Net Promoter's Promoter on What Works

Though many have made careers out of calculating the relative power of a brand, perhaps it really comes down to just one simple question: Would you recommend this brand to a friend? Compute that on a scale of one to 10 and weigh advocates against detractors and you have a Net Promoter score, an idea advanced by Satmetrix and Fred Reichheld's 2006 book The Ultimate Question. A new book by Richard Owen, the CEO of Satmetrix, takes the idea further with advice on how to improve your NetPromoter score. Owen cites some real-life examples like Lego and Symantec in the book in an effort to show how this simple metric can bring results. Owen recently spoke via e-mail with Brandweek about the book. Here are some excerpts of that conversation.Brandweek: Net Promoter seems pretty straightforward. Why did you write Answering The Ultimate Question?Richard Owen: The new book is a follow-up to Fred Reichheld's 2006 best-seller, The Ultimate Question, in which he introduced the Net Promoter Score that my company co-developed with him. Since the release of the book, most of the attention has been on the metric/score (Promoters minus Detractors) because of its intuitive nature and its correlation to revenue growth. However, thinking about Net Promoter as only a score trivializes the transformational effort required by companies to see real benefits. A metric by itself is only as good as what you do to change it. Therefore, my colleague and co-author of the book, Dr. Laura Brooks, and I wrote this book with the intent of providing a practical how-to guide to improve the customer experience and increase loyalty using Net Promoter. We were fortunate to be able to speak with and examine more than eighty organizations that have successfully implemented Net Promoter to identify these best practices. BW: What are some of those best practices?RO: In the book we introduce the Net Promoter Operating Model, which is what I like to call a checklist of six critical components that companies need to have to increase customer loyalty. We go into greater detail and share real-life examples about each element in the book, but from a 30,000-foot view they are:• Customer-Centric DNA–creating a customer-first culture where every employee understands his/her role and is given the tools to deliver superior customer experiences. • Enterprise Roadmap—gaining an enterprise view of the customer experience across all touch points.• Trustworthy Data—capturing accurate, relevant and reliable ‘voice of the customer' data.• Root Cause Analysis—analyzing the data to understand the drivers of loyalty and prioritize actions. • Action & Accountability—implementing closed-loop processes that empower employees to act on customer feedback and improve results.• Innovation & Transformation—continued innovation of the customer experience to create competitive differentiation, increase loyalty and activate positive word of mouth.BW: What can businesses hope to gain from a successful Net Promoter program?RO: They can retain and grow loyal customers and increase growth. This is especially important in a down turned market because organizations can't rely on acquiring new customers as a means for growth. By implementing a successful Net Promoter program, business will create more loyal customers who are more likely to purchase their product/service again as well as attract new customers through their positive recommendations (i.e. word of mouth). Attaching a dollar amount to all of this is something we have been studying quite a bit lately across multiple industries using what we call the Net Promoter WOM Economic Framework, which determines total customer value based on buyer and referral economics. Buyer economics refers to how much a customer spends over a given period of time, while referral economics refers to the amount of new business that is gained or lost as a function of what the customer shares with others.One example is the computer hardware industry. In the study we discovered that after considering individual spend and positive word of mouth, each Promoter was worth approximately $2,634. They spend $203 more than the industry average of $1,615 and account for roughly one-half of a new customer acquired through positive word of mouth. In comparison, each Detractor is worth just over $100 because they cost a business 84 percent of a new customer through negative word of mouth.BW: How do you measure and manage the relationship versus just an individual interaction?RO: We explain this in the book and go on to highlight the importance of cross-functionality. Customer loyalty is not always built through a one-time interaction with your brand. Generally, it's a series of experiences a customer has with your brand over time and across the various functions in your business. For instance, the customer may have a great experience when they make the purchase, but is disgruntled with delivery, packaging, installation, service/support, billing, etc. Therefore, in order for an organization to create loyal customers, it must measure and manage customers' experiences across all interactions. More importantly, each department and employee needs to understand their role in improving that experience. BW: What are the loyalty drivers you've found?RO: Loyalty drivers vary by company and industry. We think one of the most important things that an organization can do is to check the perceptual alignment between the organization's perceptions regarding touchpoints/potential loyalty drivers, and their customers' perceptions. Many companies are surprised to learn that the things they believed their customers viewed as being most important actually weren't. Some common drivers in product-based industries include product features and price, employee knowledge of products and their applications, and support and problem-resolution after the sale. A breakdown at any of these touchpoints can negate success at earlier points, which ultimately has a negative impact on loyalty.It's also important to remember that loyalty is not driven by any single metric, but is a result of a customer's experiences across touchpoints, so any assessment of loyalty drivers must be cross-functional. BW: Can you provide some examples of brands that have used NPS?RO: Hundreds of companies have integrated Net Promoter. What's interesting is that I have seen where some are even citing their Net Promoter scores in their earnings reports. On the other hand, we get the impression that there are firms out there just using the metric without really creating any positive change in their business. While they buy the idea, their execution is so thin that it is more for show than substance.In Answering the Ultimate Question, we've condensed the experiences of numerous B2C and B2B companies such as Dell, eBay, Symantec, Lego, Intuit and Virgin Media. All of them have successful programs. For instance, Symantec is a good example of a company that has operationalized Net Promoter throughout its entire organization. Its leadership is committed and has created a culture that is laser-focused on improving not only the customer experience, but also partner relationships. As a result of their efforts they have implemented a number of improvements and have seen significant increases in their Net Promoter scores. Lego also is a great success story. They do an excellent job innovating products and services by listening to the voice of parents and kids and closing the loop on their feedback to increase loyalty. In the book we share an example where the company engaged a core group of its fans in its online community to get feedback on product development and subsequently created and launched a new toy that sold out an entire year's production in five weeks. BW: What advice would you give companies today, especially in light of current economic conditions? RO: We know that recessions tend to separate the winners from losers aggressively. History suggests that those companies with a strong customer focus and an ability to make the right decisions will come out ahead.The instinctive reaction in a recession is to focus on the left side of the ledger and immediately cut costs to improve profit margins or find ‘new revenue sources' that can be damaging to the brand—retail banking fees can be an example of this. Obviously, this can be a prudent strategy, but it will backfire if cost reductions negatively impact the experiences your customers have with your brand. In this scenario, businesses are creating ‘bad' profits that will result in long-term damage to future revenue. So, companies that are able balance long-term customer value with short-term financial pressure will emerge as the winners.

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Net Promoter's Promoter on What Works

Todd Wasserman

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Todd Wasserman