The Raving Fan Rate

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Asking customers if they have actually recommended their builder is an important innovation in the NRS research.

September 01, 2002

Definitely yes
47%
Most likely
33%
Unlikely
11%
Definitely not
9%

Asking customers if they have actually recommended their builder is an important innovation in the NRS research. It separates intentions from actual behavior. "What we are calculating is customers who actually refer their builder as a percentage of total customers," says Paul Cardis. "It's not a referral sales rate."

It's closer to a raving fans rate. Builders usually calculate referral sales as a percentage of total sales. It often includes people who come to the sales office as the result of referrals from anyone -- employees, Realtors, vendors, trades. Our coverage of the NHS-winning builders includes referral sales rates, but they come from each company's internal tracking system. It's important information because it's clear that customer satisfaction drives referral sales. The builders track it because they know it is one of the most important factors in their success or failure. But keep in mind that those rates are not derived from NHS data, and builders calculate referrals differently.

Considering that builders who don't think they do well with customers probably did not enter this competition, we can't look at the pool of buyers surveyed for NHS as representing the housing industry at large. Still, we have to be encouraged that "would recommend" scores were high across all entrants.

Top Versus Bottom

When we compare the highest-scoring builders in the competition with those at the bottom of the rankings, the correlation between willingness to recommend and customer satisfaction jumps out:

Overall satisfaction compared with willingness to recommend:

 
Top 5
Bottom 5
Difference
Overall satisfaction
86.5
73.2
13.3
Willingness to recommend
91.0
71.4
19.6
When NRS asked how many actual recommendations buyers have made, the top companies in the competition separated themselves clearly.

Since purchasing your home, how many actual recommendations of your builder have you made to others?

Referrals
Top 5
Bottom 5
 
0
20%
47%
 
1-2
42%
30%
 
3-5
28%
19%
 
6 or more
10%
4%
 
"The lowest-ranked NHS builders are not doing badly, but you can see that the payoff in new business for being at the top is huge," Cardis says. "Given that senior management in all these companies spends just 1% to 3% of revenue on advertising, they have to cringe seeing data like this and thinking about lost business."


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