Temkin Experience Ratings Correlate to Loyalty

I’ll start with the takeaway: Better customer experience leads to more forgiving customers, more trusting customers, and higher Net Promoter Scores (and a myriad of other good things that we did not include in this post).

The 2013 Temkin Experience Ratings benchmarked the customer experience of 246 companies across 19 industries based on a survey of 10,000 U.S. consumers. But how does a good score relate to other measures of loyalty? I took a look at that question by examining how companies fared compared with their peers in other Temkin Ratings.

I separated the companies into five groups based on how far above or below they scored on the Temkin Experience Ratings compared with their industry averages. Using these clusters of companies, I examined their Net Promoter Scores, Temkin Forgiveness Ratings, and Temkin Trust Ratings compared to their industry averages. As you can see in the graphic below, companies with the highest performing Temkin Experience Ratings outperformed those in the bottom group by:

  • 25.7 points in NPS
  • 16.1 points in Temkin Forgiveness Ratings
  • 20.9 points in Temkin Trust Ratings

1311_TERvsLoyaltyThe bottom line: If you want more loyal customers, improve your customer experience

Tech Vendors Earn Loyalty By Being Easy to Work With

We’ve done a number of studies of the IT industry, including Tech Vendors: Benchmarking Product and Relationship Satisfaction of IT Clients, 20132013 Temkin Experience Ratings of Tech Vendors, and Tech Vendor NPS Benchmark, 2013. I examined data across these studies to analyze how being easy to work with affects loyalty.

I analyzed feedback from more than 800 IT professionals who collectively provided more than 9,000 pieces of feedback on tech vendors. As you can see in the figure below, IT buyers are more loyal when tech vendors are easy to work with.

1311_ITEasyLoyaltyI examined three measures of loyalty of IT decision makers to different tech vendors based on how the IT pros rated the tech vendor’s easiness to work with (on a seven point scale). Here’s some of what we found:

  • Across all three measures, there’s a clear uptick in loyalty between a “4″ and “5″ on the easiness scale and loyalty continues to increase with every increased level of easiness.
  • The percent of IT buyers who plan to spend more with tech vendors ranges from 4% for the vendors that are most difficult to work with to 55% of tech vendors that are easiest to work with (almost 14x).
  • The percent of IT buyers who are willing to try a new product or service from a tech vendors ranges from 7% for the vendors that are most difficult to work with to 70% of tech vendors that are easiest to work with (10x).
  • Net Promoter Scores from IT decision makers range from -72 for the vendors that are most difficult to work with to +79 of tech vendors that are easiest to work with (NPS gap of 151).

The bottom line: IT professionals prefer tech vendors that are easier to work with

Report: The Economics of Net Promoter

EconomicsOfNPS_COVER

We just published a Temkin Group report, The Economics of Net Promoter, which examines the link between NPS and loyalty across 19 industries. Here’s the executive summary:

Net Promoter Score (NPS) is a popular metric, but how does it relate to loyalty? We analyzed responses from thousands of consumers and examined the connection between NPS and three areas of loyalty: likelihood to repurchase, likelihood to forgive, and the actual number of times they recommend a company. Compared to detractors, promoters are almost six times as likely to forgive, are more than five times as likely to repurchase, and are more than twice as likely as detractors to actually recommend a company. Examining the data, we also found that consumers who gave a score between 0 and 4 have particularly low levels of loyalty. The analysis examines 19 industries: airlines, appliance makers, auto dealers, banks, car rental agencies, computer makers, credit card issuers, fast food chains, grocery chains, health plans, hotel chains, insurance carriers, Internet service providers, investment firms, parcel delivery services, retailers, software firms, TV service providers, and wireless carriers. Promoters who are likely to repurchase range from 87% for grocery chains to 73% for TV service providers, those who are likely to forgive range from 72% for rental car agencies to 59% for TV service providers, and those who actually recommended a company range from 80% for retailers to 47% for parcel delivery services.

Download report for $295 (includes Excel dataset)
BuyDownload3

Here’s the first figure from the report. It has a total of 43 figures that include specific graphics for each of the 19 industries in the study.

