NPS: Out with the Old, In with the New

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In 2003 author Fred Reichheld introduced 'the ultimate question in his <em>Harvard Business Review</em> article "One Number You Need to Grow." Answers to the question, "What is the likelihood that you would recommend company X to a friend or colleague?" proved to be so powerful in predicting customer behavior that the question became known as Net Promoter Score and served as a key growth indicator for leaders.
Metrics & Measurement

In 2003 author Fred Reichheld introduced 'the ultimate question in his Harvard Business Review article "One Number You Need to Grow." Answers to the question, "What is the likelihood that you would recommend company X to a friend or colleague?" proved to be so powerful in predicting customer behavior and customer loyalty that the question became known as Net Promoter Score and served as a key growth indicator for leaders.

But shifts in market dynamics demand a new school approach to customer experience. Last week I spoke with Deb Eastman, chief customer officer at Satmetrix, about the company's plans to energize a tired NPS methodology by launching the Net Promoter Network which is a community and content hub for sharing the latest CX-related resources and best practices. Eastman also spoke about the "new school of NPS2" consisting of four essential elements. Here's the conversation:

How has NPS and the CX landscape evolved?'

If we start with the macro issues it's become a business imperative. We see three trends that have brought this to the forefront. Since 2004 when NPS was introduced, social media has become a major force in making CX transparent in the marketplace.
The second trend is that many organizations are shifting from transactional-based businesses to subscription-based businesses. We've also now seen that from Amazon to Massage Envy. That places a focus on customer retention.

The third trend is disruptors. Uber and Airbnb have disrupted traditional industries by focusing on customers first. So that really shows how new businesses can come in and disrupt other businesses that have been around forever. It's a David and Goliath opportunity out there.

How has NPS changed on a micro level?

What we're seeing is that consumer expectations are rising because of the experiences we're having. We're accustomed to pulling out our mobile apps and interacting anywhere anytime that it's changed our expectations. We've seen NPS scores decline for the first year because of that gap. Expectations are rising and that created larger challenges for organizations.

However, we've seen NPS become the industry standard for measuring CX but it's often deployed in a way that collects scores but doesn't improve them. Therefore we define NPS around four key pillars now. The first is about building a proper measurement framework. Look at the journey and evaluate where to continuously monitor performance and how to measure NPS across the overall journey. Organizations that use NPS as a quality of interaction and can't separate from overall experience. This framework sets them up for success to have continuous flow of data that gets embedded into the business.

The second pillar is around actionable insights. That's using both structured and unstructured data to make sure insights are actionable. Different customer segments have different requirements. We're also expanding actionable insights to look beyond survey data and evaluate performance using operational and organizational data. Getting the data from other sources can be a challenge. We are looking at things like in operational data if first call resolution is used in certain boundaries, I create detractors. It's an opportunity to use this data as a proxy for your performance.

The third pillar is creating smart loops. Closed-loop processes go hand and hand with NPS since its inception. This gives people in the business opportunities to act proactively and do root cause analysis to see how to improve. What we've seen is organizations are now thinking holistically about closed-loop processes.

The fourth pillar is organizational adoption. The democratization of data and the ability of people in the organization to see their role in the customer experience, from front office to back office has changed how employees use NPS. If I'm in the call center, NPS is pivotal to my success.

Can you share some examples of companies that are using NPS properly?

There is a garbage collector in Dublin, Ireland who has built a business around the customers and the experience they deliver to them. They have been able to achieve high Net Promoter Score and retention. Another company is Nuance. They've been able to drive improvements throughout their business to prove the benefits of NPS and have expanded to 10 to 15 other units. They've built a good program and engage teams around how to use the data. They've attributed $190 million in the first year.

What are your predictions around how customer measurements will evolve in the coming year?

[Customer experience] will continue to become a business imperative and organizations that don't focus on it will continue to struggle in the marketplace. It will continue to be challenging to keep up with expectations. Companies should also expect to keep up in multichannel because customers increasingly want to interact in the channels they want and they don't want to call the call center. The call center also will be transformed in coming years. Think about the touchpoints along the journey as well as the quality of their interactions along the journey. There's a continued need to engage employees. The employee engagement element will deliver better customer experiences. Getting employees engaged around delivering a better customer experience will be a critical success criteria as well.

EXPERT OPINION
EXPERT OPINION