Discussion
Customer retention is the key factor behind the success of any business. Customer retention can be defined as the ability to hold on buyers of the particular product or service provided by the business. However, customer retention is only able if at all they are satisfied with either the service of the product they are offered (Faltejsková, Dvo?áková, & Hotovcová, 2016). To be able to establish if customers are satisfied or not, customer satisfaction measurement is used. Customer satisfaction measurement can therefore be defined as estimating or rather finding out the extent to which the customer was contended with the service or products provided to them. There are different methods in which customer satisfaction measurement can be carried out. It can either be done using external or internal measures. The common external measures used are the J D Power Associates Index and the Net Promoter Index. This two options are similar and different in various ways. It is very important to understand this measures since they are used in the day to day practice. Within the framework of this assignment, there will be a critical analysis of the two external measures of customer satisfaction. There will also be an explanation of what they can do for a business and an evaluation if they can assist the business organization close gap one.
Comparison of the Net Promoter Index and JD Power and Associates Index
Differences
The Net Promoter index
The Net Promoter Index was developed in 2003 by one Fred Reich held who was working at the Bain and Company in collaboration with company Sat Metrix. The objective was to develop a scale of customer satisfaction that could later be used to compare different industries. This index usually assess the likelihood of a customer or a respondent to recommend a similar product or service to another friend (Senoz, Daughton, Gosavi, & Cudney, 2012). This measure has a scale that range from 0 to 10 that the respondent is to answer. The ultimate question asked under this method of estimating customer satisfaction is: How likely are you to recommend company/business or product. If for example the respondent score is 0, that means he/she is less likely to recommend the business, product or service to a friend .If the score is 10, that means the respondent is most likely to recommend the product, business or organization to another friend.
Three categories of customers/respondents arise in this mode of measurement. They are the promoters, passives and finally the detractors. The promoters are those who give a score of 9 or 10.The passives on the other hand are those that give a score of 7 or 8 (Mecredy, Wright, & Feetham, 2018).Finally, the detractors are those that give a score of 0 to 6.Below is an illustration of the three categories of the customers or respondents.
After the percentage of the detractors, passives and the promoters has been established, the Net Promoter Index is then calculated as the difference between the percentages. However, it is not expressed as a percentage rather by an absolute number between -100 to +100.An example is if the business has 25% of promoters,20% of Detractors and finally 55% of passives ,then the Net Promoter Index is +5.A positive NPS score is desirable as opposed to the negative NPS score.
Comparison of the Net Promoter Index and JD Power and Associates Index
The J D Power and Associates Index is an external measure of customer satisfaction in which the customers use a circle rating to indicate their level of satisfaction with the service, product or the organization. A five star rating implies the best, 4 means better and 3 means average (Laitinen, 2018). Below 2 means poor. This ratings are usually based on independent and free from bias from several owners of the service and products throughout the world.
Despite the numerous differences between the two external measures of customer satisfaction. They share some similarities. In both the measurements, there is a scale that is used for comparison. In the NPS method, the scale is from 0 to 10 while in the JD Power and Associates method, the scale used if five circles (Kheng, Mahamad, Ramayah, & Mosahab, 2010). Another similarity between the two is that the response or rather the feedback is likely to affect the choice of other customers. New customers would generally prefer a commodity, product or service that has better ratings.
The two external measures have crucial roles in my business organization. They have the ability to attract more customers to my business. In the event the previous customers rate or rank the products they received from my business highly, it will end up attracting more customers and this generally means there will be more profits (Khan & Haasis, 2016). On the contrary, this two external measures can also create a negative image for my business organization. In the event where the customers rank the services, products or the organization lowly, it will create a negative impression and potential customers would shy off. This would then mean that my business would suffer severe losses. It is therefore important to provide the best so that previous customers rank my business highly so that I retain them and attract new customers to boost sales.
Gap 1 is the difference that exist between customer expectations and the exact services they get. This external measures of customer satisfaction can be used to assist my company close this gap. If a certain product offered by my customers is ranked highly by either of the methods, this will generally make the customers have high expectations which would be met after using or acquiring the same service or product (Gosavi, Daughton, Senoz, & Samaranayake, 2016). On the other hand, if a product from my business is ranked lowly, this would generally mean that the customers would have low expectations for the same and would be reflected or achieved after interacting with the same product. This means that the external measurement of customer satisfaction would save the customers from the existing gap between expectations and the actual feelings of the product, service or business organization.
Conclusion
It is very important to find out how customers feel or rank the product, service or a business organization. This is only possible by the use of different measurements such as the Net Promoter and the J D Power and Associates Indices. The results from this measurements are two fold, they can either positively or negatively impact the business. If a business is ranked highly, more customers are set to join the business while if the ranking is low, potential customers can shy off. The measures can also be used to close the gap 1 in business. All business should consider using the said measurements in future so that they have a clue of how well they are serving their customers.
References
Faltejsková, O., Dvo?áková, L., & Hotovcová, B. (2016). Net promoter score integration into the enterprise performance measurement and management system – a way to performance methods development. E+M Ekonomie a Management, 19(1), 93-107. doi:10.15240/tul/001/2016-1-007
Gosavi, A., Daughton, W., Senoz, O., & Samaranayake, V. (2016). Consumer perception of US and Japanese automobiles: a statistical comparison via consumer reports and J.D. Power & Associates data. International Journal of Engineering Management and Economics, 6(1), 1. doi:10.1504/ijeme.2016.079826
Khan, A., & Haasis, H. (2016). Producer–buyer interaction under mass customization: analysis through automotive industry. Logistics Research, 9(1). doi:10.1007/s12159-016-0144-9
Kheng, L. L., Mahamad, O., Ramayah, T., & Mosahab, R. (2010). The Impact of Service Quality on Customer Loyalty: A Study of Banks in Penang, Malaysia. International Journal of Marketing Studies, 2(2). doi:10.5539/ijms.v2n2p57
Laitinen, M. A. (2018). Net Promoter Score as Indicator of Library Customers’ Perception. Journal of Library Administration, 58(4), 394-406. doi:10.1080/01930826.2018.1448655
Mecredy, P., Wright, M. J., & Feetham, P. (2018). Are promoters valuable customers? An application of the net promoter scale to predict future customer spend. Australasian Marketing Journal (AMJ), 26(1), 3-9. doi:10.1016/j.ausmj.2017.12.001
Senoz, O., Daughton, W., Gosavi, A., & Cudney, E. (2012). An evaluation of professional quality measurement systems for the automotive industry. International Journal of Engineering, Science and Technology, 3(7). doi:10.4314/ijest.v3i7.8s
Zaki, M., & Neely, A. (2018). Customer Experience Analytics: Dynamic Customer-Centric Model. Handbook of Service Science, Volume II, 207-233. doi:10.1007/978-3-319-98512-1_10
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