A frequent mistake that small-business owners make is believing that growing a company is about just adding customers. That’s not true—it's really about adding profitable customers. Identifying who these customers are goes well beyond how much they buy and at what price. In my book, Bust a Myth: Delivering Customer Service in a Self Service World, I show how to determine the economic value of a customer. This includes determining their gross margin, their use of cross sells, referrals, life time value and brand power. But what actually drives a customer to be your most profitable customer?

Referrals Versus Feedback

Many small businesses focus on generating positive word of mouth on social media to develop customers as brand evangelists. This is done by sharing success stories and helping customers who have issues before or after they purchase. Many small businesses believe that customers show loyalty by their willingness to pass along referrals. This has been the focus of the Net Promoter Score that asks, “How likely is it that you would recommend [your company] to a friend or colleague?”

However, a new study published in the Sloane MIT Management Review suggests that when companies ask and listen to feedback of customers, they buy more regardless of whether they pass along recommendations by word of mouth.

The study of banking customers divided participants into four customer groups:

1.  High participation through feedback and high word of mouth through pass along
2.  High participation through feedback and low word of mouth through pass along
3.  Low participation through feedback and high word of mouth through pass along
4.  Low participation through feedback and low word of mouth through pass along

The study showed that participants who purchased the most were the ones participating through feedback and showing high word of mouth. But high participation was the overall single most important factor in determining future purchases. The study concluded that the customers who write and respond to the company are the ones who will buy the most. With their actions, they see themselves as more closely tied to the business than if they just gave reviews.

Unlike anything else, participation strengthens a trusted link between company and customer. One surveyed COO of an online search company said it should not be a surprise that these people buy: “They just invested their time and effort to help you out. Of course they will buy from you in the future.”

Getting Feedback

Unfortunately, asking customers for feedback and actually acting on it can be messy. Many product managers really don’t want to hear what customers think. They seem to follow the Steve Jobs model of “I know what is best.” So, how can you easily get participation from your customers?

1. Just ask. This can be in a variety of media: in person, on the phone, email, mail or social media. Put together a process that sends an email or letter after a purchase to start the dialogue.

2. Start an online customer forum. Establish a forum on the company’s website where customers can interact with the business and each other. Ask them to submit ideas similar to My Starbuck Ideas.

3. Form a customer panel. This can make customers feel special. Southwest Airlines actually invites frequent fliers to interview future flight attendants.

4. Do meet-ups. Meet customers when company representatives travel to urban areas for other reasons. Scott Jordan, founder of Scottevest, invites customers to meetings when he travels to get their direct thoughts about his company’s products.

5. Insert flaws. An interesting way one company included customers in the process was by putting minor flaws into their product so the customers could correct them. In this unique way, customers feel part of the process, and in return are identified as loyal customers. 

Getting customer feedback is an underutilized marketing tool. Get over the fear of what customers will say about your company. Start with the basics and expand over time. Don’t feel obligated to implement every suggestion, but keep customers informed on how you are using their feedback. It can be messy sometimes, but it also makes for very loyal customers.

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