The Value of Detractors
Maybe mushrooms and Luddites have never heard of the Net Promoter Score, co-developed by Fred Reichheld and Satmetrix. But other than those fungi and sabot-tossing naysayers, most of the rest of us in marketing have.Satmetrix recently released a study that puts an economic value on Promoters and Detractors in a business. The article, found here, doesn’t give much detail about methodology, but assuming it’s solid, the findings rely upon Referral Economics (how much a referral — or lack of one — is worth) and Buyer Economics, the more traditional customer value info you might expect.
The article I saw gives an example from the computing hardware industry. In it, each Promoter is worth an average of $2,634 — $203 more than the typical customer. Detractors, on the other hand, are worth $1,457 on average — about $158 less than the typical customer.
The Referral Economics piece is interesting. Each Promoter is responsible for contributing 0.5 of a new customer (acquired through word of mouth, and important caveat, I presume), while Detractors COST the company 0.84 of a customer (with the same caveats, but the article doesn’t elaborate.
I like the idea of segmenting and valuing the customers you have, and the notion of associating some amount of new business to referrals (and reciprocally, subtracting some amount of business for bad word of mouth) is somewhat intuitive.
The hard part, as always, is knowing which customers are going to promote or detract your company BEFORE they do so, so that you can intervene with the potential detractors and ensure continuing good experience for promoters.
In companies that rely heavily upon word of mouth for their new business, this will be exciting news. For those that don’t, a solid investigation into which core customer metric is their leading indicator of business results will remain the task at hand.
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