Net Promoter Score (NPS): Real Deal or Have Car Dealers Been Sold a Lemon?

In the field of car sales, Key Performance Indicators (KPIs) are king: all possible sales statistics are monitored, from customer visits, test drives, sales, delivery and financial insight, etc. and now customer satisfaction. These KPIs are compared to provide an industry/dealer performance standard.

Each KPI is believed to have a correlative effect on one another, in the sense that the more people you see, the more test drives, the more you sell – it’s as marketers say, ‘a numbers game’.

Now we think we can reverse the algorithm and make the KPIs do the work. By providing exemplary customer service, a customer becomes a net promoter, advertiser, and advocate for the company.

All we have to do is sit back and wait for the satisfied customers or ‘Net Promoters’ to drive the new customers, soon to be satisfied and become promoters, in our businesses and reap what has been sown.

A perfect self-sufficient and scalable business model or have sellers been sold a lemon?

What is the Net Promoter Score?

In recent years there has been an increase in the use of Customer Satisfaction Surveys and confidence in the ‘Net Promoter Score (NPS)’, especially in car manufacturers and retailers.

NPS is a question within a customer satisfaction survey, where a customer is asked to rate on a numerical scale of 0 to 10 how likely they are to recommend the retailer to someone else.

The resulting score is applied to the following three categories:

· Scoring of 9-10 Promoters – those who will actively recommend the retailer

· Score of 7-8 Passive – the ambivalent objective of customers about the satisfied recommendation

· Scoring of 0-6 Detractors – dissatisfied customers who actively discourage others

The theory

At first glance, NPS serves as a more relevant barometer of customer service levels in that the customer is not only completely satisfied, but so elated that they will sing the praises of the retailer at every opportunity.

However, it has become a key economic indicator of the future financial health of the organization and an aid in predicting future sales.

In essence, NPS is a ‘rebrand’ of a theory put forward long ago by economists in which certain key data, such as employment statistics, have a ‘procyclical’ correlation with the broader financial health of a country. Simply put, if a country is creating jobs, there will be an increase in personal spending that will be reflected in retail sales.

Three problems:

1. The problem with NPS, at least within the automotive retail sector, is the tendency to manipulate statistics.

Employees have been trained on how to ask, persuade, or even incentivize customers to “check” the 9 or 10 box in an effort to mask any real or underlying “service” issues and keep the employee and retailer out of trouble. the critical vision of the manufacturer. .

2. Even if the retailer provides exceptional service and the satisfied customer genuinely and willingly ‘checks’ 10, is there really a correlation to increased future sales?

It is fair to conclude that a 10 in NPS cannot be compared in good conscience in terms of its value as an indicator of additional job creation in the market. There is simply no predictive evidence to prove the relationship, unlike the straightforward algorithm of a person making money spending money and therefore increasing retail sales.

3. Lastly, why is there no correlative proof or proof at all about it? Instead, we as potential customers, ‘how did you hear about us?’ and then provide them with a drop-down list of options.

Surely we would like to apply a more technical approach like the one used in Google+, for example, or other social networks, where through the power of technology the relationship between customers is made clear.

Solution

Go back to basics.

Let’s forget for a moment the tangible benefit of NPS or not, as the case may be, and consider the original premise behind car sales.

It used to be said that a retailer could make more profit from a customer during the three years after they bought their car than was made from the original sale.

Therefore, the focus should not be on who the customer can refer to the retailer, but on how often they return to the retailer themselves.

The good news is that we have the ability and relatively simple technology to measure actual customer loyalty and leverage the data as a true key economic indicator.

No place to hide

Perhaps obviously the introduction of ‘loyalty cards’ would electronically track customer behavior and reward them for it, but for reasons unknown it hasn’t reached dealer groups yet. However, there is a more rudimentary solution.

1. We download vehicle sales data for a given year and filter the information to include date of purchase, customer name, vehicle registration number, and net profit.

2. We cross-reference that data with data for the three years after the purchase to determine if and when customers returned to buy.

3. We then cross-reference the data with the parts and service department to indicate how often customers visit the business.

Results

If the retailer is brave enough, they could contact those customers who never returned after their first visit and ask why, to gain real insight into customer service.

However, the results of running this experiment with various retailers, who will of course remain anonymous, have been amazing.

There is no questioning their determination and ability to win new customers and sell a lot of cars, hours, parts and finance, but they certainly make it hard work for themselves.

But in that sense, they are a one-trick sales horse and would do better to focus a portion of their efforts on learning and training on customer behavior and retention.

The mystery of KPI’s