CX Mistake #9: Falling In Love With A Metric

In this series of posts, we examine some of the top mistakes companies make in their customer experience management efforts. This post examines mistake #9: Falling In Love With A Metric. Companies often get enamored with a metric like Net Promoter Score (NPS) and lose sight of what’s really important, making improvements.

Customer experience efforts absolutely need metrics and measurements. While there’s value in collecting that data to measure or track customer experience, the true power comes when it provides insight into where and how to make improvements. But some organizations over-emphasize the metric. Companies going down this path can run into problems when they:

  • Rush into compensation. Tying business results to metrics can be a good thing. But tying too much compensation too early to any metric can also cause a lot of problems. If people have a significant part of their pay tied to a metric they don’t understand or don’t know how to affect, then they will either ignore it, get bitter about it, or find ways to “game” the system. Customer experience doesn’t improve if salespeople are calling out to customers and begging them to give higher ratings on a survey.
  • Can’t answer “why.” Reporting on a metric can highlight strengths and weaknesses of a company’s overall customer experience. So it’s understandable that some executive teams push for widespread use of those metrics without caring about the overall set of information collected from customers. But if the company does not understand “why” customers are either happy or unhappy, then they can’t systematically improve customer experience and positively affect the metric.
  • Overuse a metric. Understanding if a customer is happy overall with an organization is quite different than understanding if her needs were met during a specific service call. But some companies blindly use the same metrics for each of those areas. A metric like NPS, for example, may be appropriate for examining relationship strength, but it’s necessarily good for evaluating interactions.
  • Forget their uniqueness. Every business has a unique set of strengths, weaknesses, goals and ambitions. But when it comes to customer experience metrics, companies often want to use the same measures as everyone else. While this may enable benchmarking comparison to other firms, it does not necessarily measure how the company is progressing towards its unique goals.

Here are some tips for avoiding this mistake:

  • Treat relationships and interactions differently. The questions you ask a customer about how they view your company can (and often should) be quite different than those that you ask about an interaction. Think about different questions and methods for five different types of insights: Relationship tracking, interaction monitoring, continuous listening, project infusion, and periodic immersion.
  • Deploy shadow metrics before making large incentive changes. To help leaders in your company understand the impact of customer experience incentives, put in place the metrics you are thinking about for a couple of periods before actually making them “live.” That way people can see how it will affect them before actually does affect them.
  • Establish performance bands, not absolute targets. Customer feedback metrics can be a bit jittery. Sometimes it can be very hard to explain small movements since there’s always some variance due to sampling limitations. Rather than establishing “a number” as the goal, set targets for high and low scores. Success comes from consistently execceding the low band.
  • Measure relevant attitudes and behaviors. Businesses aren’t in the business of getting random people to recommend them. They hope to get that type of loyalty from successfully executing their mission. Develop measurements that test the attitudes and behaviors of target customer segments, making sure they line up with your specific business and brand strategy.
  • Build a robust voice of the customer (VoC) program. Creating isolated metrics will not drive change in an organization; especially when people don’t understand what drives the metric. Companies need to develop a voice of the customer (VoC) program that continuously shares actionable customer insights across the organization.

The bottom line: Use metrics to improve the experience, not just measure it

9 Recommendations For Net Promoter Score (NPS)

This week is the Net Promoter Conference in London. Since these events often spur a ton of questions about Net Promoter Score (NPS), I put together one of my periodic posts about NPS. If you’re not familiar with NPS, it’s based on asking customers a question like this:

How likely are you to recommend <COMPANY> to a friend or colleague?

Respondents are categorized as “Promoters,” “Detractors,” or “Passives” based on their answers. The Net Promoter Score (NPS) is calculated by subtracting the percentage of Detractors from the percentage of Promoters (Passives are ignored).