NPSeconomics

Here’s an excerpt from the first section that examines the data across all industries:

To understand how NPS relates to customer loyalty, we examined NPS scores for companies across 19 industries based on feedback from 10,000 U.S. consumers. The analysis covers more than 95,000 pieces of feedback from consumers about those companies. Examining three areas of loyalty across industries, looking at promoters versus detractors, we found that:

  • Promoters are almost six times as likely to forgive. We asked consumers about their likelihood to forgive a company if it delivered a bad experience and found that 64% of promoters are likely to forgive compared with 11% of detractors.
  • Promoters are more than five times as likely to repurchase. We asked consumers about their likelihood to make additional purchases from a company and found that 81% of promoters are likely to repurchase compared with 16% of detractors.
  • Promoters are more than twice as likely as detractors to actually recommend. In a separate study of 5,000 U.S. consumers, we asked consumers how many times they actually recommended each company. It turns out that 64% of promoters have recommended the company compared with 24% of detractors.

We also examined the level of loyalty across each response on the NPS scale between 0 and 10. This analysis shows that:

  • Super detractors are much less loyal. Forgiveness and repurchase loyalty stay at a consistent low level between 0 and 4 on the scale. Actual recommendations begin to increase after 5.
  • Midpoint attracts low recommenders. When we examine the actual quantity of recommendations across the NPS scale it turns out that there’s significant drop in recommendations at the midpoint of the scale, when 5 is selected.
  • Text anchors attract responses. We analyzed the volume of responses across the 11 point scale. Consumers appear to select the three responses with text anchors at a disproportionately high rate: “0,” “5,” and “10.”

Download report for $295 (includes Excel dataset)BuyDownload3The Excel file provides all of the data from the 43 figures. Note: See our report, Net Promoter Score Benchmark Study, 2012 and the post 9 Recommendations For Net Promoter Score along with all of my other resources for NPS programs.

The bottom line: Promoters are more loyal than detractors.

P.S. Net Promoter Score, Net Promoter, and NPS are registered trademarks of Bain & Company, Satmetrix Systems, and Fred Reichheld.

Report: What Happens After A Good or Bad Experience?

1212_Feedback_coverWe just published a Temkin Group report, What Happens After A Good or Bad Experience? This large-scale consumer study uncovers negatively biased feedback and significant upside from good service recovery. Here’s the executive summary:

We asked 5,000 U.S. consumers about their experiences with 179 companies across 19 industries. More than 60% who had a bad experience with a fast food chain, credit card issuer, rental car agency, or hotel cut back on their spending, and many stopped completely. But service recovery helps. For every level of improvement in how they responded to a bad experience, companies were rewarded with more sales. Unfortunately, firms aren’t very good at service recovery, especially banks and credit card issuers. TV service providers delivered the greatest number of bad experiences while grocery chains had the fewest. At a company level, ING Direct and Holiday Inn had the lowest number of bad experiences, while QVC and Best Buy had the highest. We also examined how consumers share their good and bad experiences, across age groups and income levels, and compared results from last year. This analysis uncovered a negative bias in how consumers give feedback. Motel 6, ING Direct, Albertsons, and RadioShack have the most negative bias in the feedback they get directly from customers; Cox Communications and Symantec have the most negative bias in feedback on Facebook; and Verizon and GE face the most negative bias on Twitter.

Download report for $195

The report has 20 graphics full of data on consumer behavior and company ratings. It starts by looking at the prevalence of bad experiences. It turns out that 20% of consumers have had a bad experience with a TV service provider while only 5% have had a bad experience with a grocery store.

TV Service Providers Deliver The Most Bad Experiences One of the streams of analysis looks at how consumers give feedback. As you can see, companies are more likely to hear about bad experiences than good experiences.

How consumers give feedbackHere are some of the other findings in the research:

  • ING Direct (2%), Holiday Inn Express (2%) Whole Foods (3%) and Holiday Inn (3%) had the fewest occurrences of bad experience, while Best Buy (29%), QVC (29%), Gap (28%), and eBay (26%) had the most.
  • After a bad experience consumers were most likely to completely stop spending with rental car agencies (40%), credit card issuers (39%), computer makers (35%), and auto dealers (35%), but least likely to stop spending with retailers (9%) and Internet service providers (10%).
  • When companies responded very poorly after a bad experience, 47% of consumers stopped spending completely with the company. When they had a very good response, only 6% stopped spending and 37% increased their spending.
  • Retailers (46%) most often recovered well from a bad experience while Internet service providers (15%) and health plans (15%) were the worst at recovering.
  • 38% of consumers gave feedback directly to the company after a very bad experience, but only 31% gave feedback after a very good experience.
  • 14% of consumers gave feedback on a rating site like Yelp after both a very good or a very bad experience.
  • The use of twitter to communicate about a very bad experience has grown from 4% to 9% of consumers over the last year.
  • 33% of 18- to 24-year-olds have posted about a good experience on Facebook, compared with only 5% of those who are 65 and older.
  • 18% of 18- to 24-year-olds have tweeted about a good experience, compared with only about 1% of those who are 55 and older.
  • 17% of consumers who earn $100K or more have tweeted about a bad experience, compared with only 7% of those who earn less than $50K.
  • Given their customer demographics, Motel 6, ING Direct, Albertsons, and RadioShack are the most likely to receive direct customer feedback that is negatively biased while Cablevision, Avis, Nissan dealers, and Dodge dealers are the most likely to receive positively biased feedback.
  • Given their customer demographics, Cox Communications, Symantec, ING Direct, and TracFone are the most likely to have negatively biased comments on Facebook, while Cablevision, AOL, Kaiser Permanente, and Holiday Inn are the most likely to have positively biased comments.
  • Given their customer demographics, Verizon and GE are the most likely to have negatively biased comments on Twitter, while Avis and Edward Jones are most likely to have positively biased tweets.

Download report for $195

The bottom line: Customer feedback is an under utilized asset.

Looking at ROI of CX Through Eyes of Employees

We are always looking for ways to understand the connection between customer experience and loyalty. Here’s a new approach, analyzing employee perceptions.

We asked a random sample of more than 2,400 full-time U.S. employees to compare their company’s customer experience as well as its financial results to the organization’s competitors. As you can see in the figure below:

  • 76% of CX pacesetters financially outperform their industry and 6% underperform
  • 19% of CX laggards financially outperform their industry and 23% underperform

CX leaders are more than four times as likely to financially outperform their competitors.

CXvsBusPerformance_EmployeesThe bottom line: Employees can see the value of customer experience

Companies Don’t Earn The Loyalty Their CX Deserves

Our report The ROI of Customer Experience shows that customer experience is highly correlated to loyalty. The research analyzed the relationship between Temkin Loyalty Ratings and Temkin Experience Ratings (TER) for 206 U.S. companies.

After analyzing the connection between these ratings, we found that some companies seem to have higher loyalty levels than they seem to deserve based on their customer experience while others have lower loyalty levels.

Using that dataset, I compared actual loyalty levels with projected loyalty levels. How? By plugging each company’s experience rating into our regression model to identify what their loyalty rating should be (normalized to their industry average) based on its TER and compared that projected rating with its actual loyalty rating. In the chart below you can see the companies with the largest positive and negative variances from the model’s projections.

The companies with loyalty levels the most above the projections are USAA, Highmark, Medicaid, credit unions, and TriCare. The companies that fall the most below the projections are T-Mobile, BMW, Bosch, AT&T, and Alamo.

Let’s examine USAA as an example. Since it has very high experience ratings compared with its industry peers, our model projects that its loyalty ratings should be at the high end of banks, credit card issuers, and insurance carriers. This analysis shows that USAA’s actual loyalty levels are higher than expected, even after factoring in its wonderful customer experience.

So what?!? There’s nothing inherently good or bad with being above or below the projected loyalty level. There’s no reason to expect companies to fall directly on their projected loyalty levels.

What’s interesting about this analysis is not what’s good or bad, but WHY are some companies so far away from the projected levels. This is where I’ll leave the data behind and offer my interpretation about WHY some companies have higher than projected loyalty while others have lower than projected loyalty:

  • Product fit. CX is not the only component of customer value. Companies that have tailored their products and services to better meet customers’needs (like USAA and TriCare) have an even better loyalty level than their CX would suggest. If companies have a poor product offering, then their loyalty may be lower than projected (this may explain Sears and DHL).
  • Product quality. If companies have quality problems with their offerings, then they would have lower loyalty levels than their CX deserve (this may explain AT&T, T-Mobile, and Alamo).
  • Service expectations. Companies that have premium status (BMW cars and Bosch appliances) often elicit higher expectations from customers, so they don’t earn the loyalty that their CX would suggest and have to work harder.
  • Trapped customers. In industries where customers have a hard time switching, a bad experience may not lead to the loyalty decline anticipated by the model; the same type of situation would occur if a company is harder to move away from than it’s competitors (this may explain Medicaid, Medicare, MSN, and EarthLink).
  • Commoditization. In industries that have a lot of pricing comparisons, customers may overly focus on price and not award good customer experience with the level of loyalty that the model projects (this may explain Alamo). It can also push consumers that have poor experience to more quickly leave a company for its competitor (this may explain DHL).
  • Substitutions. In sitations where customers don’t have a lot of clear alternatives, they will be more loyal to a company than the model suggests (this may explain eBay). A company that relies on self-service may be seen as easier to move from than a company that forms more personal connections with customers (this may explain E*TRADE).
  • Emotionality. Sometimes customers develop a strong affinity for a brand that increases loyalty and dampens the negative effect of any poor experiences (this may explain Southwest Airlines and Apple).

These items cover three broad topics: offerings, competitive environment and customer expectations. What do you think causes companies to earn more or less loyalty than their customer experience seems to deserve?

The bottom line: CX is correlated to loyalty, but other things matter as well

Net Promoter Labels Obscure Actual Recommendation Patterns

We recently published a benchmark of Net Promoter Scores of 180 companies across 19 industries. Within that research, we showed that promoters are more likely than detractors to repurchase. In a previous blog post, we examined how promoters and detractors actually recommend companies.

In this post, we go a step further and look at how consumers actually recommend based on the specific response to the NPS question. As you can see in the graphic below:

  • Zero means no. If someone picks the lowest score on this scale, then they rarely recommend a firm.
  • One to five is a neutral zone. Consumers that choose the next five higher responses have about the same frequency of recommending, between 18% and 29%.
  • Everything counts from six on. Thirty-two percent of consumers who selected six on the scale actually recommended those companies; the level of actual recommendations ramps up from there for each score higher on the scale
  • NPS labels hide some insight. The NPS process labels people who select “0″ to “6″ as detractors, “7″ or “8″ are called passives, and “9″ or “10″ are promoters. Theses labels may not accurately describe recommendation patterns. For instance, a detractor that selects “0″ is quite different than a detractor that selects “6.”
  • Five may be a negative collector. It appears that consumers may be selecting “5″ (the midpoint of the scale) when they are relatively upset. It could be that the selection of a “5″ out of “10″ is considered a failing score for many people (just as a 50 out of 100 points on a test would be seen as failing). This phenomena could explain the drop-off in recommendations at that level. We’ll continue to study this issue since it might require companies to rethink how they examine their survey results.

The bottom line: Not all promoters and detractors are alike.

The Excellent Economics Of Service Recovery

Most customer service and CX professionals intuitively understand that their companies need to do a good job in recovering from an experience miscue. An unhappy customer is never a good thing. So we decided to do a quantitative analysis of the relationship between service recovery and consumer spending. As you can see in the chart below:

  • Any improvement in service recovery has a positive effect on future spending patterns.
  • Moving service recovery from very poor to neutral limits the amount of decrease in future spending.
  • Moving service recovery from neutral to very good not only limits decreases in spending, but also increases the number of people that will spend more in the future.
  • Companies that do a very good job with service recovery have more customers planning to increase spending than decrease spending.

Companies that want to improve their service recovery should follow our C.A.R.E.S. model:

  • Communication (clearly communicate the process and set expectations)
  • Accountability (take responsibility for fixing the problem or getting an answer)
  • Responsiveness (don’t make the customer wait for your communication or a solution)
  • Empathy (acknowledge the impact that the situation has on the customer)
  • Solution (at the end of the day, make sure to solve the issue or answer the question)

The bottom line: Mistakes are inevitable, so recovery is critical.

Customer Service Drives Sales

This past week was National Customer Service Week. To celebrate, I’ll start by giving kudos again to the leaders in the 2012 Temkin Customer Service Ratings.

  • Publix
  • Hy-Vee
  • Credit unions
  • Chick-fil-A
  • H.E.B
  • Sam’s Club
  • Winn-Dixie
  • ShopRite
  • Aldi
  • Starbucks
  • Giant Eagle
  • JCPenney

I also decided to look deeper into our customer service data to examine the relationship between customer service and repurchasing. It turns out that we have data on over 90,000 customer service interactions. As you can see in the chart below, consumers that have a better customer service experience with companies are much, much more likely to buy from them again.

