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How to calculate your own NCAS

Monday September 2, 2013

You may already know that the single most important question you can ever ask your customers is, “On a scale of zero to ten, how likely is it that you would recommend [insert business, product, or service name] to a friend or colleague?”. Add “0 = Not at all likely. 10 = Extremely likely”. Why? Because this, and only this, question will help you calculate your  Net Customer Advocacy Score (‘NCAS’) which will tell you whether your customers’ actions will create sustainable business growth.

Once you have asked this question and got all the individual scores back, run a chart for the results of your survey, for example using SurveyMe. Note how many scores of 9 and 10 you got – these are you angels – they are your customers so hopelessly smitten with what you do, they will tell between 4 and 10 more people about you in such a way that compels those people to try you. Now add up all the scores from 0 to 6. These are your ‘demons’ – they are customers who have used your products or services but are now actively advising their social network not to use you because of something you did.  Ignore the number of ‘7’ and ‘8’ scores you got – these are people who will neither create positive or negative word of mouth exposure for you.

Now by subtracting the percentage of customers generating negative word of mouth (your demons) from the percentage of customers generating positive word of mouth (your angels) you can derive your company’s NCAS. What score did you get?…

By the way, the average company has a NCAS of 5 – 10%. Great companies enjoy scores of 50 – 70% or more. If you love your iPad, iPod or MacAir, by the way, you’ll be interested to learn that Apple’s most recent NCAS score is 83%. Think how many friends you’ve told that you love those Apple products plus how many have now got one themselves, and you’ll start to understand why NCAS is so powerful. Here are some NCAS scores from a few years ago for leading US and UK companies. Note  how Apple’s score was 66% then (and this was 2005), before Apple launched the iPhone, iPad, MacBook, iPod nano, etc.

NCAS UK vs US Companies

Net Customer Advocacy Scores are strongly correlated with (organic) company growth. Consider, for example, the charts below using data from 10 years ago that shows how NCAS correlates with growth for UK Supermarkets and Personal Computer manufacturers. NCAS are similarly reliable predictors of growth in most industries. Note, a certain Steve Jobs had only just returned to Apple at this point, the iMac was still in creation and Apple didn’t even feature in the study. Note also Compaq, whose NCAS was less than 8% and In January 1998, Compaq was at its height, CEO Pfeiffer boldly predicted that the Microsoft/Intel “Wintel” duopoly would soon be replaced by “Wintelpaq”. Pfeiffer also made several major acquisitions. In 1997, Compaq bought Tandem Computers, which instantly gave Compaq a presence in the higher end business computing market. In 1998, Compaq then acquired Digital Equipment Corporation for a then-industry record of $9 billion. At the time, this made Compaq the world’s second largest computer maker in the world in terms of revenue behind IBM. And where is Compaq now? Yes, less than 10 years after this study and even after acquisition by HP, it has consigned to the garbage heap of computer manufacturers. The same is true for Gateway Computers, which although swallowed up by Acer Inc, ceased to exist as a brand in 2011. IBM, meanwhile invested in small innovation groups that put NCAS at the heart of delivering a value proposition that their customers became smitten with.

NCAS example PC companyThe same can be said if we take a snapshot of NCAS scores from the UK grocery retail from 10 years ago. It is no coincidence whatsoever that Sommerfeld is no longer a high street brand and that it has taken almost ten years for Sainsbury’s to turn around its operations.

NCAS example UK Supermarkets

I’ve used some major companies in these examples, but it applies to almost every industry and company I can think of, however large or small. So, armed with this knowledge, what are you going to do about it?  Here are some killer questions to provoke thinking and innovation:

  1. What would be the impact on profitability if you increased your Net Customer Advocacy Score by 5% (by the way, it’s likely to produce in the region of a 25% to a 100% increase)?
  2. What additional benefits do you think you might gain by increasing the score by 5%?
  3. Why wouldn’t you want to use this metric as one of your Key Performance Indicators (KPI)?
  4. What might such a KPI reveal about the quality of your sales force?
  5. How might such a KPI be used to incentivise your sales force?
  6. How might such a KPI help you to improve your value propositions?
  7. How might such a KPI help you plan to increased growth, profitability and free cash?

Or you can read our next blog about the ‘Killer’ follow up question.

If you are struggling to create an NCAS survey, calculate your NCAS or interpret the results, please contact us at SurveyMe.

Tags: Apple, Business, Business Advice, Business Support, Customer, customer advocacy, Feedback, iPad, iPhone, ncas, Small Businesses, technology,

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