The science of harnessing customer loyalty and satisfaction is getting very trendy in business. And perhaps nothing has been more responsible for driving excitement than Net Promoter.
Developed by Fred Reichheld, Net Promoter is a loyalty metric and a discipline for using customer feedback to support business growth and profitability. You’re probably familiar with the ubiquitous Net Promoter question, “On a scale of 0 to 10, how likely is it that you would recommend our company to a friend or colleague?”
The basic idea is that you can use that question to segment your customers into three core groups: Promoters (scoring 9-10), Passives (7-8) and Detractors (0-6). You derive your Net Promoter Score (NPS) by subtracting the percentage of Detractors from the percentage of Promoters. The higher the score the better.
While the model has stirred some controversy, NPS proponents — including many prominent business leaders — claim this is a simple and effective framework to measure company performance, customer satisfaction and loyalty. It’s gritty and actionable for frontline employees across business divisions, while insightful and predictive for management.
I first heard Reichheld present Net Promoter in 2005, and I’ve been an advocate ever since, applying the methodology at the companies where I worked. Many other companies have jumped on the loyalty bandwagon as well, as evidenced by the ubiquity of the Net Promoter question. It’s everywhere. I’m personally on the receiving end four to eight times a week, that I’m aware of. I get the question embedded in surveys from credit-card companies, online retailers, unsolicited robot calls from wireless carriers, insurance providers and several business-to-business companies I deal with at our start-up. It’s official: Net Promoter is a craze.
The growing popularity of Net Promoter was also evidenced a few weeks ago at the third Net Promoter Conference in New York. Yes, Net Promoter has its own conference, and it’s produced by Satmetrix, a loyalty consulting and technology firm with which Reichheld is affiliated. The latest Net Promoter Conference seems to have attracted an audience three times the size of the first conference, which I attended in 2007.
Yet with so many companies adopting Net Promoter on the surface — again, evidenced by that ubiquitous “would you recommend” question — I have to question how many companies are reallyliving it.
My friend Deb Eastman, Satmetrix CMO, underscored that Net Promoter is not research, even though it is often executed by researchers. Rather, it is an operational program to improve customer relationships and drive a company’s cross-functional engagement. That makes a lot of sense, and represents proper execution. Yet for all the “would you recommend” surveys I receive, I feel like very few companies have actually used the program to develop deeper relationships with me! That includes both business-to-business and consumer-oriented companies.
Indeed, that was one of the major themes at the recent Net Promoter conference: Have you closed the loop? To be sure, properly administering the question for meaningful, consistent data is quite a feat. However, the score means absolutely nothing if your company is not going to operationalize it.
That means connecting the score to all business functions, using it as a tool to identify and act on problems and opportunities, and as a lever to drive change and performance. At the core of the program, that means leveraging your promoters while winning over your detractors. This requires a serious internal champion and the persistence to drive cultural change.
Despite the challenges, the bottom line cannot be disputed: You can’t be serious about measuring customer satisfaction if you’re not going to do anything about it. I believe a lot of companies bought into the idea, but haven’t committed to the necessary work. To a customer, the message may translate to: “We’re listening to you and care deeply about how you feel about us; however, we’re not going to do a damn thing about it.” Of course, that’s a situation to avoid.
Do you ask your customers how likely they are to recommend your company to a friend or colleague? If so, then how do you act on that learning?
This post also was my latest column in MediaPost.
(Photo credit:Â Stuart Berry)
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The NPS can be an effective tool for measuring customer loyalty, but only for those organizations that have the basic business fundamentals of customer service fine-tuned. Too many companies refer to their use of this type of survey system as customer engagement, and those are typically the companies that falsely believe they are “in touch†with their customers.
Consider an organization that dutifully uses the Net Promoter system, monitors the loyalty metrics and, perhaps, even goes so far as to allow customers to write in comments on the very survey that derives the NPS. Those surveys are often administered by a third party, and the data is input into one of too many customer databases where it usually sits siloed within the company’s “customer satisfaction†department. Mary may have been blown away by the product and customer experience, and Paul may have expressed anger over the same, but no one in the company really “hears†this and thus, there can be no response; no action.
Consumers who sometimes feel they are being surveyed to death often criticize the Net Promoter system. Many of these consumers also feel it is not very authentic, because companies often like to cheat the system by prepping customers beforehand or even rewarding them in advance for returning perfect 10 scores. The auto industry is historically notorious for this bad practice.
I don’t think anything will ever substitute for full on customer and consumer engagement via the many traditional and social media channels available to companies that are willing to do the work, willing to listen and willing to be accountable for the results. The NPS is limited in that it typically only produces a metric that (1) is derived from customer input and (2) reports after-the-fact information.
Companies that are truly on the cutting edge of continually cultivating lifetime advocates are constantly monitoring and participating in the conversations that abound about their brands—in real time. They tend to pull in customers and build their advocacy base because they demonstrate real transparency; they are authentic and credible. They’ve taken care to create a customer experience that is at least commensurate with the brand and they have integrated that important business component throughout the organization so that everyone knows what it takes to deliver on the promise. That’s how great brand reputations and trust and loyalty are built over time. Not just by chasing a metric.
And when things go awry—as they will from time to time—these great companies seek to optimize all of the above and get out ahead of the problem—in real time. Their humility is honest and believable. Failing at that, the greatness fades, and the brand may be irreparably tarnished. Just ask Tiger Woods—or Toyota.