The bottom line: If you care about sales, you need to care about customer service

GM’s New Formula: Quality + Customer Experience

This week General Motors announced that they were combining the leadership of the Product Quality and Customer Experience organizations into a single role, a first of its kind move for the auto industry. Alicia Boler-Davis will be GM’s Vice President for Global Quality and U.S. Customer Experience and her primary focus is on strengthening the experience in order to raise customer retention, which by GM’s calculation is worth $700 million for each percentage point increase. In addition to the merging of quality and customer experience, GM’s plan includes:

  • Dealership renovations so that the showroom enhances customer confidence and provides a strong first impression to car buyers
  • Support experts to handle the dealer and customer training required by the growing integration of technology into vehicles
  • A team to proactively handle social media monitoring and response
  • New programs to empower front-line sales and service personnel to resolve issues quickly

My take:  I applaud GM’s combination of quality and customer experience. In My Manifesto: Great Customer Experience is Free, I describe customer experience in terms of total quality.

Why does this combination make sense? Quality efforts tend to focus on removing waste and building more consistent processes, but they often lack the deep external perspective of customer needs and desires. The push for removing waste can also squeeze out some important design considerations and overly focus on short-term savings versus longer-term loyalty gains. Customer experience efforts can fill in those gaps and benefit from quality approaches for process redesign and control.

In the 2012 Temkin Experience Ratings, Chevrolet – the only GM brand in our ratings – lead the auto dealer segment and was the only one to receive a “good” customer experience rating. So the big auto maker has a solid base to work with. We’ll keep an eye on Boler-Davis’ progress.

The bottom line: Quality and CX are two great tastes that taste great together

Customer Experience And Loyalty For UK Banks

In yesterday’s post, I discussed the connection between CX and business results for U.S. banks. Well, the relationship holds true for UK banks as well. Here’s a chart with the banks in the Temkin Experience Ratings UK and Temkin Loyalty Ratings UK.

The bottom line: The link between CX and loyalty holds true in the UK

Customer Experience Isn’t Enough in Banking

I read an interesting article in the New York Times: Bank Analyst Sees No Payoff in a Customer-Friendly Focus. It discusses how bank industry analyst Richard X. Bove believes that focussing on customers may be harmful for banks because it distracts them from making money. Here’s a bit of what he said:

Spending time solving problems with people is not selling products. It’s wasting time.

My take: First of all, I think that Bove is partially right. If you don’t have good products or if you don’t have solid sales processes, then you probably won’t have good business results; customer experience is not good enough on its own. As I’ve said for many years, customer experience is not a standalone activity, it needs to support your brand and business strategy.

Having said that, our research shows that companies with better customer experience have a better opportunity to improve their business results. That relationship holds up in our research across many industries.

I decided to take a look at one dimension of the Temkin Experience Ratings (easiness of doing business) and one dimension from the Temkin Loyalty Ratings (willingness to consider for another purchase) in banking. Here’s how those CX and loyalty items line up for 16 banks.

As you can see, there’s a high correlation between CX and potential loyalty. Just because 74% of USAA’s members are likely to consider the financial institution for another purchase, they aren’t going to do it unless USAA offers them an appropriate and competitive product.

The bottom line: CX is valuable, but not enough on its own

My Manifesto: Great Customer Experience Is Free

Here’s a replay of a post of from September 2007 with a few updated links. I thought it was still relevant and worthy of a replay…

Here’s my new quest: To dramatically increase the focus on customer experience within companies by getting everyone to understand that great customer experience is really good business.

Great customer experience is not only free, it is an honest-to-everything profit maker. In these days of “who knows what is going to happen to our business tomorrow” there aren’t many ways left to make a profit improvement. If you concentrate on improving customer experience, you can very likely increase your profits.

Good customer experience is an achievable, measureable, profitable entity that can be installed once you have commitment and understanding, and are prepared for hard work. But I’ve had a great many talks with sincere people who were clear that there was no way to attain great customer experience: “The engineers won’t cooperate.” “The salesman are untrainable as well as too shifty.” “Top management cannot be reached with such concepts.”

