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Net Promoter Community > New York Conference Blog 2010 > Authors > JohnAbraham
 

New York Conference Blog 2010

8 Posts authored by: JohnAbraham
JohnAbraham

Fred Reichheld joined Steve Bonner, CEO of Cancer Treatment Centers of America for the closing session of the conference. Fred opened with a new point of view on Net Promoter, describing it as a way of taking a biblical proverb and turning it into a management system:

 

Fred Reichheld_sm.JPG

 

Proverbs 22:1

"A good name is more desirable than great riches. To be highly respected is better than having silver or gold."

 

Fred suggested a familiar sounding formula: "Think of it as Lives Enriched minus Lives Diminished, divided by Lives Touched." Is it really that simple? Ultimately, the goals of NPS are, but as we saw throughout the conference the actions and processes that allow you to create this outcome take a lot of hard work.

 

Steve Bonner – Cancer Treatment Centers of America (CTCA)

 

Steve Bonner_sm.JPG

 

Steve Bonner reinforced this by describing the many systematic things CTCA does to define it’s mission, design it’s desired experience, and reinforce quality of healthcare through regular feedback and management approaches.

 

He started by offering his personal view on the challenges for the health care industry to transform patient care. Steve pointed out that 16% of GDP in the United States today is being spent on healthcare, and this number is trending upwards in an unsustainable way. The vast majority of money being spent is on helping sick people get well. The real opportunity for us is to convert this into a true "health" care industry, to help healthy people stay healthy.

 

How NPS Can Shine the Light on Healthcare Quality

 

Quality and efficiency are the other big issues for the industry. This is where NPS could play in transforming this major sector of the economy.

 

Steve asked, "How could we use Net Promoter to accomplish more than reform. What would happen if we gave the consumer the same level of control over their choices that they have in other healthy industries?"

 

Steve called it a "renaissance," with the voice of the consumer at the center of it. He shared with us two videos from real patients, starting with Jerry Bradshaw, a police dispatcher from North Carolina, who was treated at CTCA’s Tulsa, Oklahoma facility. The video was from their "celebrate life" event, for patients who return to celebrate their 5 year anniversary of seeking treatment at one of the CTCA facilities.

 

CTCA’s average patient travels over 500 miles one way to come to one of their centers for treatment. This demonstrates how consumers are willing to take control of their own healthcare. Steve believes that when consumers take control of their healthcare decisions and choices, it can truly transform the quality and efficiency of healthcare delivery: and the patient experience.

What does CTCA do that is different?

 

Here are a few examples that Steve gave:

 

  • They publish on their website outcomes based on length of life, quality of life, and NPS.
  • They start every board meeting with a visit from a patient.
  • They do regular focus groups to explore how they could improve care.
  • They round with patients in the hospital every day, talking with them informally.
  • And they survey patients continuously in all of the facilities, to understand how they are doing in accomplishing their goal of top quality delivery of care.

 

Operating units get feedback from the survey each night, and they close the loop with the patient the next day. This closed loop entices patients into the process because they understand (and believe) it will make a difference. Most patients are contacted, and the vast majority (60-90% of them) respond with their feedback. They have brought the NPS down to the level of individual physicians, allowing them to compare their feedback to their peers in their specialty.

 

What this approach has gained for CTCA is a community of cancer survivors who are Promoters for the organization. The company’s four facilities, located in Illinois, Pennsylvania, Oklahoma, and Arizona, all operate at NPS levels of 80%+.

 

For some companies, this may seem incredible…but think of it this way. Imagine that you or your parent was diagnosed with stage 3 cancer, and you went on a search to find the best place to receive care. Imagine that you not only received great medical care, but also had an amazing overall experience that built your trust. And imagine that the treatment worked.

 

While the last step in this chain is not in CTCA’s control, I’m guessing most patients understand that….so what would you say if someone asked your opinion? How would you feel about an organization that accomplished this?

 

Peronally, I think the upside for healthcare oriented companies is huge. What industry has a greater potential to develop trusted relationships with its customers? I’m hoping that 5 years from now, this industry will have taken the example of CTCA and created a true "renaissance" in customer-focused care. Thank you, Steve, for the inspiration.