Bruce, your comment is a post in itself (I hope you don't mind that I republish it as such in a couple days). Agree with everything you say, but your comment here got me thinking:
“Consumers who sometimes feel they are being surveyed to death often criticize the Net Promoter system. Many of these consumers also feel it is not very authentic, because companies often like to cheat the system by prepping customers beforehand or even rewarding them in advance for returning perfect 10 scores. The auto industry is historically notorious for this bad practice.”
I believe there is a similar, unintended trend happening, thanks to the ubiquity of Net Promoter. The fact is that everyone knows the question now, including the science and agenda. I'm sure this is debatable, but my hunch is that deep familiarity with the question leads to bias which leads to gaming.
However, back to Deb's point, if the purpose of Net Promoter is to operationalize and imthe improvement of customer relationships and drive a company’s cross-functional engagement, then perhaps the gaming can be overcome.
Net Promoter does have real value when it is properly used for its intended purpose. But when it is not (and often when, from the top of the company down, incentivizing techniques are improperly used to “drive” the metric), the results tend to mask underlying organizational dysfunction with all aspects of customer service & satisfaction. The loop is never closed and the boss is totally bewildered. His/Her NPS looks great but the phones are lit up 24/7 with angry customers.
Frankly, when you think about it, if the Net Promoter tool is being used as it should operationally—and any gaming affects mitigated or otherwise weeded out—then the “score†or the NPS should pretty much reflect what I call the customer/consumer “sentiment†metric that is derived from those rich customer engagement media resources—the other tools—I talked about in my comment. It IS hard work to finally get it right, but when both are executed flawlessly and across the enterprise, it just becomes a way of doing business, and everyone in the loop reaps the benefits.
The NPS can be an effective tool for measuring customer loyalty, but only for those organizations that have the basic business fundamentals of customer service fine-tuned. Too many companies refer to their use of this type of survey system as customer engagement, and those are typically the companies that falsely believe they are “in touch†with their customers.
Consider an organization that dutifully uses the Net Promoter system, monitors the loyalty metrics and, perhaps, even goes so far as to allow customers to write in comments on the very survey that derives the NPS. Those surveys are often administered by a third party, and the data is input into one of too many customer databases where it usually sits siloed within the company’s “customer satisfaction†department. Mary may have been blown away by the product and customer experience, and Paul may have expressed anger over the same, but no one in the company really “hears†this and thus, there can be no response; no action.
Consumers who sometimes feel they are being surveyed to death often criticize the Net Promoter system. Many of these consumers also feel it is not very authentic, because companies often like to cheat the system by prepping customers beforehand or even rewarding them in advance for returning perfect 10 scores. The auto industry is historically notorious for this bad practice.
I don’t think anything will ever substitute for full on customer and consumer engagement via the many traditional and social media channels available to companies that are willing to do the work, willing to listen and willing to be accountable for the results. The NPS is limited in that it typically only produces a metric that (1) is derived from customer input and (2) reports after-the-fact information.
Companies that are truly on the cutting edge of continually cultivating lifetime advocates are constantly monitoring and participating in the conversations that abound about their brands—in real time. They tend to pull in customers and build their advocacy base because they demonstrate real transparency; they are authentic and credible. They’ve taken care to create a customer experience that is at least commensurate with the brand and they have integrated that important business component throughout the organization so that everyone knows what it takes to deliver on the promise. That’s how great brand reputations and trust and loyalty are built over time. Not just by chasing a metric.
And when things go awry—as they will from time to time—these great companies seek to optimize all of the above and get out ahead of the problem—in real time. Their humility is honest and believable. Failing at that, the greatness fades, and the brand may be irreparably tarnished. Just ask Tiger Woods—or Toyota.
Bruce, your comment is a post in itself (I hope you don't mind that I republish it as such in a couple days). Agree with everything you say, but your comment here got me thinking:
“Consumers who sometimes feel they are being surveyed to death often criticize the Net Promoter system. Many of these consumers also feel it is not very authentic, because companies often like to cheat the system by prepping customers beforehand or even rewarding them in advance for returning perfect 10 scores. The auto industry is historically notorious for this bad practice.”
I believe there is a similar, unintended trend happening, thanks to the ubiquity of Net Promoter. The fact is that everyone knows the question now, including the science and agenda. I'm sure this is debatable, but my hunch is that deep familiarity with the question leads to bias which leads to gaming.
However, back to Deb's point, if the purpose of Net Promoter is to operationalize and imthe improvement of customer relationships and drive a company’s cross-functional engagement, then perhaps the gaming can be overcome.
Net Promoter does have real value when it is properly used for its intended purpose. But when it is not (and often when, from the top of the company down, incentivizing techniques are improperly used to “drive” the metric), the results tend to mask underlying organizational dysfunction with all aspects of customer service & satisfaction. The loop is never closed and the boss is totally bewildered. His/Her NPS looks great but the phones are lit up 24/7 with angry customers.
Frankly, when you think about it, if the Net Promoter tool is being used as it should operationally—and any gaming affects mitigated or otherwise weeded out—then the “score†or the NPS should pretty much reflect what I call the customer/consumer “sentiment†metric that is derived from those rich customer engagement media resources—the other tools—I talked about in my comment. It IS hard work to finally get it right, but when both are executed flawlessly and across the enterprise, it just becomes a way of doing business, and everyone in the loop reaps the benefits.