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:

1. Shift to service economies
2. Shortcomings in public accounting
3. The high rate of CRM failure, and
4. 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.

The conference wrapped up with a "fireside" chat with Fred Reichheld, author of The Ultimate Question, with moderation by Dr. Ralph Oliva, Executive Director of the Institute for the Study of Business Markets at Penn State University. His passion for the importance of NPS as a key business metric is clear, and it's hard to argue with the facts. Fred offers some practical advise for those embarking on the NPS journey.

The focus on Net Promoter started because he saw a fundamental disconnect in the world. Business had come to the conclusion that loyalty was irrelevant, yet the best businesses were living up to the highest standard, the golden rule. He set on quest to prove that loyalty is driving market leadership.

"You can't grow business unless you treat people so they want to come back and bring their friends," Fred states several times during his discussion.

When asked what he found most surprising, he indicated that while he worked hard to simplify, he is surprised at how others have oversimplified. Organizations seem to be skipping the fact that NPS is a discipline, not a score. It's not a marketing thing, it's a people thing. People want to be treated in a specific way and when you want to grow, customers come first. 

The other area Fred stressed is not to average NPS, which provided a nice link to Rob's segmentation discussion earlier today (see my notes to that talk). Specific customers drive profitable growth, and it's important you look at NPS based on your customer segmentation. Breakthrough innovations come from understanding the most valuable customers across the organization. 

An area Fred stressed several times was the cross-functional nature of the NPS discipline. The most successful businesses that have embarked on NPS have not delegated to marketing or research, but kept it at a senior level and started with a few dozen of their most important customers. Senior executives have to drive the change across the organization and get involved directly in following up with customers. 

When asked about NPS skeptics, Fred suggests that organizations start by looking at the facts in their own business. You have to know how much to invest for each type of customer.

If NPS is to be integrated into the key performance indicators of business success, we must engage the CFO. For those getting started, get your CFO aboard. Until the CFO is onboard you won't get too far. You need them to see that loyalty and the financial metrics work hand in glove.

For those that have existing satisfaction systems, Fred suggests that if it is working great, keep it and don't change it. However, he goes on to point out that 95% of businesses don't have the right system and putting in an NPS framework allows you to step it up to a strategic level and "re-brand" your process to engage your customers.

When asked about response rate targets, he has set the bar at 95%. Today's best in class companies are finding 60% or more on their relationship surveys and expect to see that increase. Intuit earlier shared their success of 95% response rates for their Personal Pro Response rates, demonstrating the success you can achieve when you build customer feedback into your products and processes.  Closing the loop with the customer and demonstrating that you are listening is key to driving higher responses rates.

In an interesting moment, Fred asked himself a question of who has impressed him the most and turned him into a Promoter, clearly demonstrating his desire to show off his brand advocacy. Not surprisingly he noted Apple. After sharing his personal experiences he went on to explain that when Apple launched their stores they were designed not to sell more product, but to create Promoters. Clearly a strategy that is working for many as I'm currently typing this blog on my new MacBook Pro as a result of several Promoters that had shared their experiences with me! (Blogmaster note: Scott Smith agrees with Fred and Deb; read his blog on Apple and customer experience.)

For those of you starting on the NPS journey, Fred offers some practical advice. Get your senior leadership in a room and ask yourself:

• What is the true objective?
• What is wrong with the current process? 
• Who is going to close the loop?

Get your customers involved in designing a program that will engage them and drive the right changes in your business to increase loyalty and drive growth.

And finally, when asked about his vision for the future, Fred sees NPS as a new metric system for measuring business success. He hopes to see more people across the enterprise engaged in using the NPS discipline and attending conferences such as this one. This level of adoption will likely lead to the need to audit scores. Once you tie to compensation, funny things will happen. (Blog master note: for a discussion on connecting NPS and compensation, go to this discussion forum link; brief registration process required for viewing.)

As the conference wraps up we all have a lot to take home and think about. Thank you to the Satmetrix team that created this opportunity to learn more about how to transform our business and truly adopt the NPS discipline.

Prior to NPS, we had a system that measured one thing, accounting. Business has shifted from the need to treat customers properly to the need to make my profits. While integrating NPS into core business metrics is a journey, we have made great strides in the past couple of years.