 

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1 Comments Permalink Tags: treatment, centers, bonner, health, nyc, america, of, ctca, nps2010, cancer, care
JohnAbraham

Dr. Vince Nowinski, Director of Methodology for Satmetrix, discussed a newly completed assessment of how organizations are doing when it comes to Net Promoter best practices. Dr. Laura Brooks was originally scheduled to present this topic, but fell ill with the flu…we were lucky to have Vince already with us in New York, since he worked directly with Laura on development of the assessment.

vince_nowinski_small.JPG

From Vince’s perspective, many companies excel in one area or another. But they are asking, “How do I know where the gaps are?” That’s the question he set out answer today.

Vince described why Satmetrix calls the assessment Net Promoter 360. The feedback on internal practices includes viewpoints from the Executive Sponsor of NPS within the organization, the Senior Executive Team, and Program Sponsors who manage the feedback operations. Think of this as a 360 degree view of what’s going on with your Net Promoter program.

Who Participated?

 

Vince presented data from a group of 22 different companies from 12 different industries, with an even split of B2B and B2C business models. Most of the companies (about two-thirds) had over $1 billion in revenue.

The assessment itself was designed jointly by Satmetrix and Bain & Company.  Questions on the assessment capture a mix of internal attitudes, behaviors, and business results to assess a company’s maturity level in adopting the Net Promoter discipline. It includes questions like, “Does the organization invest resources? Do executives believe the data they have is reliable? Do they understand what the top customer priorities are? Do they have closed loop processes in place to address individual customer issues?”

How Mature Are You?

 

Vince separated the 22 companies into 3 groups, to understand different levels of maturity.

 

Level 1: Developing

Adoption of Net Promoter is limited to some parts of the organization. Data was not yet trustworthy, or fully used operationally within the business.

Level 2: Progressing

The biggest difference here was that NPS had wider adoption, and companies were regularly taking action on the data. This group also had a big focus on root cause analysis…indicative of a phase of adoption where tactical insights are being developed.

Level 3: Advanced

These companies had Net Promoter fully integrated with the decision making culture. They were focused on understanding relative competitive position, and had processes in place to focus both on limiting Detractors and, more importantly, generating more Promoters.

Some Key Differences

 

Ultimately, Vince pointed to the measures of customer centricity as the most linked to overall level of adoption. Many people describe this as “culture.” I like to think of it as passion for the mission of the company.

What really struck me was the internal NPS for the Net Promoter program itself. Advanced companies had 96% Promoters of their NPS efforts, with no internal Detractors. These are organizations where all the key executives and core team members are “on the bus.” In contrast, those at the developing stage had closer to 50-60% Promoters and a group of Detractors within the core circle that should normally be leading the rest of the organization.

Advanced companies (100% of them) felt that NPS was involved in the day-to-day operations of the business, while none of the advanced companies described it as a “research initiative.” I found this point interesting. What language does your organization use to discuss Net Promoter internally? I’m sure the advanced companies have “research” resources involved with the program, but they understand that the ultimate value of the research is its use in strategic and tactical decision making. The other word that jumped out at me was “initiative.” The advanced companies don’t think of it as a one-time initiative. It is part of the way they do business.

Finally, Vince turned to the big question: What’s more important, eliminating Detractors or creating more Promoters? Ultimately, companies need to do both, but we found that the more advanced companies were in their adoption of NPS, the more likely they were to be focused on creating more Promoters. That’s really the end goal, isn’t it? You may indeed need to focus on eliminating Detractors, but if that’s all you ever focus on, it can be hard to define a winning vision and sustain the motivation of your employees.

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JohnAbraham

Jeanne Bliss discussed “extreme” customer loyalty with three beloved companies that are featured in her new book, I Love You More Than My Dog. She opened by describing 5 key decisions that beloved companies make.


1. They decide to believe

2. They decide with clarity.

3. They decide to be real.

4. They decide to be there.

5. And they decide to say sorry.

 

I loved Jeanne’s discussion of how companies say “I’m sorry.” It’s not just about a hollow apology, as Jeanne said. It’s about “saying it with humility and repairing the emotional connection with the customer.”Jeanne mentioned that she did most of the research for her book before the economic crisis hit last year. So, before the book went to print, she went back to re-validate that all of the beloved companies were still prospering, since that was a core tenet of the book. What she learned was that, indeed, these companies did well through the economic downturn. If fact, they continued to grow.

