Richard Owen, CEO of Satmetrix, the co-developer of Net Promoter, kicked off the presentations by talking about Net Promoter and the value to your business. He talked about why Net Promoter is taking off.
Richard presented four reasons that are driving the adoption of NP:
- Shift to service economies
- Shortcomings in public accounting
- The high rate of CRM failure, and
- The Reinvention of marketing.
(And all in 45 minutes)
The first big topic that Richard covered is the shift to service economies.
When farmers started to celebrate birthdays for their kids, they used ingredients they had on the farm to make a cake. Eggs, milk, etc. Cost? About 5 cents. As people moved off the farms they went to the store and bought the same ingredients for about a dollar. But people wanted further convenience, so they bought cake mix (about 2 dollars). But more convenience was desired, so they go to the bakery and can pay up to 50 dollars for the same cake containing about 5 cents worth of ingredients – this is the definition of the full-service economy. But this is not the end – parents want a better experience for their kids, so they take their kids to entertainment places with pizza, games and the cake thrown in. Total cost? Over 200 dollars. The point is that advanced nations have moved from manufacturing to an experienced-based economy. Services are where the vast majority of value is being created. This leads to customer experience as a differentiator and why NP is important. The point is that value creation is becoming harder and harder. Operational efficiencies like inventory control are not a source of value creation any more. Long term value creation is now around the customer.
The next topic was the shortcomings in public accounting.
Accounting is not sexy. But accounting has profound impact on how a company does business. If customer metrics were as important as financial metrics then CEOs would be held accountable- but they are not. And compensation does drive behavior. In this case, short term profits vs. investing in long-term customer value creation.
This is why is NP compelling as it offers an open standard. It is compelling for marketing as well as financial organizations. With NP as an open standard you can optimize your business around financial performance and customer performance.
The next topic that Richard covered is the high rate of CRM failure.
Companies are spending billions on CRM, but companies do not know anything about their customers. This is because CRM is an inside-out view – what they have bought, when they bought it, etc. NP is a complement to CRM since it provides an outside-in view that is predictive and forward looking.
One of the failures of around CRM is adoption. NP can aid CRM adoption since it provides a valuable tool to your sales team. Just ask any account manager if knowing his Net Promoter scores of his decision makers and influencers for his next big deal would be valuable!
The last topic that Richard covered is the Reinvention of Marketing.
Advertising is in trouble – he gave the example of Digital Video Recorder ownership having increased to 20% of US households. Of these households, 70% skip commercials. Reaching your customers is getting harder and harder.
On the flip side, blogs have taken off. Your customers are talking about you. Wikipedia, RSS, podcasting, etc. are all growing. People want to be heard! What used to be frustrated letters to the CEO and phone calls to support are now being played out on YouTube. The suggestion box on the CEO’s door is now being done in public. These public sources are influencing opinion. Facebook has 90% of the student population in the US, MySpace has 57 million members, networking, open source technology. All of this is Word of Mouth marketing, positive and negative.
Bad PR from these online communities can negate million dollars of marketing spend. Marketing’s response is to spend more on marketing tricks, not on improving the customer experience. If you do not respond by focusing on customer experience you will lose in the end.
WOM is taking off and NP is one of the ways to get your arms around this phenomenon. The other point Richard got across is that Marketing does not know the efficiency of their spend. Interesting, since marketing efficiency is going down.
All of these things add up to why Net Promoter is taking off. The last reason he gave is that Net Promoter is an open standard. It is this openness that will drive its success at being adopted by a wider community.