Commentary
Don't Worry About Customer Satisfaction If You're Not Going To Do Anything About It
- by dave.b , Max Kalehoff , February 19, 2010
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.
advertisement
advertisement
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 really living 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?
I'm curious how they distinguish a "promoter" from a "detractor." A lot of times these algorithms get so complicated that it's hard to follow the math - at the end of the day the formula gets so convoluted trying to measure the qualitative with the quantitative, you have to question whether it's accurate. I for one am RESERVING JUDGMENT, after digging info about the company. I don't get it but I trust they know what they are doing.
Excellent point. I think that many companies get wrapped up in the execution of the Net Promoter question and the data without fully "operationalizing" it as you suggest. That can probably be said about a lot of measurement tools and company awards/rankings, even. Execution is critical, "winning" the score is an accomplishment but the real test is applying learning to continual improvement.
It is also difficult to remind users of NPS that the score is most useful for internal benchmarking and comparison and doesn't really mean anything compared against another company's score. Properly coding and responding to the verbatim responses is essential to operationalize NPS results.
With our NPS data we were able to identify a quality issue with one of our suppliers and make some process changes that resulted in a dramatic increase in our NPS score, but more importantly was a dramatic improvement in our product quality, reducing cost and waste.
You are correct in saying that this Net Promoter is not research. While the question of likelihood to recommend is an excellent questions to measure positive word of mouth, the assumptions that Net Promoter jumps to are excessive. To assume that someone that does not recommend is a detractor is a dangerous assumption. This is not a tool to measure negative word of mouth. And to operate an unbalanced 3 point scale (1-6, 7-8, 9-10) introduces huge margins of error. Being a promoter, being satisfied or being loyal are not binary or trinary, but rather should be measured on a scale. While I do see many execs embracing Net Promoter, often driven by its simplicity and effective marketing, I have seen little or no valid financial evidence supporting the Net Promoter concept is an accurate measurement or a predictive measurement. Many advocates (people using Net Promoter) does not signify its validity. This is a mistake that has nearly killed industries
That being said, Net Promoter does bring attention to the customer within organizations, and that is a great thing.
Good post, Max, and I agree with the bottom line conclusion.
Don't measure anything if you're not willing to take action.
Useful metrics like NetPromoter can make a big difference, but only if leadership is willing to embrace and take action. It takes fearless leadership.
Jeff Ogden, the Fearless Competitor
http://www.fearlesscompetitor.com
President, Find New Customers
http://www.findnewcustomers.net
We use the Net Promoter Score, or rather did. When our market share started declining in 2008-9 (anyone checking our quarterly results will know this), our NPS actually went UP.
The simple reason is that disgruntled people will simply take their business elsewhere rather than continue buying your products and "disrecommend" you, which is what the NPS presupposes. Meanwhile we have a small base of loyal fans who have continued to buy us.
Bottom Line: NPS is popular because it's a simple way of depicting word-of-mouth, and hence makes for a succinct KPI. But it's wrong, wrong, wrong as it ignores likelihood to switch. A better way of tracking the customer is future purchase intent. If your customers are increasingly planning on going elsewhere...
While it is true that "exceptions prove the rule", consumer satisfaction must be very low on the totem pole. As examples, just think of American Airlines, probably the most hated major company in the world; or the 30+ minute waits for Adobe to pick up the phone; of the awful service we get from cell phone companies such as T-Mobile. Yet, people continue to fly American, drop $600 for Photoshop CS4 and join T-Mobile. I can see where Net Promoter has an excellent idea, but companies just don't seem to care and it doesn't seem to affect their business all that much.