Take a New Look at the Ultimate Question
When Fred Reichheld introduced Net Promoter Score (NPS) a few years ago, many detractors debated his simple methodology. How could a single question build customer loyalty, retain employees, and ultimately grow your business?
Today, hundreds of companies around the world have subscribed to the Net Promoter philosophy. But many of them still don't understand the true meaning of NPS and what Reichheld meant the question to become: an organizational discipline that transforms your business around the customers.
But according to Reichheld, too many people remain fixated on the scores, which impede NPS' true reach. "Maybe it was a mistake," he revealed at the Net Promoter conference on Monday in San Francisco. "The one place I'm deeply disappointed is the level of rigor I've seen here."
Reicheld admitted that companies cannot be driven by scores; it's what they do with the scores that matter most and getting the people in the organization to treat customers the way they'd want to be treated. "It's the Golden Rule that drives growth. When you get into the business world, you forget about it," he said.
The Ultimate Question, the one that started the Net Promoter phenomenon--"Would you recommend?" he admitted, does not determine promoters and detractors; it's the question "Why do you feel this way?" that determines real insight.
Until companies can move beyond getting their organizations to reach high Net Promoter scores, and help their CFOs to understand how to quantify and increase the number of promoters, then they won't find success with NPS.
Much of the challenge lies with the debate over whether to tie employees' compensation to the score, with the promoters saying the strategy helps to ingrain NPS into the culture. The detractors, on the other hand, say that plan distracts employees from providing good service because they work with blinders on, with that number all they can see.
This was the sentiment of many attendees I spoke to at the conference. One woman I spoke to who works at a financial services company said her issue is how to engage the field sales employees in how to use NPS. None of them seem to understand the importance of it, but she is reluctant to tie the scores to their bonuses for fear they will lose site of the customer.
Diana Dykstra, president and CEO of the San Francisco Fire Credit Union, said she's been incenting her employees since the start of the NPS program with 100 percent of her staff's incentives based on NPS. For management, 50 percent of incentive money is based on the company's overall NPS. "It's important and reinforces the culture," she said.
Laura DeSoto, senior vice president of strategic initiatives at Experian, is not convinced. Six years into Experian's NPS effort, the company decided only this year to tie incentives and bonuses to the number. "We have felt passionately that this would be dilutive to our efforts and gaming and other types of behaviors will come about," she said. DeSoto added that tying incentives to the number gets employees' attention, but unless a company's leadership can drive the strategy through the organization, she recommends against fixating on the number.
At Intuit, President and CEO Brad Smith, said it's about the ability to react to the moments of truth the NP surveys reveal. Since deploying NPS in 2003, Smith said his company has gone through many chapters of the customer journey. At first, "we were all over the score," he said. Now, Intuit has learned from its mistakes and currently is at a point where they're getting employees and customers together to drive innovation.
Part of that involves sharing the comments from Net Promoter with the employees and responding to their feedback. "For a company that is committed, it's about getting out of the way to do great things for customers. Our employees weren't hearing the feedback...so we got it to employees in real time so they can reinforce the positive...and adjust on the things that didn't go well," Smith said. "If we were actors and actresses and had to perform 360 days a year to an empty theater, it would be a detriment. We weren't letting them hear the applause."
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Thanks Adelino,
I never made that assumption. By pointing out that many companies are using it, I was only trying to show how pervasive the metric has become.
Despite its alledged flaws, NPS is one of many metrics that should be considered when organizing the organization around the customer.
The argument that is presented in the beginning of the article is momentously flawed: the fact that many companies began employing the NPS does not mean that the NPS is any valid. This is akin to saying that there are far more flies than humans therefore, since flies eat waste, humans should also subsist on waste.
The truth of the matter is that time and again the NPS has not held up to scrutiny: it is not a predictor of anything, and the methodology that lead to its development has been shown to be flawed.
It is a cult, and like many a cult it has followers.
We at 1to1 have always maintained that companies which use the NPS metric in accordance with a host of other enterprise, financial and customer-focused metrics, will have a more complete picture of customer loyalty, satisfaction, and lifetime value change.
Whether or not it's a "cult" or not, is to be debated, however, the bottom line is that NPS is stirring conversations like the ones we're having here and educating executives on the simple fact that customer disatisfaction drives more defection than customer satisfaction drives loyalty.
Hi Mila
The NPS isn't just a metric, it is now almost a business cult under the guidance of Fred Reichheld. As the cult increases in momentum, critical thinking often seems to get thrown out of the window.
Putting the well-documented methodological problems that cast doubt on the rigour of NPS to one side, I am always amazed at managers who believe a business, any business should be measured, monitored and managed on the basis of one number, any one number. NPS, CSAT or whatever.
Kaplan & Norton debunked using financials as the one nunber in the 1990s. And showed why having a balanced scorecard was far more effective. Business is complex and you need a number of metrics to keep your finger on the larger business pulse. Sure, the balanced scorecard is not easy to implement, but who said effective management was supposed to be easy.
NPS may have a role in the balanced scorecard. But it is not a replacement for the joined-up thinking that the balanced scorecard drives.
Graham Hill
Customer-driven Innovator
PS. Has no-one seen the Kumar study (in the HBR) that showed that:
1. Less than 50% of customers who said they would promote a product or service to others actually did
2. Less than 50% of those who wee promoted to actually signed on as customers
3. And much less than 50% of those who signed on as customers ever became profitable.
I am not sure we need these sort of net promoted customers. NPS sounds so great, until you look at the details of it in action. As in all things managerial, the devil is in the details.
I would like to raise a few points on the use of the NP metric:
1. I do not think an incentive scheme should be calculated on the basis of a single metric of performance in managing customer relationships -- a set of measures with weights assigned to them should be used reflecting different aspects of the domain. A non-compensatory scheme may also be used giving dominance to NPS, say if the score is above a certain level.