Chris Zane, Zane’s Cycles

 

Chris Zane.JPG

It was inspiring to hear from an entrepreneur like Chris today. He described how he teaches his employees to believe in the customer. As he said, “Our approach is to provide more service than what seems reasonable. What we’ve found is that most customers take only what they need, so he can offer it for everyone.” But it wasn’t just about believing. Chris had hard numbers too…he understood the lifetime value of his customers, and put his philosophy in the context of that. For example, he lets customers take bikes for a test ride, and they trust them. No complicated paperwork. Isn’t that risky? As Chris describes, he loses about 5 bikes a year, but sells more like 5,000. What’s the impact? They have grown 23% a year for 29 years. They have 45% margins (the industry average is 38%), and $15 million in sales from a single store.

 

Fred Taylor, Southwest Airlines

 

Fred Taylor.JPG

 

Next, Jeanne interviewed Fred Taylor, Jr. who manages Southwest’s proactive customer service team, which handles communications after disruptions in service. Fred described how he came to this unique role within Southwest. Colleen Barrett , back in 2001, was searching for someone to take on proactive communications, and she pulled Fred from the front lines to take on this role. Fred described the daily process…They start with a morning overview meeting, where they review a pipeline of information about service delivery across their entire system of operations. Then they have criteria to determine which customers need customized follow up communication. Each communication is unique, but they have three key things in common:

 

1. They acknowledge the situation

2. They apologize for the experience they have had

3. They make some gesture to help regain the customer’s trust

 

They want to reach the customer electronically or with a physical letter before the customer has to reach out to them to lodge a complaint. He read a blog post from a customer who received one of their communications. The customer summed it up in this way: “It’s important to be ready to respond when you are not perfect. Only then can you created devoted customers and loyal fans.”

 

Wayne Peacock, USAA

 

Wayne Peacock.JPG

Wayne discussed Jeanne’s key decision called “Clarity of Purpose” and what this means for USAA. This is a company that is clear on its mission…and rightfully so. USAA is a membership organization, serving over 7 million members of the U.S. military, and they are legendary for their service, not just within the military community. Wayne shared the following quote from a 40-year member of USAA:

“USAA is the best relationship (next to my wife / she’s sitting next to me) I’ve had my entire life.”

 

Wayne described how they keep a relentless focus on their members by integrating the life of the military into their corporate culture. Executives and employees participate regularly in events with the military, to understand their lives. They also hire their customers…almost 1 in 5 of their employees has served in the military or had a spouse or family member who has served. This helps to reinforce what they do in new employee orientation, to extend this knowledge of military life to all employees both through training and through personal connections. By understanding what military life is all about, their employees are able to “respond with empathy.” What does this empathy and clarity of mission get for USAA?

 

  • Over 97% of their customers stay with them each year. In their insurance business, their next best competitor is 9 points behind them on this core metric. In fact, 90% of military officers who have joined USAA have stayed with them for a lifetime.
  • They also have received numerous awards for customer service from industry organizations. Net Promoter is no exception on this one…When we benchmarked NPS for different industries last year (2009), USAA had the highest scores across all of the industries studied. jeanne bliss.JPG

 

 

Wayne ended by giving Jeanne a taste of what new employee orientation is like for USAA employees. The audience got a fun break by watching Jeanne get dressed up in infantry gear. She even had a chance to taste an MRE (Meal Ready to Eat), courtesy of USAA.

 

What’s Your Story?


Jeanne summarized by challenging all of the audience members to decide what their company’s story could be. As Jeanne put it, “Beloved companies have a story. If your customers can’t describe, consistently, what they get from you…then you have no story.”

 

 

 

 

 

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JohnAbraham

Rob Markey of Bain & Company hosted this compelling discussion of customer loyalty in the financial services sector, with three well-known companies that are actively using Net Promoter to get closer to customers and reposition for customer-led growth following the tumultuous events of the past 18 months.


Rob opened with a sobering description of the run-up to the late 2008 financial meltdown. I won’t recount the gory details, because I’m sure most of us remember it all too well. What I heard yesterday, which was new for me, was a view of the amazing pressure and challenges that was taking place within the industry.
With that “pressure cooker” context, Rob turned the discussion to the customer. What happened with customer relationships?

 

rob_markey_panel.JPG


I have summarized below some of the key turning points and guiding principles that each of these leaders used to help their companies maintain a focus on the customer when it was perhaps the hardest environment for this.


