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 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?