My take: Let me start looking at NPS with some data points from the report, The State Of Customer Experience Management, 2011:

  • 48% of large companies (more than $500M in revenues) are using NPS
  • 67% of those using NPS report positive results (15% say it’s too early to tell)
  • 84% of large firms with voice of the customer programs (including those that use NPS), report success from those efforts

NPS can be a valuable metric, but only when incorporated within a strong voice of the customer (VoC) program. Here are a handful of overall recommendations about NPS:

  1. Stop dreaming about an “ultimate question.” Having worked with dozens of organizations on their NPS efforts, I can tell you that the NPS question is not nirvana. Even the most successful users of NPS ask customers a series of questions and get feedback through a portfolio of mechanisms.
  2. Look for magic in the “why.” To some degree, it’s useless to know if someone is likely or unlikely to recommend you if you don’t also understand why they feel that way. So you need to make sure customer feedback helps you understand why customers feel the way that they do. Which leads to my next recommendation…
  3. Focus on improvements, not questions. Feedback is cheap, but customer-insightful actions are precious. The goal for any feedback mechanism (like NPS) is to drive improvements in your business. Successful NPS programs have strong closed-loop VoC programs that go from detection of customer perceptions to deployment of improvements (see my post about the 6 Ds of a voice of the customer program).
  4. Don’t lose sight of segments. An overall NPS score across your customers may be a good metric for aligning focus across the company, but it’s not very diagnostic. A good VoC program needs to track this type of data across key customer segments and understand which interactions (“moments of truth”) are driving those scores.
  5. Understand the elements of experience. When it comes to making improvements, you need to understand the three core elements of any experience: Functional, Accessible, and Emotional. A good program needs to provides insights into how customers perceive each of these elements.
  6. De-emphasize the “N” in NPS. NPS improves by eliminating Detractors or by increasing Promoters. but those changes can also offset each other. So the “netting” of the scores removes important clarity. Companies need to look at the rise and fall of Promoters and Detractors independently, since the changes needed to affect these areas are often quite different.
  7. Tap into the power of the language. There’s a lot of data to suggest that other measures such as the ACSI’s satisfaction index are as good as NPS (many people argue that it’s better, but I don’t want to enter that debate). What sets NPS apart is the wonderfully clear language around “Promoters” and “Detractors.” Make sure that the education across the company focuses heavily on those terms.
  8. Build a strong VoC program, with or without NPS. The overall program is more important than the choice of a metric like NPS. So make sure you focus on building a strong VoC program whether or not you use NPS (check out our VoC resource page).
  9. Remember, this is a long-term journey. Companies can make short-term improvements with superficial changes, but long-term success requires institutional capabilities. Start by understanding the 6 laws of customer experience and create a roadmap for building four customer experience core competencies: Purposeful Leadership, Compelling Brand Values, Employee Engagement, and Customer Connectedness.

The bottom line: Successful NPS implementations require strong VoC programs

A Loyalty And Satisfaction Misconception

Many companies struggle to create loyal customers. Even companies with very active customer experience efforts can have a hard time building loyalty. One of the reasons for this difficulty is a fundamental misunderstanding of how loyalty and satisfaction are connected. So I’ve created this graphic to teach an important principle:

Loyalty is not the opposite of dissatisfaction. Eliminating dissatisfaction is often a necessary, but not sufficient step for creating loyalty. Here are some things to keep in mind:

  • Dissatisfies are often “must-have” features (spend a few minutes learning the Kano Model), eliminating them only leaves the customer with a neutral feeling about your company.
  • When you do analysis on your voice of the customer data, you should separately identify (and work on improving) drivers of satisfaction and drivers of dissatisfaction.
  • Users of the Net Promoter Score will also find the same connection; creating Promoters requires a different set of activities than eliminating Detractors.
  • Drivers of loyalty are often more unique across customer segments than drivers of dissatisfaction.
  • You can’t create a lot of loyal customers until you consistently eliminate areas of dissatisfaction, so start there.

The bottom line: Don’t just eliminate dissatisfaction.

The Current State Of Customer Experience

We just published a new Temkin Group Insight Report, The Current State Of Customer ExperienceThis report, which is based on a survey of 140+ large North American companies, provides insights into the progress that companies are making on their customer experience journeys.

