +100, with higher numbers indicating more satisfied customers. Companies with more detractors than promoters will score negative numbers.

Mountains of research suggest that companies with a poor Net Promoter Score® are, in essence, dying a slow death. A company with a low NPS® score will have serious issues with both customer service and customer loyalty, and unless something changes, the company is headed downhill.

On the other hand, companies that have a high Net Promoter Score® are the ones most likely to grow and thrive. So a company that is consistently scoring around, say, 62, has many more promoters than detractors (or neutrals) and is doing something right. That company is likely to find continued and greater success. One number can have a lot of predictive power.

So what is your company’s number? What’s the one figure that can tell you if you are headed for success or need to make some serious course corrections?

Luckily, the number is easy to calculate. Start by polling your customers over a period of time, aiming to gather at least 30 total responses to make the calculation meaningful. Once you have a set of responses from your customers, continue tracking responses to see how you can impact your score over time, increase customer satisfaction, and create a company that an ace business investor would be willing to put $100,000 into. There are several resources online for learning more about the Net Promoter Score®, and we will be going into more detail in future blog posts.

Want to learn more about O3's offerings? Check out what you could be doing in your business today, and request a free demo.