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by Richard Hamer
The Way to Ask a Loyalty Question: “On a scale from 0 to 10, with 0 being very unlikely and 10 being very likely, how likely are you to refer your health/drug insurance to a friend or colleague?”
Senior consumers are currently showing some lack of vigor in their shopping habits for senior health insurance and drug coverage. Infrequent need to purchase and high switching costs (the effort required and potential risk of switching) define the health insurance competition.
For companies that want to grow a Medicare business, the loyalty of customers is important. We offer the Net Promoter metric for loyalty as an alternative to measures of retention or satisfaction. These metrics are often too complex to influence action and are difficult to link to growth or profit.Net Promoter was developed by Frederick Reichheld of Bain and Company, by matching survey responses to actual subsequent customer behavior. He found that the Net Promoter survey question was most closely related to future customer retention and referral behavior across a variety of industries.The Net Promoter loyalty question asks a survey respondent to consider the likelihood of a concrete action – that being, making a recommendation to a friend. Because of this, it performs better than questions about loyalty or satisfaction in the abstract such as “how satisfied are you?” or “do you think company x deserves your loyalty?”
Reichheld and his colleagues also developed the 11 point scale we use here and “Promoter/Detractor” designations. They found that defining Detractors as respondents who answered the above likelihood question 0 through 6 was most reliable. It defines a group of customers that behave similarly, and it avoids the trap of defining someone who answers just north of neutral (response option 5 on the scale) as loyal or satisfied. Promoters are those who answer the question with a 9 or 10. This group has a much different relationship with their company. People who answer the question with a 7 or 8 are labeled “Passively Satisfied”. These persons are most likely to stick with a company because of inertia or barriers to switching. The difference between the percent of respondents who are Promoters and those who are Detractors is called NET PROMOTER. Net Promoter is straightforward. At it’s root, it tells companies how they stack up against others and how far they need to go before their own number of Promoter customers is as high as top competitors and their own number of Detractor customers is as low. It is a guage of how much of a boost or a drag a company’s customers are to its effort to grow. In the Medicare market, profitable growth may lie in a company’s ability to get its loyal customers to become, in effect, its marketing department. Reichheld has shown Net Promoter to be correlated to the future growth of companies in the airline, Internet, and car rental business. We have just finished the first Net Promoter study for health insurance. Overall the health insurance industry’s Net Promoter score is 33.2%. About average when compared to other industries. The basic idea for using this study’s results is to compare Net Promoter statistics from competitors. A comparative analysis will reveal root causes of differences as well as best directions to pursue. Deft Research’s ability to survey the customers of many companies at once and provide clients with the resulting competitive intelligence is what really counts in this study. Action item: increase Promoters, decrease Detractors. Goal: bring Net Promoter to 75% or better. This is where companies, such as eBay and Amazon.com, with top loyalty and the growth that comes with it, sit. For more information about the study http://www.deftresearch.com/deft_insights.htm Richard Hamer is a principal at Deft Research, LLC, Minneapolis, Minnesota