Laura Brooks from Satmetrix discussed the importance of building trusted relationships with customers and employees and how that results in the economics of word of mouth. She started with recent research in high tech, financial services and telecommunication industries that showed trusted relationships had a stronger correlation to recommend scores then product or service performance. This was true of vendors with both one-off point solutions as well as broader solutions. Product innovation is not sufficient, buyers want a trusted partnership.

Critical to building trusted partnerships with customers is having trusted partnerships with employees.  She referenced other conference speakers that shared the importance of engaging employees in improving NPS scores. More mature Net Promoter programs go beyond engaging employees to evaluating the Employee Net Promoter Score (EPS). Without loyal employees you cannot create loyal customers and achieve results. Employees want to be valued and know their values are in alignment with the organization. Drivers of employee loyalty include being consulted, collecting their feedback, and rewarding for results.

Employee Promoters are more likely to be customer facing. People feel they are valued in these roles and they feel their contribution is important in the context of the company's strategic direction. The Allianz presentation yesterday discussed how they connect the front office to the back office. Laura suggested that getting both the front office and back office people following up with customers helps the back office employees better connect to the customer.

Now that we have discussed trusted relationships with both customers and employees, let's connect that to word of mouth. Most of us know that the old advertising model of broadcast communication is broken: 76% of people don't trust advertising. Today's marketing is about word of mouth. According to Forrester Research, 80% trust word of mouth more than any other source.

Word of mouth is no longer constrained to the water cooler. Research shows that word of mouth is on the rise. The Net Promoter research data shows referrals increased 8% over the last year across all industries and in some industries as much as 18%. This is largely driven by consumer generated media and online social networking.  It is estimated that the top dozen social networking sites have over 30 million users. In this connected world, people desire dialogue with brands and with each other.

Next, Laura introduced the concept of NetWorked Promoters, those that are more connected and tend to have a bigger impact on word of mouth. NetWorked promoters are a special subset of your promoters.  They refer more, are more socially connected and credible and tend to be more charismatic.  When studying online communities she found that 80% of the ideas voted as most popular in the community typically come from this group.  Focusing efforts on the few NetWorked Promoters can extend reach and influence over a large number of people.

Let's now look at the economics of word of mouth. Customer value is made up of both referral economics and buyer economics. Net Promoter measures both loyalty and total customer worth that lead to organic growth.

Laura shared research from 2007 for the B2C computer hardware industry and mentioned two other studies coming out, one on the credit card industry and the other on the wireless industry. In this model Satmetrix found that the B2C hardware industry has a NPS of 27%. By contrast, Apple has a NPS of 78%. She then shared how that impacts the bottom line.

• Promoters spend more. The research showed Apple customers spend 1.5 times more than the industry average and promoters spend 1.3 times more. Apple Promoters refer positively on average 90% of the time vs. 75% for the industry average.
• Referrals. The research showed that in the B2C hardware industry, average promoters refer 78% of the time and detractors have negative referrals 29% of the time.  But detractors have 4 times the impact than promoters.

This research has been put into an economic model that would be difficult to describe on this blog.  CLICK HERE to download the white paper, titled Net Promoter Economics: The Impact of Word of Mouth.

The key takeaways from Laura's presentation

• Today's buyers want trustworthy relationships with your organization.
• Strategies for building trust based relationships include Employee Promoter Score (EPS) and NPS
• Word of mouth economics are driven by buying and referral behaviors
• Promoters spend more and refer more
• NetWorked promoters have higher referral rates through connected word of mouth
• The key to Net Promoter economics is TRUST.

Click here to download the presentation.

So, you have measured Net Promoter. It's taken time to launch globally, and now the results are out.  What are some of the first questions you get from the CEO and regional teams? Do any of these sound familiar... "Is this a good score", "what about the competitors" and "what are the results for the other regions"?

As a seasoned researcher, it certainly does to me! And judging from the questions from the delegates after the Competitor and Cultural Benchmarking Session it seems that these questions are common in boardrooms around the globe.

The session conducted by James Young, Business Consulting Director for Satmetrix EMEA cautioned that there were a number of issues involved with answering these questions.  Frustratingly, it seems that there aren't always easy answers!

Sitting in James' session reminds me that there are a lot of considerations when trying to benchmark NPS.  These include cultural bias experienced in use of scales, robustness of sample and the industry in which you operate.  James advises that caution needs to be exercised when sharing benchmarks with senior execs as a lot of times they want to build it into compensation schemes or targets without much thought for these considerations.

James shared some insight around research that Satmetrix recently conducted in the US.  It appears that NPS scores differ greatly by industry and (surprise, surprise) the Telco industry tends to score lower NPS (circa 2%) than the financial services industry (circa 20%).

Also, when it comes to cultural bias (again looking at Satmetrix B2B research) customers in Latin America tend to score higher on NPS (average 35%) while the folks in APAC tend to be more reserved with their ratings (average NPS -10%).  Getting hold of free country level NPS benchmarks is like gold dust so James shared some online resources that people might find useful.

• Neutralizing Cultural Response Bias on Customer Loyalty Surveys (Satmetrix whitepaper)
• "Net Promoter Scores Australia 2006", Melbourne Business School
• "The One Number You Need to Grow", Harvard Business Review, December 2003
• "Would You Recommend Us?", Business Week, January 30, 2006
• Marek, Sue, "On the Hot Seat: Verizon Wireless CEO Lowell McAdam" Fierce Wireless, October 30, 2007, retrieved December 23, 2007
• Reichheld, Fred. The Ultimate Question: Driving Good Profits and True Growth, Harvard Business School Press, 2006
• GE Letter to Stakeholders, 2005 Annual Report
• P&G Investor Day presentation, December 16, 2006
• Allianz Capital Markets Day presentation, July 13, 2006

When it comes to competitive benchmarking, James shared the basics of how this could be achieved.

1. Ask competitor questions in your own survey. Upside this is probably the cheapest way to get benchmarks, downside there is likely to be a positive bias as these are your own customers (so no true market position)
2. Primary data.  Often research companies publish their own benchmarks based on the surveys they conduct.  This is probably more expensive than option 1.
3. Custom or syndicated panel of non customers.  Upside: this probably the best indication of market position. Downside: probably more expensive than the other options

An important message communicated from the session was that while benchmarking plays an important part of an NPS programme, it really depends on where you are in the journey.  If your business is just starting with NPS, it may be more productive to concentrate on moving the scores for your own organization first, then after your programme has matured for a year or two, begin to incorporate competitor and/or cultural benchmarks. This gives the business time to absorb and action customer feedback and for the customer NPS programme to be embedded in the DNA of an organization.