In the B2B track, we heard from Dr. Laura Brooks of Satmetrix, Martyn Christian of FileNet, and Simon Lyons of Aggreko. All of these presentations highlight key themes for success in realizing gains in NetPromoter scores that drive business results. The consistent themes of these speakers clearly demonstrate best practices that must be deployed to drive growth.

To start with Laura shares her research on the best practices observed in the Satmetrix customer base. By analyzing customers, she has found 4 key elements to success:

• Executive foundation: This is not a vision or mission statement, but a way of doing business, led from the top. This means putting investment behind it and driving change throughout the organization. This is key to realizing the value of NPS. If your leadership is paying lip service to customer centricity, you will not see the value of NPS or any loyalty program.
• Organizational alignment: We heard this as a key theme to Experian's success earlier today as Laura DeSoto shared the techniques they deployed to align the organization around delivering a superior customer experience. To what extent does every part of the organization really focus on the customer and how to you translate that to every employee's role?
• System infrastructure: You need the supporting system infrastructure to enable the collection, analysis and accountability of customer insights. You must have the systems in place to deliver data quickly to every employee and make it actionable. We heard from several speakers today that traditional market research data is not timely enough to enable the organization to quickly respond to customer feedback.
• Process integration: You must integrate the data into the natural flow of the business to truly drive customer centricity throughout the business.

Laura's presentation had much more insight into the best practices for moving your Net Promoter score. John Williams shares more in his posting "Measure Who Matters!"

http://netpromoter.typepad.com/.shared/image.html?/photos/uncategorized/matrix.jpghttp://netpromoter.typepad.com/.shared/image.html?/photos/uncategorized/handshake.jpghttp://netpromoter.typepad.com/.shared/image.html?/photos/uncategorized/respect_and_handshake.jpgAfter learning of the journey at Experian, we had the chance to hear from Das Narayandas, a well-regarded authority on B2B marketing & customer management. Das shared two very simple frameworks with a powerful punch. 

The basic message was if you want to build good loyal customers you must understand the value you create for customers and evaluate your customer portfolio to meet their unique needs. 

Creating value for customers requires that you move from product features to customer benefits. This has never been more important than in today's selling environment. Gone are the good old days of buying on the promise of the value your product or service may bring. Customers today are more discriminating and demand measurable business outcomes.   

Das offers a 2x2 framework: your ability to quantify the benefit on one axis and your ability to communicate the benefit on the other. By looking at your value proposition in this context you can quickly identify where your value proposition is and how it drives sales. The framework offers 4 categories:

1. High economic benefit, high ability to communicate: you must compare yourself with your competitors and have superior price performance.
2. High economic benefit, low ability to communicate: the burden of truth is on your side. Get a 3^rd party benchmark, pilot test or offer guarantees.
3. Low economic benefit, high ability to communicate: focus on building brand preference
4. Low economic benefit, low ability to communicate: not ideal for acquiring customers. Use as the glue to loyal customers.

The second framework he offered allows you to evaluate your customer portfolio. After all, customers are not all created equally and you need to manage them differently. In this framework, he offers us another 2x2 matrix. Here, we look at price on one axis and cost to serve on the other. Keep in mind that cost to serve excludes cost of goods sold (COGS).

In his experience companies have customers scattered in all four quadrants, and the important point is to understand where customers are in their lifecycle. Here's how they break down:

• High price, high cost of services: this is where life begins. Customers here value innovation, want full service, and are willing to pay for it.
• High price, low cost of services: the good life! Are these customers loyal or uninformed? They will eventually become informed and you need to understand them and keep them as long as possible.
• Low price, low cost of service: commoditization. This can be 40% of a business. Here you have to strip away and sell the core product at the lowest possible price.
• Low price, high cost of service: while obviously not ideal from a business prospective, you may choose to invest in some customers in exchange for reference or partnering on new products. Here you should evaluate whether you can move the client to another quadrant, strategically invest, or whether you need to fire them.

Das wraps up by telling us Promoters can live in any of these quadrants. The important point is to understand where they live and how best to serve them. 

I would recommend evaluating your benefits and customer portfolio in this context. I put this tool in my bag for future use. Sales & marketing today requires a focus on benefits vs. features -- these frameworks can provide the discipline to evaluate how best to serve your clients and create more Promoters.