How to Spotlight Your Best Customers
Using the Ultimate Question
By Dave Savage
We all know that one of the keys to creating the ultimate mortgage practice is to build a loyal following of past clients who not only keep coming back year after year, but also enthusiastically refer their friends and colleagues every chance they get.
Recently, I discovered one of the most important Key Performance Indicators to future profits and success—the Net Promoter ® Score. It was developed by loyalty expert Fred Reichheld and explained in his latest book, "The Ultimate Question: Driving Profits and True Growth." The score is based on the concept that all customers can be divided into three categories: promoters, passives and detractors.
Promoters are your best customers and your most loyal and best referral sources;
Passives are customers who are satisfied but unenthusiastic, and can be easily drawn to the competition;
Detractors are unsatisfied customers who are at the highest risk of defection.
Based on Reichheld’s research, the most successful and profitable companies are those with the most Promoter and Passive customers. This seems pretty obvious; however, let’s face it—most companies don’t measure this KPI and we all know the quote “you can’t improve what you don’t measure.”
The next challenge is that most companies ask too many questions in their surveys that don’t provide any actionable insight. The key to this measurement is not just asking the right questions, but asking a single right question—the Ultimate Question—which most accurately reflects what kind of customers they are.
So what is this Ultimate Question you need to ask your customers in order to generate such powerful information? It is:
“How likely is it that you would recommend our company to a friend or colleague?”
Answers will range on the scale below from 0 (least likely) to 10 (most likely). As you can see, those that fall into the 9-10 category are promoters—your best referral sources.
Your Net Promoter Score would be determined by subtracting the percentage of detractors from the percentage of promoters (%P – %D = NPS). The resulting number should serve as your starting benchmark as you try to turn more customers into promoters. I would even recommend starting with a more aggressive score by subtracting both passives and detractors.
Check your results against some the nation’s most respected brands:
USAA - 82%
HomeBanc - 81%
Harley-Davidson - 81%
Costco - 79%
Amazon - 73%
Chick-Fil-A - 72%
Ebay - 71%
Vanguard - 70%
SAS - 66%
Apple - 66%
Intuit - 58%
Cisco - 57%
Federal Express - 56%
Southwest Airlines - 51%
American Express - 50%
Commerce Bank - 50%
Dell - 50%
Adobe - 48%
Electronic Arts - 48%
How Does the Ultimate Question Apply to the Mortgage Industry?
In conversations I’ve had recently, several people have asked me how the Ultimate Question and Fred’s formula apply to the mortgage industry. My answer: it’s right on target.
In fact, Fred references the mortgage industry in his book, as well as in a March 6th Harvard Business Review article. He says:
“An average mortgage originator (salesperson) earns about $50,000 per year, with repeat customers and referrals accounting for between 20 and 40 percent of revenues. By contrast, the most successful mortgage originators can earn $1 million a year or more and typically generate at least 80 percent of their revenues from repeat customers or referrals. Getting customers to return—and getting them to bring their friends with them—completely changes the economics of the business for individual sales reps.”
For a more specific example, consider this case study from his book:
“In the early 1990s, HomeBanc was a small company with about 150 employees…one office outside Georgia, and mortgage volume of about $500 million. By early 2005, the company had grown to…1,200 employees, 22 branches in Georgia, Florida, and North Carolina, and more than $6 billion in mortgage volume. CEO Pat Flood’s loyalty-based strategy depends heavily on repeat business and referrals, and it works. The company does little consumer advertising, yet growth in mortgage originations has exceeded 25 percent a year for the past decade, more than double the market average. The average NPS in the mortgage industry is 3 percent; HomeBanc’s latest figure exceeds 80 percent.”
Fred’s breakthrough for building your practice around promoters is brilliantly simple and straightforward, and will help you measure and grow your most valuable asset—your clients. If you have a team or an assistant, I highly recommend that you align their compensation to growing your Net Promoter Score—just imagine the impact if 80+ percent of your customers score you as a 9 or 10 on how likely they are to refer you business! Wow!
I highly recommend that everyone serious about personal and professional success start to measure their NPS.
For more of Fred Reichheld’s learnings that can be applied to your business:
http://www.netpromoter.com/calculate/nps.php
http://chiefmarketer.com/crm_loop/roi/new-metric-022206/
http://www.bain.com/theultimatequestion/home.asp
Net Promoter ® is a registered trademark of Satmetrix Systems Inc., Bain & Company and Fred Reichheld.