So how do I plan on igniting the great customer experience is free movement?

First, it is necessary to get top management, and therefore lower management, to consider customer experience a leading part of the operation, a part equal in importance to every other part. Second, I have to find a way to explain what customer experience is all about so that anyone can understand it and enthusiastically support it. And third, I have to get myself in a position where I have a platform to take on the world in behalf of customer experience.

That’s really what I believe, but I must confess that those aren’t all my words. Just about everything written after the first paragraph came directly from the book Quality Is Free: The Art of Making Quality Certain by Philip B. Crosby. I’ve made minor edits and changed references from “quality” to “customer experience,” but those are Crosby’s words from his book that was initially published in 1979.

Why did I “borrow” Crosby’s words? Because I see a lot of similarities between today’s need for customer experience improvements and the 1980′s quest for quality in the US. I was actually involved in the quality movement in the late 80′s and early 90′s — running quality circles, developing process maps, running workout sessions at GE, using fishbone diagrams, etc.

Here are 7 critical areas in which the great customer experience is free movement can learn from the quality is free movement:

  1. Nobody owns it (or the corollary, everybody owns it). In the early stages of the quality movement, companies put in place quality officers. Many of these execs failed because they were held accountable for quality metrics and, therefore, tried to push quality improvements across the company. The successful execs saw their role more as change facilitators – engaging the entire company in the quality movement. Today’s chief customer officers need to see transformation as their primary objective — and not take personal ownership for improvement in metrics like satisfaction and NetPromoter.  
  2. It requires cultural change. Many US companies in the 1980′s put quality circles in place to replicate what they saw happening in Japan. But the culture in many firms was dramatically different than within Japanese firms. So companies did not get much from these efforts, because they didn’t have the ingrained mechanisms for taking action based on recommendations from the quality circles. Discrete efforts need to be part of a larger, longer-term process for engraining the principles of good customer experience in the DNA of the company.
  3. It requires process change. Quality efforts of the 1980′s grew into the process reengineering fad of the 1990′s. As business guru and author Michael Hammer showcased in his 1994 book Reengineering the Corporation: A Manifesto for Business Revolution, large-scale improvements within a company requires a change to its processes. That perspective remains as valid today as it was back then. Customer experience efforts, therefore, need to incorporate process reengineering techniques. That’s why these efforts must be directly connected to any Six Sigma or process change initiatives within the company.
  4. It requires discipline. Ad-hoc approaches can solve isolated problems, but systemic change requires a much more disciplined approach. That’s why the quality movement created tools and techniques — many of which are still used in corporate Six Sigma efforts. These new approaches were necessary to establish effective, repeatable, and scalable methods. A key portion of the effort was around training employees on how to use these new techniques. Customer experience efforts will also require training around new techniques. Here are a couple of my posts that describe this type of discipline: Four Customer Experience Core Competencies and The Six Ds of a closed-loop VoC Program.
  5. Upstream issues cause downstream problems. This is a key understanding. The place where a problem is identified (a defective product, or a bad experience) is often not the place where systemic solutions need to occur. For instance, a problem with a computer may be caused by a faulty battery supplier and not the PC manufacturer. A bad experience at an airline ticket counter may be caused by ticketing business rules and not by the agent. So improvements need to encompass more than just front-line employees and customer-facing processes.
  6. Employees are a key asset in the battle. The quality movement recognized that people involved with a process had a unique perspective for spotting problems and identifying potential solutions. So the many of the tools and techniques created during the quality movement tap into this important asset: Employees. Customer experience efforts need to systematically incorporate what front-line employees know about customer behavior, preferences, and problems as well as what other people in the organization know about processes that they are involved with.
  7. Executive involvement is essential. For all of the items listed above, improvements (in quality then and in customer experience now) require a concerted effort by the senior executive team. It can not be a secondary item on the list of priorities. Change is not easy. To ensure the corporate resolve and commitment to make the required changes, customer experience efforts need to be one of the company’s top efforts. Senior executives can’t just be “supportive,” they need to be truly committed to and involved with the effort.

Corporations removed major quality defects in the 80′s, re-engineered business processes in the 90′s, and now it’s time to take on the next big challenge for corporate America:  Customer experience.

It’s critically important, it’s broken, and fixing it can be very profitable. So don’t settle for the status quo! It’s up to you.

