This piece originally published on Forbes.com.
Many entrepreneurs intuitively know that some customers are worth far more to the business than others. The best customers are loyal promoters who sing the company’s praises to friends and colleagues. They tend to spend more with the business, stay with it for longer and often cost less to serve. Their lifetime value, therefore, is usually several times higher than those customers who are neutral, let alone detractors.
To create more of these promoters, companies need to gather regular customer feedback so that they can understand what about their experiences mattered to these customers and why. Which services delight customers (a convenient mobile app or a helpful call-center agent) and could be adopted in other areas? What annoys them and should be changed?
Very small companies might be able to learn this from informal conversations, but as companies grow, collecting feedback requires a more rigorous approach. Surveys can work, though many consumers today are overwhelmed by such requests, leading to declining response rates. Online ratings and comments might yield nuggets of information, but the rise of offshore click farms generating five-star ratings for pay has tainted some websites.
Mobile software offers a promising alternative. Take the restaurant industry, where word of mouth can make or break the business. Sure, customers can write about their experiences on Yelp or OpenTable or Zagat. Yet restaurateurs have struggled to know for certain what guests are thinking about their experience, and they would love a chance to intervene on the spot if things are going wrong or to thank and reward their happiest, most loyal customers.
Some small restaurant chains now are using mobile-based rewards program technologies to ensure that they hear from and respond to a wide range of guests. One software tool ties a prepackaged rewards system to a customer’s credit card.
This doesn’t require a complex point-of-sale integration. The customer, after registering for the restaurant’s program, simply uses the registered card to pay for a meal, earning points in the program, with the value and redemption options determined locally. As soon as the transaction goes through the system, customers receive a notification with a link to very simple request for feedback. A small California chain, for instance, gets feedback from about 75 guests every week, and about one-quarter of those guests take the time to add written comments.
Feedback in this system flows directly to the restaurant manager, who sees a dashboard summarizing the data. “I can see in real time what’s going on with our guests…for [the group] as a whole…and at the restaurant level,” an owner told my colleague.
This app’s data confirms the importance of delivering a great customer experience. Promoters outspend all other customers by 17% each month. They’ll forgive one bad experience, but a series of bad ones will lead them to visit much less. So it’s essential for restaurant managers to reengage with the customer after a slipup.
Two added benefits flow from this high-velocity feedback loop: The process of asking customers for feedback builds deeper relationships and a higher likelihood of a return visit. And by handing feedback directly to front-line employees, owners give employees the power to manage that make-or-break word of mouth.
James Allen is co-leader of the global strategy practice at Bain & Company and co-author of the upcoming book “The Founder’s Mentality.”