It looks at topics like the adoption of voice of the customer (VoC) programs and Net Promoter Scores, the use of social media activities, and the goals, obstacles, and ambitions for customer experience. Here’s the executive summary:

Using the Temkin Group customer experience competency model, we found that only 3% of firms were “Customer-Centric Organizations” while 33% of firms were “Customer-Oblivious Organizations.” While companies rated highest in the area of Purposeful Leadership, only 16% received “very good” ratings in that competency area. This data highlights that companies are still in very early stages of customer experience maturity. We expect the results to improve over time; as 65% of respondents want to be customer experience leaders within three years.

Download report for $195

The report has 20 figures; with lots of data. Here are some interesting factoids:

  • Only 16% think they always or almost always delight customers getting customer service online.
  • 95% want to improve profitability, but only 43% want to improve the work environment for employees.
  • 37% have had a customer experience leader for at least 12 months
  • 71% identified “other competing priorities” as a significant obstacle to their customer experience efforts; the most commonly selected of the 11 obstacles we asked about.
  • 57% have a formalized voice of the customer (VoC) program
  • 45% that have a formalized VoC program tie compensation to customer feedback scores; one of the 15 VoC activities we asked about.
  • 32% have been using Net Promoter Score (NPS) for at least 12 months; 19% are not familiar with NPS
  • 31% analyze conversations in social media sites like Facebook and Twitter; the most commonly used of 11 social media activities we asked about.
  • The customer experience competency assessment showed a wide range of results across the 20 questions:
    • Highest scoring: Senior executives regularly communicate that customer experience is one of the company’s key strategies
    • Lowest scoring: Marketing does as much brand marketing inside the company as it does outside the company

In addition to the data insights, the report has a number of self-assessment tools that you can use to compare your efforts to the 140+ respondents:

  • In the Temkin Group Insight Report, The Four Customer Experience Core Competencies (free download), we introduced an assessment tool for our competency model. This report allows you to compare your results with 140+ other companies.
  • A tool for gauging your voice of the customer (VoC) activities
  • A tool for gauging your social media activities

Download report for $195

The bottom line: Customer experience management is still immature

Survey Shows Strong Customer Experience Ambitions

Temkin Group recently ran its first research survey looking at the state of customer experience within companies. The response was great, more than 400 people took the survey. Here are some of the high-level results:

  • 13.8% think that their company is the best in their industry in customer experience, while 60.2% want to be the best in their industry within 3 years
  • When it comes to online interactions, only a few respondents think that their company always or almost always delights their customers:
    • 22.8% when customer researches a product
    • 22.4% when customer purchases or applies for a product
    • 25.4% when customers get customer service help
  • Here’s who’s most often running the company’s customer experience efforts:
    • Dedicated customer experience group (28.9%)
    • Marketing (21.9%)
    • Customer service (17.1%)
  • 62.7% have a senior executive in charge of their customer experience efforts
  • 51.4% have a formalized voice of the customer (VoC) program, and 80.7% of those people think that it has had a positive impact on the company
  • 42.9% are using Net Promoter Score (NPS), and 65% of those people think that it has had a positive impact on the company
  • Companies identified these as the top obstacles to improving customer experience:
    • Other competing priorities (61.7%)
    • Lack of a clear customer experience e strategy (48%)
    • Limited funding (42.7%)
    • Conflict across internal organizations (38.5%)

As a courtesy to the respondents, they were sent a detailed report on these findings. We will make that report available more widely within the next couple of weeks and will be discussing more of the data in upcoming posts. In particular, I will be analyzing the responses from 150+ large North American companies.

The bottom line: Customer experience remains a hot topic

It’s Time To Talk About Net Promoter

The annual Net Promoter Conference is this week in New York. Unfortunately, I couldn’t attend due to some client projects. But I still want to weigh-in on Net Promoter, since I get a lot of questions on the topic.

Here are answers to some of the basic Net Promoter questions:

  • What is the Net Promoter Score (NPS)? Using a survey question like “How likely are you to recommend <COMPANY> to a friend and colleague?” respondents are categorized as “Promoters,” “Detractors,” or “Passives.” The Net Promoter Score (NPS) is calculated by subtracting the percentage of Detractors from the percentage of Promoters.
  • Is NPS a good thing? Yes, if used correctly. No, if used incorrectly.
  • Is NPS really “The Ultimate Question?” No, it’s only one customer input of many that are needed in a Voice of the Customer (VoC)  program.
  • What is the biggest problem in Net Promoter programs? Companies focus on the “metric” instead of the improvement process fueled by the metric.
  • What is the big change in Net Promoter? Companies have focused primarily on eliminating “Detractors” but more companies are looking at creating and empowering “Promoters.”

