Generating growth in a contracting economy

UQ Business School Industry Fellow Chris Roberts argues slashing staff to reduce costs might be exactly the wrong thing to do when times get tough. Mr Roberts, who was appointed as an Industry Fellow in October 2008, said instead enhancing customer loyalty was critical in a slowing economy. "Though increasing customer focus rather than cutting costs may seem counter intuitive, when you factor in the incremental loyalty, repurchase rates, and especially word of mouth it makes perfect economic sense," he said. "Even if overall demand in a category decreases, organisations can still take a leadership role and ensure they position themselves strongly for the future," he said. Mr Roberts said his analysis of five major Australian industry sectors used the highly-regarded Net Promoter Score to assess performance. He said, "The Net Promoter Score asks customers how likely they would be to recommend the company to others." "By focusing on improving their customer experience, companies can significantly improve their Net Promoter Score - which is associated with better growth outcomes," he said. Mr Roberts said he had surveyed five industry sectors - property insurance, banking, mobile networks, online shopping, and health insurance. "Widely recognised as one of the most accurate measures of customer loyalty, the Net Promoter Score is used by many major organisations including GE, Microsoft, Paypal, Phillips, Sony, American Express, and The Harvard Business Review." "Because it is such a good indicator of customer loyalty, it is also proven itself to be an excellent predictor of business growth." Mr Roberts, CEO and founder of Engaged Marketing, said he had surveyed a total of 1501 customers. "In general, Australian brands across the five categories performed badly with only 7 out of 31 achieving a positive score. "Only two organisations - APIA and Bendigo Bank - achieved world-class scores." "Bendigo Bank blitzed the banking sector coming in way ahead of giants Commonwealth Bank and National Australia Bank." "The survey also put home grown online retailer Oztion ahead of international brands eBay and Amazon." Mr Roberts said there had never been a more critical time for organisations to go back to basics and focus on the customer. "In tough times customer loyalty is vital - and everyone knows word of mouth is the most effective and trusted sales and marketing channel available to business." "The Net Promoter Score is the closest thing we have to a measure of how positive or negative a company's word of mouth is likely to be." "Customer service can sometimes seem to be nothing more than courtesy and being nice," he said. "The reality is that in the current environment, customer service is an economic necessity." The full report outlining scores, key findings by industry, and identifying the drivers of recommendation behaviour is available at www.engagedmarketing.com.au.