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Right Said Fred: Net Promoter Conference London (part 3 of 3)


Fred ReicheldThey saved the best to last. Final item on Agenda at the London Net Promoter event was Fred Reichheld, author of "The Ultimate Question" and inventor of the Net Promoter Score.Fred is a magnetic speaker, and while I mused on how lucky SatMetrix and Bain are to have a person like this working with them, I found myself wondering why the PR bunnies there had not got him speaking TV or being interviewed by national press. I don't believe the message is too specialised. We are all customers - we should all have companies working hard to win our business.He first outlined how he had been pilloried in the press for Net Promoter. "Just one question? Too Simple!" screamed old fashioned measurement companies and "Dangerous for business!" Like Fred I firmly believe in the power of the short survey. Apart from anything else, it respects the customers time.Another firm tenet of Net Promoter is the Open Source concept. Anyone can measure. It's transparent and companies can benchmark each other. Again, rival companies hate that, as they can't use proprietary, black box measurements.He spoke eloquently about how the "Golden Rule" was a turning point for him. The more he looked, he found that companies who "Do The Right Thing: Treat customers how you would like to be treated" made Good Profits. Key examples: eBay, Enterprise Rental Cars. He quoted CEO Taylor from Enterprise: "The Only way to grow a business is to get customers to come back for more, and tell their friends". Simple, eh?
Anything less than a 10 is a "fail"
Fred next surprised me by saying that Net Promoters strata of Detractors, Passives and Promoters were a good place to start, but that in reality, any customer who does not give you a "10" when asked "Would you recommend...", he would class as a failure. You did not really enthuse them. So shoot for 10s.The key measurements of loyalty are
  • Repurchase ratio
  • Customers returning and buying additional lines
  • Referrals: Who came by referral? Who Referred?
  • How many constructive feedback comments come in?
The Gorilla vs. Big Dog
The lessons from Enterprise and others are that a revolutionary approach to metrics is needed. In the photo above you can dimly make out the slide Fred showed.On the left: The gorilla of Profit. We have 300 years of measuring and understand profit - judging companies on performance - but often that metric works against customer loyalty. Hardly surprising when you learn that loyalty metrics are not robust.On the right: his puppy dog representing today's measurement of loyalty and satisfaction. No one takes them seriously. Too many metrics, not consistent, not reported at board level or Wall Street.Solution: Companies that take this seriously turn loyalty metrics into something that is robust. They turn the metrics into a "Big Dog" (metrics with teeth) to compete with profit metrics! (Of course then the slide animated to show a big fierce dog. Great metaphor!)Key elements to Big Dog metrics:
  • 2 question survey with 95% response.
  • Reduce detractors - make call backs
  • Grow promoters - make rankings by branch, segment
  • Make a Leadership Priority.
NPS should be as important as profits. Example of a turnaround was brokerage Schwab, who took NPS from -35 in 2004 to 23 in 2007. NPS was the first thing managers looked at every day.
Middle Managers are the Villains
Fred next discussed some examples of bad profits - actions that customers mad. Examples: Hotel phone bills higher than room fees, Opaque bank charges, charges for overdrafts,Cellular: best price for new customers (rewards DISloyalty), rental car petrol fees 3x retail etc.Not only do customers hate these but front line workers dislike them, and so do CEOs. So who dreams these up? Middle managers who have to make profits.Solving this he drew up a segmentation graph with NPS on bottom axis, and profitability on side axis. (Guess what - it's the Magic Grid we have in CustomerGauge!)
NPS requirements
Fred said he thought many companies are playing at NPS. He listed the key tests that a company needs to pass if he were to mark them as NPS-aware.
  1. Categorisation: Marking all customers as detractors, passive or promoter
  2. A process in place to reduce number of detractors
  3. Process to grow PROFITABLE prompters
  4. Leadership priority
Just measure. The "Why?" is usually obvious.The next frontier is Employee NPS. He outlined how Bain had taken seven years to get NPS into employee metrics. Now managers are bonused on it. The survey: "Is this the place you'd want a friend to work? Is your supervisor the sort of person you would recommend someone to work for? "So it takes a while for Big Dog (loyalty) metrics to compete with Gorilla (profit) metrics.
Saving Customers, Saving Lives.
He signed off a very interesting talk with a book recommendation: "Better" by Atul Gawande, a medical author who wrote of how another simple 0 - 10 metric had changed the world: The Apgar score to assess baby health. In 1950 1 in 30 newborns died in the US. In 2005 a mere 1 in 500 died. The score was deceptively simple. Yet it triggered and prioritised hundreds of life saving innovations.I'm sure that while NPS might not save lives, it will really save a few customers, and who knows, maybe some companies as well...

Next Up: Creating Customer Cults: Net Promoter Conference Day 2 (part 2 of 3)

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