Mike Hill takes a look at the potential of the Net Promoter Score® for the health and fitness industry
The old customer service adage about a good experience being shared among three friends/colleagues but a bad one being shared with 10 is now hopelessly out of date. Put a good recommendation on LinkedIn or a bad one on a leading review site and not only will it reach 100 times more people within days, but it will stay live for months.
So what’s the ultimate question to ask your customers if you want to understand their relationship with you, as well as the future growth potential and profitability of your business? And what do Amazon, Google, Apple, Travelodge, Virgin and DC Leisure all have in common?
These companies, along with many others across the world, believe the ultimate question is represented by the Net Promoter Score® (NPS) a customer loyalty metric developed by Fred Reichheld, Bain & Company, and Satmetrix.
Asking The Question
Reichheld argues that its main benefit is that it gives organisations a single customer service objective: creating more ‘promoters’ and fewer ‘detractors’ – a simple concept for employees to understand. When properly used, NPS® can also reduce the complexity of implementation and analysis frequently associated with measures of customer satisfaction, providing a stable measure of business performance that can be compared across business units and even across industries.
Companies obtain their NPS® by asking customers a single question on a 0 to 10 rating scale: “How likely is it that you would recommend our company to a friend or colleague?” Based on their responses, customers are categorised into one of three groups: Promoters (9-10 rating: loyal enthusiasts who keep buying from a company and urge their friends to do the same), Passives (7-8 rating: satisfied but unenthusiastic customers who can be easily wooed by the competition) and Detractors (0-6 rating: unhappy customers trapped in a bad relationship). The percentage of detractors is then subtracted from the percentage of promoters to obtain a Net Promoter score® – a clear measure of an organisation’s performance through the eyes of its customers. A score of 75 % or above is considered quite high.
Created from years of research – hundreds of businesses across many industries – NPS is also proven to be linked to sustainable growth. Indeed, companies that achieve long-term profitable growth have Net Promoter Scores two times higher than the average company, while NPS leaders outgrow their competitors in most industries by an average of 250 %. In addition, a 12-point increase in NPS has been shown to lead to a doubling in company growth rate.
Put simply, promoters stay longer (increasing membership fees and saving on marketing and promotion costs), spend more (increasing secondary spend) as they are interested in your company’s services and products, and promote your brand (increasing non-incentive based referral, with referrals from promoters themselves more likely to become promoters). They are also less price-sensitive than others, believing they are receiving good value for money, and complain less frequently than detractors, tying up less customer service time.
Good Profits, Bad Profits
NPS is also based on the concept of ‘good profits’ and ‘bad profits’. Good profits are medium- to long-term and sustainable, delivering long-term growth and profitability. Bad profits are short-term and can only sustain a business for a relatively short period of time. Measuring customer satisfaction won’t distinguish between the two, but NPS will.
Selling the wrong product or service to a customer and then under-delivering on the service promise leads to a high percentage of detractors in your customer base, delivering bad profits. “The problem we have is that almost all health and fitness operators survive off bad profits,” says Alister Rollins, CEO of The Retention People (TRP). “With half of all members stopping using a facility after just a few months, yet still paying, almost all profits from these customers is bad and unsustainable. It’s no wonder we have a retention problem! NPS gives this sector a method of gaining visibility of the problem and a structure to improve, which in turn will see the growth of the sector again.”
First National NPS Survey
With its emphasis on personal customer service and the importance of word of mouth marketing, referrals and recommendations, NPS has great relevance to the health and fitness sector; indeed, a number of companies already use it, or something similar, as their key service metric.
Customer insight specialist Leisure-net has therefore teamed up with TRP to formally launch NPS into the sector by running the industry’s first national survey and benchmarking service – a survey which, in the long run, will enable operators to benchmark their customers’ satisfaction and loyalty not only against other operators, but also against companies outside the leisure sector.
The survey is ongoing but currently involves more than 50 public and private operators, carrying out the simple online survey among more than 50,000 members across 300-plus sites. Initial results outlined last month have revealed an incredible range of NPS scores, with the lowest operator scoring just 4 % and the best scoring 76 %. The current average is 25 % – very low in comparison to other industries – which highlights the need for our sector to improve its focus on service. The average scores for the whole sector are shown in the table on page 3.
Key reasons that people gave for being promoters were:
- Helped me to achieve results in terms of my health, fitness or weight
- Friendly, supportive and knowledgeable staff
- Great relationships with other members/customers
Key reasons that people gave for being detractors were:
- Staff not interested in helping me
- Staff not friendly and do not talk to me
- I haven’t achieved what I wanted to
- Lack of basic cleanliness and working equipment
Fitness & The NPS
Steve Philpott, CEO of DC Leisure, certainly thinks NPS has great potential in our sector. “The sector needs powerful customer service matrices that can be benchmarked both internally and externally against other sectors, and we are very happy to be pioneers in embracing this powerful customer measure. As an ex-marketeer, I’ve been fascinated with the NPS ever since I was introduced to the concept two or three years ago, and I’m really pleased that we’re now using them as the key metric in DC Leisure’s customer KPIs.”
One of the key problems facing our sector over the last 20 years has been our reliance on bad profits at clubs/centres, with too high a percentage of detractors. If we were to concentrate on turning more of our members into promoters, putting this objective at the centre of everything we do – from marketing and sales, through recruitment and training of staff, to service delivery processes and systems – this could create a tipping point, bringing about a vital change in our businesses from bad to good profits.
Net Promoter, NPS, and Net Promoter Score are trademarks of Satmetrix Systems, Inc., Bain & Company, and Fred Reichheld. Companies must obtain a licence to use NPS, as it is a protected process and registered trademark; Leisure-net and The Retention People can help businesses to obtain this licence.
