Fred Reichheld Gives A Net Promoter Update
January 27, 2009 12 Comments
I was able to catch the closing session with Fred Reichheld at yesterday’s Net Promoter Conference in San Francisco. For those of you who don’t know Reichheld, he’s the author of the book The Ultimate Question and widely viewed as the “father” of Net Promoter methodology. I’ve spoken at the same events as Reichheld many times over the last few years, and it’s always a pleasure to hear him speak. He has a nice down-home delivery; as if your uncle was talking to you about Net Promoter.
But I’ve noticed a distinct shift in his message over the last couple of years. He used to be a jubilant evangelist for the magic of running your company by using a single question to customers: “How likely is it that you would recommend our company to a friend or colleague?” The answer to that “ultimate question” categorizes every customer as a promoter, detractor, or passive. If you take the percentage of promoters and subtract the percentage of detractors, then you end up with a single, simple metric: Net Promoter Score (NPS).
Interestingly, his message is becoming somewhat more somber, and is now converging with the advice I’ve been giving to clients for several years: scores only matter if they help you improve your business. Here was one of Reichheld’s opening statements:
The score, NPS, maybe was a mistake. It’s not the score, it’s what you do with the score to make promoters.
Unfortunately, too many companies get obsessed about their Net Promoter Score and don’t focus enough on customer experience improvement plans. This approach ends up with a lot of frustration with the (lack of) results.
As always, Reichheld provided valuable insights. Here are some of his comments that I found particularly interesting:
- He said that by naming things and creating structure, you change how people think. (I absolutely agree; one of the principles of my research has been to create structure around amorphous concepts).
- He chastised the group a bit for “not doing the hard work” of putting together solid business cases that link an increase in promoters to better business results. He said that economic effects are extraordinary, but you can’t get the business on-board until they see the details of the financial impact. Firms need to get their finance organizations involved so they make a case that the CFO will buy into.
- The three elements of the business case he mentioned were: Word of mouth referrals, retention, and share of wallet.
- Reichheld put up Apple as a good example for using their net promoter approach (partly because he is working with them as a case study for his next book). At the beginning of each shift, Apple store managers have a list of all of the “10s” (the top score) along with the associated verbatims from the previous day’s net promoter surveys. They ask the employee who was rated a “10” to describe what he thinks he did that drove the score.
- He said that the Net Promoter question works in about 80% to 90% of the cases he’s seen. But he also said that the one (or two) questions you use do not have to be the likelihood to recommend question. You just need to use a question that categorizes customer into these that are passionate about your company and those that are not.
- One attendees asked a great question: “How do you explain the Home Bank results (going out of business) when they had such high Net Promoter scores?” Reichheld responded by saying that NPS is not a magic bullet and that Home Bank shouldn’t have sold bad mortgages.
I’m thrilled to see that Reichheld’s message is starting to align more with mine. It takes a lot of hard work and commitment for firms to make progress along their customer experience journeys. Not surprisingly, this is what I’ll be discussing in my speech later today.
If you made it this far in the post, then you will likely be interested in a research report that I’m just finishing up called “Voice Of The Customer, The Next Generation.” I should be able to blog about it in more detail next month.
The bottom line: Here’s the ultimate lesson: create more promoters.