Susan Sobbott, American Express OPEN


Susan described their step by step escalation of cost controls and credit availability, in reaction to the major shifts they were tracking in the market. Their base of customers had traditionally been very unlikely to default, but many of these customers who had a lot of assets (such as multiple homes) were suddenly in a very different credit position. So they were forced to take credit back from some of these customers.


The good news is that Amex was able to avoid cuts in customer-facing staff. They understood who their best customers were, and put a fence around them to protect them. In addition to their in-house models of creditworthiness, they also did a manual reviewed on every one of our their key customers to make sure they were being as fair as possible. We also were very protective of their rewards programs, since this is so central to their value proposition.

 

When it came to NPS, Susan described an interesting dilemma. Her organization had traditionally focused customer feedback and Net Promoter on the feedback of their most important target segments. But as the economy changed, more and more customers moved into the high credit risk categories, skewing their segmentation approach. Were these customers just temporarily out of their target? What they learned was that they needed to go back to this segment and understand how the relationship had changed when credit lines had to be reduced. They also improved the speed of their feedback loop…moving from quarterly to monthly surveys, which has increased the value of the feedback they are getting. They learned that these customers cared a lot about their relationship with the company, and that the customer wanted to protect that long-term relationship.


How could they work with their customers for the long-term? One interesting example Susan gave was in their outreach to help small businesses figure out how to grow in the difficult economic climate:


“We were lucky to have built a social network for small business prior to the downturn. So we were able to leverage that, since no one else was providing information for small businesses. We were able to step into that role as an information resource.”


Susan believes the actions they took to reduce risk, while painful at the time, have now put them in a better financial position to extend credit as the economy improves, especially for their best customers.

 

Isabelle Conner, ING


Isabelle described the far reaching nature of the recent financial events for her industry, and her company. For the first 18-and-a-half years of ING’s 20 year history they were growing and profitable. Then, almost overnight, they found themselves in a similar boat to many other financial institutions, struggling with massive changes in the market.


When it came to customer relationships, they made no changes across the board that would impact the customer negatively. Instead, they understood that as a highly decentralized organization, each unit had to make prudent decisions about extending credit. They had to balance their desire to support long-term customers with additional credit, and the financial reality of the market situation. As Isabelle put it, “Each business looked inward and had to figure out how to get through it.”


One thing that was consistent for her, throughout the financial crisis and still today, is the customer experience that they need to deliver. She summed it up nicely by saying that customers want it to be “easier” to do business. This theme of making ING easier than ever to interact with is at the core of their strategy, and their efforts with Net Promoter.


Now that the firm is looking toward the future, her main focus is on re-engaging their 120,000 employees across the business. Helping them to make “easier” part of their mindset and the way they behave every day. As Isabelle put it:


“For about a year we were in denial. But we are getting a lot of new engagement around what customers really want, which is for it to be easier to do business with us. Customers want transparency and they also want trust. And what we’ve learned is that by making things easy, you also build trust.”


John Marcante, Vanguard


John explained that, on one level, his firm was fortunate because they don’t hold investments. Therefore, the crisis caused less of a cash concern for Vanguard than for some other financial players. But there were huge challenges to manage when it came to customer loyalty and perception.

 

For example, when the market went down 45% in March 2009, they were faced with tons of people calling in with great concern. Their response was to invest a lot of time in increased customer outreach. The last thing they wanted was for people to overeact and make a bad short-term decision. As John put it, “If you weren’t being proactive about reaching out to customers, you were likely to lose them with portfolios moving in a negative direction.”


John explained how they experimented with one change that, ultimately, impacted customer relationships too much, and they had to reverse course. They had historically provided their most important high net worth clients with short-term coverage for check overdraws. As John explained, “we had never had someone who didn’t pay us back.” When they stopped this courtesy practice, it only took them 2 weeks to realize this was the wrong direction to go. “We saw it show up in the NPS, and realized it was an issue. The survey came back and people were saying, ‘Now that times are tight, you are running away.’” They understood quickly that they needed to stay focused on the long-term customer relationship.


Rob asked John what Vanguard is doing to position itself for success as things improve.