As Crosby said in his book:

You can do it too. All you have to do is take the time to understand the concepts, teach them to others, and keep the pressure on.

The bottom line: The great customer experience is free movement is officially underway. Join me!

What Drives Net Promoter Scores (NPS) in IT?

A previous post examined Net Promoter Scores (NPS) for tech vendors and the relationship between NPS and market share based on feedback from IT decision makers within large firms. Since I’ve had questions about that post, I decided to examine a common question: What’s driving those NPS scores? It turns out that the answer (no surprise) is customer experience.

We examined a number of metrics and their relationship with NPS in two areas:

  • Correlation (R). This looks at how connected one metric is to another, ranging from -1.0 to 1.0. A correlation above 0.5 is strongly positive and above 0.7 is very strongly positive.
  • Slope. This looks at the change in NPS that relates to a one-point change in the metric. A higher slope means a change in the metric has a higher change in NPS.

Our first analysis examined NPS scores versus the Temkin Experience Ratings for Tech Vendors. It turns out that there was a very strong correlation (R= 0.77) and the slope is 1.13.

We then examined the correlation and slope between NPS and components of the Temkin Experience Ratings as well as with product and relationship satisfaction scores.

Here are some observations from the analysis:

  • Customer experience is critical. Temkin Experience Ratings has the highest impact on NPS, with the highest overall correlation and slope.
  • You have to be easy to do business with. The highest individual correlation (.75) and slope (1.11) is with the accessible element of the Temkin Experience Ratings, which looks at how easy the company is to work with.
  • Relationship trumps product. It turns out that the correlations are about the same for relationship satisfaction and product satisfaction, but the slope is much higher for relationship satisfaction.
  • Cost of ownership stands out. When it comes to the slopes, cost of ownership (.99) stands out amongst the satisfaction items. Support of account team (.86) is also relatively high.

The bottom line: To improve NPS, improve customer experience.

You can purchase this data for $295. The Excel spreadsheet contains NPS, Temkin Experience Ratings, relationship satisfaction, and product satisfaction data for 60 tech vendors in the analysis as well as for 28 others with sample sizes of less than 60 respondents.

Net Promoter Score and Market Share For 60 Tech Vendors

Temkin Group recently surveyed 800 IT professionals from large companies and asked them a series of questions about tech vendors. This research has fueled some of our previous posts: Temkin Experience Ratings for Tech Vendors, How IT Professionals Share Feedback About Vendors, and Tech Vendors: Benchmarking Product and Relationship Satisfaction of IT Clients.

We also asked the IT professionals to rate each tech vendor on the Net Promoter Score (NPS) scale.* NPS is based on one question: How likely are you to recommend the tech vendor to a friend or colleague? IT professionals choose an answer on a scale from 0 (not at all likely) to 10 (extremely likely). Responses are put into one of three categories:

  • Promoters (score 9 or 10)
  • Passives (score 7 or 8)
  • Detractors (score 0 to 6)

NPS is calculated as the percentage of promoters minus the percentage of detractors. (If you’re interested in best practices for using NPS, read my post 9 Recommendations for NPS which is also part of our VoC resource page).

Here is the NPS for 60 tech vendors, ranging from Intel, Microsoft and Cisco in the 50s down to Compuware, Unisys, Cognizant, and Capgemini below 10.

We also asked the IT professionals how much their company was planning to spend in 2012 compared with 2011 and mapped this data with NPS. It turns out that we found four bands of performance in this market based on NPS scores:

  • More than 40: These companies have much higher purchase momentum and are poised to grab a lot of market share
  • Between 28 and 40: These companies have above average purchase momentum and are poised to gain market share
  • Between 23 and 28: These companies have below average purchase momentum and are poised to lose market share
  • Less than 23: These companies have much lower purchase momentum and are poised to give up a lot of market share

You can purchase the data in an excel spreadsheet for $195. The file includes details on the 60 tech vendors shown in this blog post as well as 28 other tech vendors with sample sizes too small to be included in our published research. The data includes sample sizes for the companies, percentages for promoters, detractors, and NPS score, as well as the percentage of companies with increasing spending plans and those with decreasing spending plans.

*Note: Net Promoter, NPS, and Net Promoter Score are trademarks of Satmetrix Systems, Bain & Company, and Fred Reichheld

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