2. I am still not clear whether changes in NPS are analysed and reported at the level of single customers or only at an aggregate level and whether it can be linked to the work of individual employees?
3. A reward or incentive programme does not always have to be financial -- sometimes compliments to the employee(s), announcement on the company intranet or by putting his/her name with a picture on a board is doing much better for the good feeling and pride of employees -- it would work best of improvement in NPS can be linked to individual employees or at least teams of employees.
4. To give analysis and implementation greater depth and capability, I believe that not only changes in the NP score should be tracked over time but also changes in the whole distribution of answers changes, i.e., those who recommend the company/brand vs. thos who warn against it. The NP should also be segmented with respect to strategic customer groups.
Ron Ventura, Ph.D.
I'll agree with most comments here that NPS as a discipline or operational strategy is better than the single metric. I've had limited success with it so far. I prefer measuring the behaviors that would lead a customer to recommend - what is called "advocacy," or doing what is in the best interest of the customer. Knowing how you rate on customer advocacy is more actionable than a single score that measures an attitude/belief instead of a behavior.
It's curious that people would react with trepidation toward giving primacy to a singular metric--the NPS.
Haven't companies done this for years (and continue to do so) by measuring salespeople and managers on the single metric of revenue? Of course, most of us are more comfortable with the unintended behaviors that myopia creates because at least we know what the behaviors are, and we know how to measure revenue!
Still, NPS is a step in the right direction. The best comments I have read are those that take a nuanced approach: NPS is one of a variety of measures that should be considered for MBO's and bonuses. Calling NPS the holy grail for measuring business efficacy risks falling into the same traps that revenue measurement alone did.
And, as was pointed out, if personal bonuses are involved, someone will find a way to game the system, now matter what is measured.
Much has been debated about the effectiveness of Net Promoter—should it be a stand-alone metric? What about customer satisfaction surveys? Should NPS be tied to employee bonuses?
I think companies tend to overthink NPS. The metric was designed as straightforward methodology for companies to become more customer focused. It’s a rallying cry for companies to align themselves with the processes and metrics to form better relationships with customers.
Using one question may not always be the right approach for every company. In most cases, NPS should not be used alone and should not replace customer satisfaction surveys. You will always get a more granular level of information from multi-question surveys. But they should be used in conjunction in feedback efforts.
My experience with talking to companies also leads me to believe that the companies that have tied any customer-focused metric to employee incentives have greater success in building customer loyalty than the organizations that don’t reward employees. It seems to be the most effective strategy in keeping employees focused on delivering great service.
As for the challenge of keeping organizations focused, a company embarking on this journey would benefit from hiring a customer champion—someone who will continuously campaign to executives for customer-focused processes and metrics like NPS and evangelize the customer strategy throughout the organization.
We have had a combination of NPS and the score from another question ("Based on this experience would you open your next account with us?") on our employee scorecards for over a year. It had been on the exec scorecard for two years but the number didn't move until it went on the employee scorecard.
I agree that without regular feedback that helps the organization understand what elements of their business is affecting the score the number is useless. But that could be said for any metric. I'll butcher the saying, but "any map will work if you don't know where you are going."
I have been following Fred Reichheld for 20 years. He's right about the lack of rigor. Customer centricity is still little more than a check box for most companies. Being measured by quarterly results makes it difficult to truly commit to investing in becoming truly customer centric. Company cultures also don't make it easy to ask and respond to the types of questions that will have the most impact on a company becoming truly customer centric. Perhaps the most powerful of these questions is "if you could change one thing about being our customer, what would it be?" I have used this in many situations and the results are truly remarkable. By carefully analyzing the feedback and taking appropriate actions and reporting back to customers what actions have been taken, companies are able to create better relationships with customers that drive real, tangible value for both parties.
I had to look up NPS before commenting, but it makes perfect scene. It also makes sense that there would be confusion about the numbers vs how to respond.
I think it was Jack Welsh who is often quoted as saying that "we spend too much time looking at the CEO's butt, and not enough time looking at the customers face'...or something like that.
The Balance Score Card made a lot of sense to me. Balancing financial, customer, internal and learning aspects seemed to address the interests of all the stakeholders, but I found the average person had considerable difficulty translating this into daily activities and actionable items. Having one factor a guiding light makes the end game much clearer but it still takes the other three factors and a plan to make it work.
Connecting the employee direct to the customer response is a good thing; connecting everybody’s bonus to customer satisfaction is also a good thing. Without that aspect, the other 3 aspects are a mute point. However, without the other three aspects you might end up giving away the shop.
The challenge is to keep the organization focused on the spirit and intent of it all; if you get too caught up in the 3rd decimal place of any measure you will lose sight of the bigger picture.
Interesting..
Let's also look at & examine companies which have been successful or are successful without getting into NPS...How are they able to do it ? Is it that they are doing everything which anyways would culminate into getting a good/high NPS or is there something else to it..
Pl. discuss..n share ur views..
thanks
Interesting points here. In my experience senior executives can get distracted by the numbers rather than what's informing them (this might be a way of avoiding difficult issues - particularly when the scores are good). When you look at the "why do you say that?" responses you start to get really actionable data.
My personal view is that measuring the number of Very Satisfied customers gives you just as good an indication of whether your customers are likely to act as advocates but as long as organisations act - with rigour, as Fred Reichheld points out - on the underlying data I wouldn't recommend one measure over another.
Concerns about gaming to get favourable scores are understandable but I don't think they are unique to NPS. Mystery shopping and other techniques can help identify a disconnect between the scores and the actual customer experience.