Fred Reichheld began his session by tackling the debate raised by the market research community. He referred to himself as the anti-christ of market research. While all three of his books have been best sellers, The Ultimate Question has stirred up major debate in the market research arena. The biggest criticism is that it’s over simplified. It’s just one question and nothing about why? Yet, if you read the book it’s all about the why. NPS is not intended to be a superior predictive analytic; it is intended to be a management tool.
He addressed the question of why the “status quo” market researchers are so critical of NPS and believes it’s because NPS has attracted so many of their customers. He showed a slide with many big brand logos that are using NPS and seeing results.
Fred has resisted the temptation to address the market researchers head on and instead has invested his energy into helping companies get results with NPS. According to him, here are the reasons why so many companies are using NPS vs. traditional approaches:
- Intuitive and practical
- Efficient and respectful of customers’ time. (He described a recent experience with British Airways where he was presented with a survey with 79 questions. The first 15 questions could have been filled out by them -- seat, flight, etc. This was not respectful of his time.)
- Diagnostics have to take place by people so they can take action.
- Action oriented: daily, weekly, monthly report
- Motivational. It’s not about the score, it’s about treating people in a way that builds relationships.
- It’s the right objective.
- Loyalty economics, link to the numbers investors care about.
- Open source. Most loyalty index calculations are a closed source.
- Based on a simple moral premise, treat others the way you want to be treated.
The goal is not about the score, it’s about turning everyone you touch into a promoter.
The model is clear. Customer loyalty drives growth. Loyalty is driven by partner, employee and channel loyalty. Their loyalty is driven by the leadership loyalty, creating a culture of rewarding those that treat people right.
In contrast, business is run by accounting standards. Financial metrics that are audited, and people go to jail if they are dishonest about the numbers. How many people have gone to jail for gaming satisfaction numbers? (Otherwise we wouldn’t be able to buy cars, as all the car dealers would be in jail!)
Bad profits alienate customers and de-motivate employees. Examples:
- Hotel: phone bills
- Banking: returned check fee
- Cellular: best price for new customers
- Airlines: change fee
- Rental car: gasoline refill at 3x retail
NPS is radical. It’s trying to take bad profits out of the business. Instead, it focuses on the building blocks of growth.
- Repurchase
- Buy additional lines
- Referrals
- Constructive feedback
None are measured in generally accepted account metrics.
Balance the power between net profits and net growth.
Part of the success of Enterprise Rent-A-Car is their focus on NPS. They focused on:
- Reliable categorization of detractors and promoters
- Approach to reduce detractors
- Approach to grow promoters
- Established as a leadership priority
They stack ranked their branches; low performing branches couldn’t be promoted. They audit results and fire people that cheat. The results are that 80% of customers are promoters, they have grown to dominate the industry while price competitive and paying their people best in the industry.
The key is to get NPS working at all levels. Top down is helpful for setting strategic priorities and driving culture change. Bottom up, frontline engagement changes the score daily, weekly, monthly. Cross functional leaders tend to be the ones designing the policies that drive bad profits because they have a financial budget they have to hit even if it impacts loyal customers because this is typically not measured. Drive NPS measures across at all levels to get results.
Think of profitability and Net Promoter simultaneously. He showed a chart from one of the accounting firms that segmented promoter, passive, detractors on one axis and profitability on the other. This allows companies identify the market segments with best profits and high loyalty allowing them to focus on the markets that matter most. When the biggest accounting firms are using NPS, good things will happen.
Finally, he asked the audience if they were doing NPS. Here are the questions to ask yourself regarding your Net Promoter program:
- Are you categorizing customers into promoters, passive and detractors in a reliable way?
- Do you have systematic process for reducing detractors?
- Do you have a systematic process for growing profitable promoters?
- Is it a leadership priority?
While the market researchers debate the relative merits of multi-variant indices, the companies represented here at the Net Promoter Conference are getting on with the business of building more promoters and eliminating detractors.
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