Here are some posts about Net Promoter (and more broadly around VoC programs) that you may want to read:

The bottom line: It’s time to start creating Promoters.

My Closing Thoughts On Net Promoter

I had planned to do one last post about the Net Promoter Conference in San Francisco to recap my session. But it turns out that Jessica Tsai from CRM Magazine did a great job capturing it in her article called “The 5 Levels of Customer Experience Maturity,” so read her article if you want to hear about my session. One thing that she didn’t mention was a quote I used from Ghandi (in addition to the quote from Morpheus that she mentioned in the article). How often do you get to hear a blending of wisdom from Morpheus and Ghandi?!?

So, rather than recap my session I’ll share my thoughts on the Net Promoter movement. Some of this is captured in my post about Fred Recihheld’s speech and the subsequent comments on that post. But I decided to vet my thinking in a Q&A format. So I will ask and answer a series of questions:

Q: Where is Net Promoter Score (NPS) at in its lifecycle?
I’d say NPS is entering early adolescence. The excitement and exuberance of a single measure for customer loyalty is giving way to some second guessing and rethinking. Companies are learning that it’s not as easy as just using NPS, it takes hard work to figure out how to best use NPS to improve customer experience. The NPS conference, though, was at the right level. Rather than promote the greatness of the NPS metric, Recihheld led the charge around figuring out how to use it as a catalyst for change.

Q: There’s been a lot of debate about the value of NPS, is Net Promoter a good thing?
Yes, absolutely! Despite the mistakes and drawbacks of NPS, it has been enormously successful at catalyzing the attention of senior executives on the issue of customer experience; it’s made customer experience relevant to the executive suite. And one of the best things about NPS, which doesn’t get enough attention, is that it has introduced a common language around customer segments: Promoters, Passives, And Detractors. The use of common vernacular is a very powerful tool for aligning organizations.

Q: What have been the biggest problems with NPS?
NPS has been marketed as the “ultimate question” and the single metric you need to run your business. While this has been an important part of its success in garnering attention, it has led many practitioners to misunderstand its true value. The key value of NPS is not as a metric, but as part of an approach for improving customer loyalty. NPS’ role is to segment good outcomes (Promoters) from bad outcomes (Detractors) so that the company can diagnose the drivers for each of those situations. This only becomes valuable when the company uses this insight to change what they do so as to create more good outcomes in the future.

Q: Could another question work just as well?
Yes, I believe that there are other questions that could also work as a diagnostic. For financial services and health care firms, a question around customer advocacy could work. At Forrester, we’ve tracked customer advocacy by asking consumers how much they agree with this statement: “<Firm> does what’s best for me, not just what’s best for it’s bottom line?” Also,  satisfaction questions can work. As I’ve said in the past, any company that can institutionalize processes that create more satisfied customers and creates less dissatisfied customers will do well.

Q: Are there places where an NPS question doesn’t work?
Yes, there are many places where the net promoter question isn’t appropriate. I always discuss voice of the customer efforts (of which NPS is a part) in the context of five levels of insight: Relationship tracking, interaction monitoring, consinuous listening, project infusion, and periodic immersion. NPS fits nicely in the relationship tracking bucket, but is not a good fit for the other levels of insight. Satisfaction questions actually work much better for interaction monitoring.

Q: It sounds like satisfaction can be a useful concept, why doesn’t it have the same “buzz” as NPS?
Fred Reichheld. The excitement about NPS was created by the energy and dynamic nature of Reichheld. While satisfaction methodologies have been around for a lot longer time than NPS (see theacsi.org), they lack a spokesperson who is as persuasive as Reichheld. Through a combination of his HBR article, books, consulting, and speaking engagements, Reichheld has created “the buzz” around NPS.

