Net Promoter Community

Fred Reichheld, author of the Net Promoter book, The Ultimate Question, gave a historical review of the history of NPS. He has spent 30+ years talking about the importance of loyalty. Loyalty is a difficult term it seems for businesses to latch onto, so you are better off talking about growth. The two are almost synonymous. Loyalty leaders grow at 2.6 times that of competitors. Loyal customers do four key things that drive growth:

1. Repurchase
2. Buy more
3. Refer
4. Give feedback

Fred talked about Chick-fil-A, and how even though it breaks the *traditional* rules of economics, it is a tremendous success by focusing on what is right for customers. Enterprise is another example of building a business around treating customers well so they come back and tell their friends! Fred gave some other anecdotes about Southwest and Harley-Davidson. The Golden Rule was integral to all these successes: "treat others as you would like to be treated."

Bad profits alienate customers and demotivate employees. Fred had some hilarious stories of how he personally has been impacted by bad profits. He outlined some of Enterprise's approach to operationalizing Net Promoter, as discussed in his book. The "recommend" question probes both dimensions of loyalty - the heart and the head.

The fact that it has assets (promoters) and liabilities (detractors) brings it somewhat closer to accounting methodologies. But don't get too hooked on the question. As long as you have one that works for your industry, the key thing is being able to categorize people as promoters, detractors, and passives. Companies Fred called out that are implementing NPS well, and from the top include GE, Apple, Intuit, and Charles Schwab.

To summarize, driving loyalty takes focus from the top, including both support and participation. It also requires a lot of hard work, involving customer segmentation, training, IT capabilities, team accountability and alignment, proper rewards, and senior execs on board.

You can check out Fred's thinking at http://www.netpromoter.com/netpromoter_community/blogs/fred_reichheld.

It's always great to hear Fred speak. It also would be good to hear some new case studies from his current engagements. Thanks Fred!

Click here to download the presentation.

Vivian Blade, a Master Black Belt, shared her experiences in using NPS to drive loyalty at GE. Jeff Immelt, GE's CEO, is driving NPS from the top down. It makes life a lot easier in terms of driving the program. A viable business needs organic growth... and NPS supports this by showing if you are growing your base of loyal customers. GE thinks of NPS and Lean Six Sigma complementary to driving growth.

NPS works across B2C and B2B as well as to provide product and process insights. Key point... NPS is not about managing the score... it IS about how we improve customers' experiences. GE uses a simple framework for listening, acting and measuring in order to drive growth.

Listen for the survey process: Vivian thinks segmentation is very key. This segmentation needs to line up to corporate objectives. It is very important to do root cause analysis and involve the leaders in those call backs. You will get important experience cues and product cues from the feedback. From that, you will know what defects you will need to eliminate for. But more, you will get some pointers on the *wow* factor or what will differentiate you.

Act: Using Lean Sigma, you have two buckets.

1) Tactical — action plan by customer 3-6 month followup
2) Strategic — systemic fixes... use Lean to improve customer facing processes.

Lean Six Sigma can be used in any function...if there is an output; there is a process, so Lean Six Sigma will work!

Lean attacks waste by reducing cycle time. Six Sigma attacks defect reduction and variation. Some analysis of process time shows that about 95% of time in a process is NON-value add! So, lots of waste in what we do! Vivian showed eight categories of waste... some were surprising, such as unrealized creativity. Vivian mentioned the previous session's discussion of Adaptive Design at St Joseph's Hospital. This embodies many of Lean's ideas... focus on the process and eliminate waste, and start from the customer (or patient) in.

Vivian showed how GE Money used Lean to figure out why it took a dealer 63 days to transact with GE! They got the process down to 1 day by figuring out what was causing the delays and completely revamping everything in the process.

Measure: It is important to measure the results of your actions against key customer metrics.

So the key message is look at your customers' experiences and moments of truth and figure out what you need to do to meet and exceed their expectations. It is also key to get this into the DNA of a company to make it sustainable. This requires accountability and making sure you reward the right behavior. I thought this was a really interesting session as it showed real-life applications of both NPS and Lean principles.

Coming from a company that does not have a Six Sigma practice, I wondered how at least it might be possible to use the Lean method to look at our processes and eliminate waste. This might be the best way to truly improve our customers' experiences for the long haul.

Click here to download the presentation.

Richard Owen, CEO of Satmetrix, decided to *go large* in talking about state of the Net Promoter nation. He's gone out to the Net Promoter community of 6000-7000 today and asked what is working? Successful companies understand that NPS is not the goal, but operational change is the goal. NPS is not a research exercise. No miracle will occur just from measurement. You need an operational approach.

Having sorted out NPS, Richard moved onto the easier topic of the world economy. The story of baking birthday cakes over the years shows how we have added a higher level of service to every purchase... economies are moving to service economies.

Richard referenced 3 drivers of value creation:

• Operational excellence
• Product design
• Customer intimacy

Operational excellence has run its course as shown by the growth of Dell in the 90's and subsequent decline in the 2000's. It has been pretty much nailed by most companies. Product design is important; e.g., Apple. You also need to think of customer service innovation. Customer intimacy is central to NPS. Senior execs realize that customer intimacy is one of the last remaining drivers of growth that can differentiate them in the marketplace. Future growth will be tied to customer intimacy. How will companies react to pending financial crisis? If you have operationalized NPS, there should be great opportunities as a driver of growth in tough times.

Richard then moved onto accounting practices: NPS is not a standard, unlike GAAP. Today's accounting does not reflect customer lifetime value, so we don't have the full picture. Four out of five CEOs said they were willing to destroy value to make the quarter. A lot of money is flowing into private equity. Why? Regulation burden perhaps, but maybe it enables companies to restructure, build customer value, and do the right thing for the long-term. Pressure on EPS forces cost reductions, but what happens to customer loyalty?

The rotation of CEOs who inherit the situation shows how it can take 4 cycles to recover. Given the average tenure of CEOs is 2-3 yrs, it doesn't inspire long-term vision! If we add a new metric -- customer -- to the equation, we will get a more balanced and complete view. Strong financials and strong NPS give the full picture. The ultimate solution to angry customers is to be in touch and react in a positive manner and harness these people to be your promoters.

Richard had some thoughts on marketing: DVRs will be in 50% of all households in the near future...so where is advertising going? Word of mouth (WOM) is going to become increasingly relevant. 93% consumers lack belief in ads. 78% trust their friend's recommendation when making a purchase. What is the impact of blogs? P&G in league with the devil? Oh my. Customers' frustrations are now being played out on the internet for the entire world. Facebook's valuation and membership show how these media are the new face of marketing. Apple pricing, JetBlue runway story, and Mattel lead paint are some examples of the dramas played out on the internet.

Frontline employees are key: Have you driven the right culture and behavior to drive the right WOM? Walmart experiences show how you can't fake it! This is not something you can farm out to an agency. It must be genuine.

Richard had some thoughts on Zoos: Zoos were formed to help people see animals in their *native* habitat, especially if they can't afford to trek to Africa. People are creating customer zoos, aka focus groups. But with today's technology, you can get access to lots and lots of customers without putting them in artificial environments. You can go to Africa! Start to think about building a relationship with customers that transcends a focus group and build an ongoing dialog, not a piecemeal conversation.

The net of Richard's talk: if you think of NPS as research, you miss the power - it is an operational tool to drive change. The shift to a service economy supports NPS, but you need to have the rigor and link to growth. Pushing against this is the focus on short-term growth. WOM is the biggest driver of brand today. Build large-scale connections with your customer base.