If you have had profits in the past there is no guarantee you will have them in the future. To quote investment company advertisements, “past performance is no guarantee of future results.” You need to have a leading indicator. A leading indicator would show current business conditions which would lead to continued success. Two very important measurements are employee engagement and customer loyalty. While sales and profits are very important measurements, they tell you what has happened. Employee engagement and customer loyalty tells you what will happen.
When you have engaged employees they will do their best work which will result in loyal customers. You should measure employee engagement at least once per year. The ultimate employee question is, “How likely are you to recommend our company as a great place to work?” When you have highly engaged employees you have promoters of your workplace. A measurement called The Net Promoter Score (NPS) has been developed to measure this.
When you exceed the customer's expectations and create an emotional bond with your customer they too become your promoter. They will recommend your company and your product to friends. According Fred Reichheld, pioneer in customer loyalty, the most important question is, "How likely are you to recommend our product or service to a friend?"
Fred Reichheld's 2006 book, The Ultimate Question, challenged the conventional wisdom of customer satisfaction programs. It coined the terms bad profits and good profits and pointed to a faster, much more effective way of gauging customers' real loyalty to a company, introducing the quantitative measure (The Net Promoter Score) for establishing a baseline and effectively tracking changes in customer loyalty. This is true also of employee engagement or employee loyalty.
NPS is based on the fundamental perspective that every company's customers can be divided into three categories: Promoters, Passives, and Detractors. By asking one simple question - How likely is it that you would recommend [Company X] to a friend or colleague? - Reichheld states that you can track these groups and get a clear measure of your company's performance through its customers' eyes. Customers respond on a 0-to-10 point rating scale and are categorized as follows:
To calculate your company's Net Promoter Score (NPS), take the percentage of customers who are Promoters and subtract the percentage who are Detractors.
Make sure you do not only react to customers who complain. Depending on the size of your business set up some type of system to measure the opinions of the buyers of your products or services. You can do this anonymously but give a customer the option of identifying themselves to management. Then call that customer immediately and ask that customer what you need to do to exceed their expectations. By listening to your customers and employees and acting in their favor you should be building the most important metric—employee engagement and customer loyalty. If these metrics are rising, then rising sales and profits will follow.
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