Q: What should companies using NPS do going forward?
First of all, get everyone in the company to use of the three labels for customers: Promoters, Detractors and Passives. Then, make sure that you shift your thinking form “tracking” NPS to using it as part of a diagnostic approach for improving customer experiences. You should create the following endless loop: NPS identifies Promoters and Detractors, diagnostic analysis identifies what separates those outcomes, change the experiences for customers based on that insight, and then create more Promoters and Detractors, and then NPS identifies Promoters and Detractors, etc.

Q: How do you keep executives aligned with these efforts?
Executives will (and should) only keep focusing on NPS (or, more correctly, customer experience improvements) if they see business value from those efforts. So NPS practitioners should work with their finance teams to build models that show the value of creating more Promoters and decreasing the number of Detractors. Without this clear connection to financial results, it will be hard for companies to continue to invest in this area. This type of insight will help executives understand that creating Promoters is a fundamental part of their job. And, finally getting to my quote from Ghandi:

All compromise is based on give and take, but there can be no give and take on fundamentals. Any compromise on mere fundamentals is a surrender. For it is all give and no take.

The bottom line: NPS has great potential, but the results are up to you.

Fred Reichheld Gives A Net Promoter Update

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.

Intuit’s Brad Smith Shares Customer Experience Insights

I’m speaking tomorrow at the Net Promoter Conference in San Francisco. After my flight today, I was able to catch a couple of sessions. One of those was a speech by Brad Smith, Intuit’s CEO.

(For some more background, read my post: Net Promoter And Satisfaction Battle For King Of The Ring).

Intuit has been one of the most active users of the Net Promoter methodology (focusing on customers’ answer to a single question: Would you recommend Intuit to a friend?). It started when Intuit’s founder Scott Cook championed the deployment of the Net Promoter Score (NPS) across Intuit in 2003. I’ve had several meeting with Cook since then and can attest to his strong commitment to NPS. One of Smith’s initial statements was very telling:

Net Promoter is core to the company… it’s part of who I am as a leader.

Smith also said that 81% of sales are directly attributable to word of mouth. He then went through three lessons that Intuit has learned on it’s Net Promoter journey. Here are a few of his interesting comments on those lessons:

1) Leaders Must Chart The Course

  • He discussed “True North” as the direction towards customer experience that everyone in the company shares
  • One of the firm’s goals is to have an NPS at least 10 points more than the nearest alternative
  • They use customer feedback to rapidly change the Turbo Tax product; they changed more than 90% of the code during the tax season.

2) Delighting Customers Makes Employees Hearts Beat Faster

  • He said that employees need hear customer feedback; whether they’re complaints or applause. Without it, he said, was like giving a show day after day in an empty theater.
  • To empower employees to unleash ideas, 10% of employees time is “unstructured” and meant for finding ways to improve customer experience. They’ve created an online “Brainstorm” tool to facilitate idea sharing across the company. 

3) Innovation Fuels Customer Delight

  • He suggests that you need to question long-held beliefs; and gave several examples of ideas from Gen Y employees. One of those ideas was to put the live support community inside of Turbo Tax. It turns out that 40% of the questions customers had were being answered by other customers.
  • The company created Intuit Labs to facilitate innovation.
  • One great example was a problem with Intuit’s IVR (the menu of options customers hear when they call). Customers were getting incorrectly routed 40% of the time. Since it took 10 days to reprogram the IVR, they couldn’t try a lot of things in the normal way. So one engineer said let’s do this the old fashioned way; and they did. People answered the phone and spoke the menus. By trial and error, they found a menu structure that worked before reprograming the IVR.

The bottom line: Would you recommend this blog to your friends and colleagues? 🙂

“LIRM” More About Net Promoter vs. Satisfaction

Well, it looks like my post on Net Promoter ignited some passionate debate — take a look at the comments posted on this blog if you’re interested. As this battle continues on, I want to make sure that people keep their eye on the toughest part of implementing any relationship tracking system — whether it’s based on Net Promoter, satisfaction, or some other measure. 

My suggestion: “LIRM.