John described their aggressive approach to retaining customers, since it’s so much more effective to retain customers than to acquire new ones. Much of this is focused on coaching the front line on how to provide excellent service, no matter what the situation. He told an amazing story about a 2 hour call with a husband and wife couple, where the husband was getting ready to go in for brain surgery. Their goal was not to cut the call short. Instead, the entire team celebrated that call, because ultimately, it’s times like that when the way you act truly matters.


As John put it, their end goal is to activate their Promoters. “Ultimately, if we can help customers share their stories, we believe it will come back to us in good ways.”
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JohnAbraham

Eric Murphy discussed his journey to transform Ingenix from a product-focused to a customer-focused culture.

 

Eric Murphy.JPG

 

Eric has partnered with their COO and the CEO to get all 11,000 of their employees to change their mindset. How can you go about this? Eric offered an honest assessment of where they are 18 months into their journey: and how NPS features in this transformation strategy.

 

They have 11,000 employees to cover 250,000 clients. Of those clients, about 240,000 are physicians. But that still leaves them with 10,000 business clients to manage with 11,000 team members, total. How could they treat these 250,000 clients in a way to generate delight?

 

He described how they use NPS as the measure of success for their Client Engagement Model. What was clear was Eric’s vision of how they will redefine, purposefully, the customer experience for Ingenix customers…in a way that is targeted and differentiated. He used words like, “trusted partner” to describe how Ingenix is focusing its efforts with its most strategic clients and partners.

 

To accomplish this, they are stitching together over 250 unique IP assets (software, data), as well as the silos of people and expertise that were huddled around each of those areas of speciality. The challenge he described, which many B2B businesses also struggle with as they grow, is to bring that wide variety of capability into an integrated solution for a strategic client.

Words Matter

 

Eric is the Chief Client Officer at Ingenix…but that wasn’t his title just a few months ago. He changed his title from Chief Sales and Marketing Officer to Chief Client Officer to reinforce the client-focus that he wants to have permeate throughout the organization. They have also changed titles from “account managers” to “client managers.” As Eric put it, he wants to remove the word “accounts” from their vocabulary.

 

But it’s not just words. They have also redefined their team structures around these “client managers,” and have put their expertise within the business units. As soon as they did this, magic started to happen. They also changed their compensation structure, to focus more heavily on client success measures. His goal is for their most strategic clients to for all to be Promoters. It is a lofty goal, but ultimately, the bar needs to be set so high to achieve his vision of success with this key client group.

Start with Good Data

 

Eric admitted that the quality of their contact data when they started was not up to snuff. In the first few months alone, they were able to make incredible strides in understanding who the key decision makers were, cleaning up their data, and more effectively communicating with customers about the goals of the feedback process.

 

Results So Far

 

Their initial results, only 18 months in, are impressive: a 22 point increase in their Pharma sector, and 28 points in their employer segment.

 

My Favorite Quote
“I had a marketplace that wanted to buy a kitchen, and we were selling them pots and pans.”

 

More about Eric Murphy and Ingenix

 

I interviewed Eric back in December, and you can find more details on the Ingenix story by clicking on this link: Q&A, December 2009.

 

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JohnAbraham

Progressive has been using NPS for 4 or 5 years now, but Richard started with a true feedback story that predates their NPS days.

 

Richard Watts.JPGHe was in charge of their direct business at the time, with 9,600 sales and service reps reporting to him. At the time, their feedback loop was informal. People would come down the hall and raise the flag when call center interactions pointed to a potential problem.

One particular day, a bit of company lore was created. The head of marketing’s mom bought insurance from Progressive in the state of Pennsylvania, and was sent a regulatory “Notice” that she was required to return. She accidentally forgot to return the form…and was promptly cancelled.

So what does a mom do when their insurance is cancelled? Well, if your son runs marketing for the insurance company, you can guess the call doesn’t come in through the call center!

As Richard described, this feedback loop led to some interesting learning about the customer process design, and has survived many years as part of the company’s culture. When they looked into the cancellation at the time, they realized that in the state of Pennsylvania they had been cancelling about 10% of all the new customers because of this technicality. And what was even more fascinating was the fact that returning this form was not the only way to meet the state’s regulatory requirement. The company could just as easily accomplish this by proving that the form had been sent.

A Rallying Cry for the Customer

 

Richard asked us, “Would you do that do your Mum?” And that’s the rallying cry that he still uses today as a filter, to decide if their processes and policies are as customer-friendly as they should be.

