The second session was by Satmetrix's James Young, Managing Consulting - Europe. James discussed goal setting and best practices for actioning business improvement by setting appropriate goals. I think this is a very important topic, and one that I've heard much discussion and debate, especially when wanting to tie compensation to these targets.

James believes that having a step-by-step process approach for setting up appropriate goals is critical.  He reiterated that the process should be based on the foundation that had been raised by previous Satmetrix presenters, which contains the 4 main pillars: Executive Foundation, Organizational Alignment, System Infrastructure, and Process Integration.

The specific process James reviewed was:

• Set Strategic Direction
• Capture Customer Experiences
• Target Value Drivers and Action
• Leverage Functional Processes
• Balance Targets and Align Strategy

James also noted the importance of directly linking goals to drivers of loyalty using statistical techniques. He showed a cascading approach, and used a pyramid diagram to convey the details. At the top of the pyramid was Net Promoter Score (NPS), then it moved to functional level goals, and then event or transactional goals at the bottom. The point I took away from this is that one metric is not enough to truly achieve your objectives. James points out that in order to make improvements across the business you must set goals that are relevant in the various operations in the business. This includes setting goals all the way down to the front line employees. Setting goals on solely on overall aggregated NPS is just not enough.

James also talked about how important it is to continue to reevaluate your goals over time. Targets will move. While you may take great care to set initial goals, often times business conditions and priorities change and as a result your goals should reflect these changes. This will more easily allow you to track performance against these goals as they relate to corresponding financial performance. James suggested that setting a periodic review process is an effective way to achieve this.

Goal setting is a complex undertaking, but James's structure seems to address the key issues to consider. I really enjoyed this session.

In the Net Promoter community, 68% of companies aspire to be customer centric but only 15% achieve this goal based upon research Satmetrix (co-developer of Net Promoter with Fred Reichheld and Bain & Company) recently conducted with over 100 companies in the community. This aspiration is why there is so much interest in the Net Promoter conferences, stated Henry Jones, Satmetrix's Director of Business Consulting, EMEA, in his talk.

Companies that exhibit best practices around the Net Promoter discipline see results. In this case, the winners, as he called them, were seeing high NPS with an average 3-year revenue growth of 50%. Their winners were intensely customer-centric, had executive engagement and delivered a superior customer experience. Sleepers did not.

The winner companies all scored the highest in the four key areas of the Net Promoter Discipline and Satmetrix Maturity Assessment Model. This included executive commitment and actions, organizational commitment from all employees, system infrastructure of a trustworthy data collection and delivery system and business process integration.

So what are the challenges Henry asks? First, it's getting executives to put their money where their mouth is. CEOs state they are customer centric but still need proof points to act. These proof points are out there as we have seen at the conference and documented in the conference blogs. The next challenge is getting organization to get employees to have the behavior that generates the right customer experience. This is best done by rewarding employees financially who have the right customer-centric behavior.

The last point Henry makes is to be sure you have a closed-loop tactical feedback system in place. This is where we get feedback information into the business and act on this in a way so that the customer sees results. There are proof points that show by focusing on the key areas of the discipline, you will get results like IBM, GE, Phillips, Lego and other companies that presented their case studies.

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.