“LIRM” (from my report Building Your Voice Of The Customer Program) represents the elements firms need to put in place to make any voice of the customer program effective. The acronym stands for:

  • Listen. All components of a VoC program need clear mechanisms for capturing everything from customers’ perspective on specific interactions to their satisfaction with the company.
  • Interpret. Customer feedback needs to be examined by asking questions like “Is the issue we’ve uncovered isolated or systemic?” And “Where in our organization can we best deal with this situation?”
  • React. For each component of a VoC program, firms need explicit processes for making changes throughout the organization – based on what is learned from customer insights.
  • Monitor. As with any well-run corporate program, each component of a VoC program needs automatic feedback loops that track work plans and results.

The bottom line: When it coms to this Net Promoter debate, listen and LIRM.

Net Promoter And Satisfaction Battle For King Of The Ring

Let’s start with a confession: I’m a big professional wrestling fan; so I really enjoy a good battle. One thing that I’ve learned from the WWE, is that it’s the storyline that makes a battle come to life. And the Net Promoter vs. Satisfaction debate has all of the story trappings of a great tag team match!

One one side of the ring in the blue trunks is the tag team of Fred Reicheld, “father” of the Net Promoter System (NPS) concept and Satmetrix Systems, implementor of NPS-based survey systems. On the other side of the ring in the red trunks, we find Claes Fornell, “father” of the American Customer Satisfaction Index (ACSI) and ForeSee Results, implementor of ACSI-based survey systems.

Both of these teams are fighting for their approach to be recognized as “THE” measure for tracking customer relationships. To put this into perspective, this type of measure represents only one of the five levels of a voice of the customer program (see my earlier post on voice of the customer programs).

Let’s start by handing out some awards to the teams:

  • Best marketed: Net Promoter (Reichheld is very good at touting his concept — and in writing compelling books about it)
  • Most mature: Satisfaction (The ACSI has been tracking data since about 1994 and satisfaction has been around as long as I can remember)
  • Most quantitative: Satisfaction
  • Sexiest: Net Promoter (it’s caused a lot of hooplah)

Net Promoter has gained a lot of momentum over the last few years as many large companies have adopted it. The methodology is pretty straightforward: ask people if they’d recommend your firm. Based on their response, they get categorized as a Promoter, Detractor, or neither. You take the percentage of Promoters and subtract the percentage of Detractors and that leaves you with a Net Promoter percentage.

This debate was enhanced by a recent study cited in the Journal Of Marketing which found that…

Using industries Reichheld cites as exemplars of Net Promoter, the research fails to replicate his assertions regarding the “clear superiority” of Net Promoter compared with other measures in those industries.

Well, if you’re wondering what I really think about this Battle Royale, then here it is. Just like wrestling — the storyline is much more exciting than the reality of the battle. Here’s my take on the contest:

  • Net Promoter is not the “ultimate” measure for a customer relationship
  • Then again, neither is satisfaction.
  • But companies are better off when they have more satisfied than dissatisfied customers and more Promoters than Detractors.

My recommendations:

  • Don’t expect any single measure to be eutopia. Both measures are good, but neither one has enough information to fully guage customer relationships and to provide enough diagnostic information to make all of the necessary improvements.
  • Focus on one measure to build alignment. Picking a single measure to focus on (whether or not it’s perfect) can be very valuable in aligning the organization. If you can get your entire company focused on either raising satisfaction or increasing the number of Promoters, then you will likely see some significant improvements in the reallt important metrics: retention, sales, etc. So, if in doubt, pick one and move on.
  • Evolve your metrics over time. The previous two bullets may seem to contradict each other, but they don’t when you look at it over time. The value from locking into a single measure like Net Promoter is as much from aligning the organization as it is around the perfection of the metric. But after the organization gets aligned, firms will need to build out the portfolio of metrics — and find out for themselves which measures are both predictive and diagnostic.
  • Look at Customer Advocacy. The ring was too crowded to add another contestant to the match earlier in this post, but for some industries we’ve found another measure that is a powerful indicator of loyal customer behavior. So, in the purple trunks is Customer Advocacy, the perception that the firm does what’s best for customers, not just what’s best for its own bottom line. We strongly recommend that financial services and healthcare firms take a very close look at this measure.

The bottom line: Don’t get too caught up in determining the winner of this battle. Just make sure that you do something and are prepared to learn and evolve over time.

If you’re a client of Forrester, then I also recommend that you read these two research documents:

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