 

As Richard described this story, I thought back to many conversations I have had with people about how to make cultural change happen within companies. It requires stories that “shock the system” and demonstrate a new way of looking at things and making decisions.

Richard showed the economics of Promoters, Passives, and Detractors in Progressive’s business. He highlighted the importance of working on these numbers with the CFO. They use NPS economics to support decision making in many parts of the business, including their IT prioritization process. It is also becoming an important yardstick for measuring performance of the service providers who support Progressive’s business.

Verbatims and Follow Up

 

Richard turned next to discuss the importance of verbatims. For him, the verbatims are the equivalent of having the Customer Service Rep standing outside his door, mimicking that natural feedback process that happens when employees sit together.

To create this, they push verbatims to employee desktops based on the topics of interest to them, giving them a running ticker of comments during the day. It makes it so personal…employees start to read the comments, and it connects them to what is going on with the customer in the moment.

In their claims area, about 11% of survey respondents request a claims rep follow up, and 3% request follow up from a manager. They integrate this follow up process with their claims system, and log what they learn from each call. Richard admitted that they tend to focus most of their efforts today on following up with Detractors, like most businesses. But it gives them lots of valuable feedback to use in the business.

What’s Your Price?

 

As expected, they find that in time periods where they increase rates, NPS moves down for those consumers. They also see differences when they run promotions. Richard called it “Bait and Switch.”

 

For example, they offer a one-time discount for moving to online, paperless interaction. The problem is that when they renew, this one-time discount goes away. And yet people don’t always remember why their rate was discounted. So as soon as rates go back up, they see NPS dip.

One interesting innovation around pricing that they have implemented is a new function on their website that allows the customer to say what they want to pay, and they can come back to the customer with information on what coverage this will buy for them.

It’s the Little Things

 

But ultimately, pricing can be difficult to control. So, Richard turned next to a series of smaller process improvements that are easier to address without a lot of extra cost…just by better understanding the customer’s point-of-view and needs. Everything from the way they print and mail their insurance ID cards (consumers were losing them in the stacks of paper they receive when they sign up). Another example was the way they presented the discounts that the policyholder received. They not only made this easier to read, but also added a section with suggestions on how they could save even more money.

It’s the Big Things, Too

 

How do you let customers know about the changes you are making?

In addition to the little improvements, Progressive has also made some big investments in things like the claims experience. Richard noted that Claims is one of the most critical moments of truth in the insurance experience. For auto claims, they have set up a concierge service, where the customer simply drops off their car, and is handed the keys to a rental car in the same building, through a partnership with Enterprise Rent-a-Car.

Richard’s 2 Big Takeaways

 

  1. Work on your own economic value of NPS, and get it blessed by your CFO.

  2. Work on your customer feedback loop. Use the comments and engage with the verbatims, not just the score. This really helps to personalize it, and get eager employees involved in helping to make changes happen.

 

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JohnAbraham
Richard Owen delivered the first keynote session for the 2010 New York conference, discussing the future of customer experience by taking a look at several historical customer-facing innovations.

 

Why is it that companies operate the way they do? What happens when new players enter an industry, or a major competitor changes the rules of the game?

 

Richard illustrated this with examples from several industries, and with a bit of economic theory too.

 

For example, why is it that hotels have fixed check-in and check-out times? Turns out, it’s mostly about the cleaning schedules. Yet the cost associated with cleaning is only a small fraction of the value of the customer’s stay. One company, operated by renowned hotelier Horst Schulze of West Paces Hotel Group, is innovating by doing away with fixed check-in and check-out times. Why not just organize your hotel stay based on your schedule as a guest? Now that’s an innovation.

 

Richard pointed out that most big changes tend to come from entrepreneurial companies and new entrants. But innovation isn’t just about products! The first three examples he chose were all, essentially, about distribution channels:

 

  • Avon: Started by David McConnell in the late 1886, and first branded as Avon in 1928, was a major innovation in the sale and distribution of cosmetics...as Richard described the Avon model which leveraged personal networks and social relationships, I realized that social networking (just like word of mouth) is nothing new!
  • Dell: Michael Dell decided that the notion of selling computers through dealers might not be the best model. This led to one of the biggest innovations in high tech distribution with Dell’s online "built to order" processes, that have changed IT purchasing and the computer industry.
  • Amazon.com: Want to buy a book? If you’re my age, you remember the days where you had to call around to see which bookstores had the book you wanted in stock. Or you had to wait until they could order it from the publisher or from another bookstore. As Richard put it, "Going into a bookstore had its limitations on choice, convenience, and price." Honestly, my kids wouldn’t have a clue what the fuss is all about. Amazon has changed distribution for books, and many other categories of products, by moving the shopping experience online.

