CFOs and CMOs - Maybe we can help each other?
In the October issue of “Treasury & Risk” (before you ask - my UBS broker sent it to me, thinking I would be interested in it, and she was right) the cover article urges CFO’s to pay more attention to customer satisfaction and service, because customer satisfaction is a key to long-term success. One metric the article considers at length is Reichheld’s NPS, or “Net Promoter Score,” which most of you already know boils down to the difference between the percentage of customers likely to recommend you to a friend or colleague, and the percentage likely to denigrate you. The advantage of NPS is also its disadvantage – it is a single number, based a single survey question ("On a scale of 1 to 10, how likely are you to recommend us..."). As Reichheld says in the article, everyone knows “customer satisfaction is a key component of value. They just don’t have a good way of measuring it.” Until NPS, of course, which he maintains, with good reason, is an excellent and well-documented leading indicator of competitive marketing success.
The simplicity of NPS has irritated market researchers no end, however. Robert Shaw, for instance, a marketing professor at London’s Cass Business School, is quoted in this article as calling NPS “utter hogwash.” Now this might or might not have something to do with the fact that Shaw wrote a book himself, called Marketing Payback, proposing his own much more complicated series of metrics and tests for marketing effectiveness. But remember what Henry Kissinger said about academics: "University politics are so vicious precisely because the stakes are so small." (Our bet is that roughly ten times as many marketers have read Reichheld's book The Ultimate Question, as have read Shaw's.)
Regardless of whether you buy into the effectiveness of NPS or not (make no mistake: Martha and I certainly do), something later in this same magazine caught my eye. It was a summary of the survey responses from more than 500 senior financial executives interviewed with respect to what they consider important in their jobs.
Question: Which functions need to be supported more effectively by technology over the next 12 to 24 months?
Answer: Business performance management (24%), cash flow forecasting (23%), and risk management (18%). No other issues made the double digits. Seems to me that each of these desires would be better satisfied than they are today if a company were to use NPS as a leading indicator of lifetime value change, coupled with Return on Customer (SM) as a metric to quantify the financial implications, all of which would need to be supported with computer analytics, of course.
Question: What do you feel stifles innovation most?
Answer: Unwillingness to invest in initiatives without guaranteed short-term return (50%). Next highest answer is less than half of this (answers are for companies with $500m+ in revenue). Yet another role for ROC.
Maybe it's time for CMO’s to open a dialogue with CFO’s in order to help them come to grips with long-term-short-term trade-off issues. After all, these are the kinds of tough issues that every marketer confronts head-on whenever first putting pen to paper to consider the merits and costs of a marketing or brand initiative…
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