 

But Richard’s biggest innovator accolades went to Wal-Mart. Walton’s original idea was to be an innovator in distribution. He used to fly his plane around the US, and look for small towns with lots of homes but no large stores. As Richard put it, "He brought choice, distribution, and price efficiency to lots of cities where this simply didn’t exist."

 

My Own Experience at Wal-Mart

 

After hearing Richard's talk, I was writing this summary and reflected back on my own experience with Wal-Mart.

 

I was in the midst of that revolution growing up in Oklahoma, not far from Wal-Mart headquarters in Bentonville, Arkansas. What Richard failed to point out was the incredible tension this created in rural communities, where the Wal-Mart store put many small retailers out of business. But even if you had friends in small town retailing (we did!), you had to eventually accept the reality that Wal-Mart simply offered a better overall mix of choice and value…which was what the customer wanted.

 

In fact, I experienced it first hand, working in one of my first jobs as a cashier at Sam’s Club, Walton’s warehouse retailing giant. I was always amazed at how far people would drive from surrounding communities to buy products at the Sam's Club where I worked. This was Walton out-selling himself! What the local town Wal-Mart couldn't deliver, they could get by driving to the nearest Sam's Club (even better prices as a member).

 

I even had the pleasure of meeting Sam Walton himself when he stopped in at the Tulsa store on 46th and Sheridan Road, where I worked…driving up in his pickup truck, decked out in a baseball cap and jeans (yes it is true what they say about him). He was already the richest man in America in those days, thanks to his innovative approach to business, but I think he stayed true to himself. And he understood what the average person in a small town needed.

 

Richard Discusses Exceeding Expectations (aka The Zone of Tolerance):

 

Richard Owen.JPG

 

As Richard noted, Walton had 10 rules for doing business, and rule number 8 was "Exceed your customer’s expectations. Give them what they want, and then give them a little more." It’s similar with Net Promoter. The only way that you can really create lots of Promoters is to redefine what people expect in your industry, or by significantly exceeding their expectations so that the customer notices.

 

Richard illustrated this idea of "exceeding expectations" by asking two volunteers up on stage. As research has shown, expectations are grounded at a certain level based on what consumers know from an industry, and there is also a higher level that defines what consumers really want. Researchers have called this the "zone of tolerance." But this range of expectations moves around. It moves with Price, first of all. It also moves based on what people experience from other companies.

 

In most industries, the players sit in the center of the zone of tolerance. But what happens periodically, is that companies completely redefine what people want by delivering a new type of experience, and this is a key factor in generating legions of promoters. This is what major innovators like Avon, Dell, Amazon, and Wal-Mart have done in their day.

 

Richard also went into a discussion of Game Theory, and how the interactions between companies tends to lead everyone to the "middle" of the zone, generating lots of passives. Think of this as a sort of, "lock in" with standard operating procedures, making it hard for companies to break away from the pack. Even if you try to make a big change, it can be incredibly hard to get your operations to adopt the change.

 

But occasionally, this balance is disrupted by an entrepreneur (from the outside) or (more rarely) by a major change from the inside. He used GM as an example of a company in crisis that has had the impetus to start major change. They are working on two major innovations right now. The first is a money-back guarantee. This is common for some smaller purchases, but it’s a big change for auto purchases. He rated this one with a thumbs up.

 

The second innovation they have tried is to sell cars online, using an eBay auction. They ran this experiment for 6 months recently (click here for Richard's blog about it when it was first announced), but it didn’t pan out well.

 

What went wrong? Richard believes this failed primarily because they didn’t complete the innovation…they just routed people into the dealership, and it was back to standard operating procedures again. This illustrates the difficulty of making change happen.

 

Bad Baggage

 

The airlines seem to be moving in the opposite direction, by charging for bags. "Is it a race to the bottom?" Richard asked. Luckily, not everyone is playing the game. As Richard pointed out, "Southwest now can create Promoters by doing absolutely nothing at all!" "Bags fly free" is now a differentiated experience, and Southwest is advertising about it.

 

Other great innovations Richard pointed out included:

 

Reed Hastings founded NetFlix because he hated the fact that Blockbuster was making money off of him by charging late fees. So he innovated in the other direction, redefining what people expect from home movie rentals. I've got some more thoughts on NetFlix in this blog post.

 

Online dating websites: why limit your choices to people you happen to meet through your personal network? Online dating websites have changed the paradigm for this completely.

 

Richard ended with a challenge for conference attendees in their own businesses. What is happening in your company and your business that relies on industry status quo? Are you a victim of living in the zone of tolerance? How will you break out of it? That’s some food for thought as we kick off the conference.

 

Sam Walton quotable quote (courtesy of Richard):

 

"Swim upstream. You should go the other way and ignore the conventional wisdom."

 

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0 Comments Permalink Tags: satmetrix, owen, avon, amazon.com, zone, tolerance, dell, wal-mart
JohnAbraham

I’m sort of embarrassed to admit this, but I was one of the last people in my circle of friends to get a cell phone. I was also the last executive at my company to succumb to instant messaging. And, it’s true, my wife manages our wireless network and most of the technical stuff in our house. Maybe it’s because I spend so much time consuming and creating information at work every day, that when it comes to my personal life I sort of like to be disconnected.

 

One thing I do enjoy is curling up for a good movie in front of the TV, true couch potato style. So when we walked past our local Blockbuster store last night on the way to dinner, the “store closing” sign really struck me. That a competitor could so quickly emerge and “bust” Blockbuster’s formerly dominant position for in-home movie rentals is a testament to the truly dynamic nature of customer expectations. If I want to be on the couch, Blockbuster got me out of the movie theater and into my home. That was step one. But why make me drive to a retail store? I’d rather just stay in my pajamas…enter: Netflix. But it doesn’t stop there. Why should I worry about fees for returning a movie late? Netflix solved that too.

 

A few nights ago we used the Netflix online service to watch a movie on our new “extra large” computer monitor. So while Blockbuster may be busted, Netflix can’t rest on its laurels. The Internet may yet “disintermediate” the U.S. postal service completely when it comes to delivering that little red envelope to my door. We’ll see if Netflix can stay on top of that change in the coming decade.

 

While I’m not exactly an early adopter as a consumer, I must admit that I’m fascinated by the big questions that come from trying to sift out “fads” from major innovations in customer experience. And all of us who work in the area of customer experience and customer feedback must be constantly on the watch for clues and innovations that customers will point us to in their feedback. It starts with commentary about what they want and where your company may fall short, but it’s more than that.

 

Creating a promoter is also about what your customer can get (and what they expect from you) based on other experiences they have both inside your industry and with other interactions at work and at home. And the holy grail may well come from using NPS in conjunction with other forms of smart listening to divine what the customer would aspire to (and pay for), if only someone could figure it out.

 

This year’s Net Promoter Conference comes at a pivotal time, at the beginning of a new decade and on the back of a pretty horrible time economically for most companies. But I think all of the churn, company failures, and restructurings have set us up for a new era of innovation as the companies that remain standing jockey for position while the economy recovers.

 

Net Promoter will be a strategic advantage for companies who have mastered the use of this approach. And I’m looking forward to exploring the implications of that with our distinguished group of guest speakers, and members of the Net Promoter Community, in New York on February 1st and 2nd.

 

Whether it’s the continued evolution from mobile “phones” to mobile information access, debate over healthcare delivery models, the rebuilding of trust in financial services, deeper process and technology integration among business partners, new support channels, or a new way of developing your people…come prepared to discuss how the customer’s voice can help you navigate these opportunities using NPS as a compass.

 

What will customers expect of your industry (and your company) in the coming years? Please send me your thoughts.

 

P.S. My new “extra large” computer monitor comes courtesy of Dell. It’s very nice, and a great value, according to my wife. For full disclosure, Dell is a client, and my boss spent a good part of his career there. But my wife made this purchase decision all on her own. Remember she controls the technical stuff at home…and the purse strings :)
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2 Comments Permalink Tags: nyc, conference, netpromoter
New York Conference Blog 2010

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