Fred Reichheld's Blog

Stop Trying to Satisfy Employees!

info@netpromoter.com — Wed, 18 Apr 2012 20:54:08 GMT

Lots of companies now understand that they need to turn more customers into promoters if they are to grow profitably. They also recognize that they can’t accomplish that goal unless front-line employees and supervisors are enthusiastic and love their work.

The latter realization has given a boost to the mini-industry of experts in employee engagement.These experts help companies implement periodic surveys that gather confidential responses from employees on how happy they feel along a variety of dimensions. The experts aggregate the data, sprinkle some statistical fairy dust over it (each provider has its own magical recipe), and identify the “key drivers” of employee satisfaction. They then recommend a set of improvements based on comparisons to proprietary benchmarks and putative best practices. The logic seems reasonable: find ways to satisfy your employees, and they in turn will delight customers.

The problem with this process is that it does not work very well. “Satisfying” employees isn’t even the right goal. The right goal is to help everyone in your company earn real happiness by putting them in a position where they can delight customers. When they succeed in doing so, you can make sure they get full recognition and appreciation for their accomplishment. (Earning a 9 or a 10 from a customer is like receiving a standing ovation.) Every day, for instance, Apple Retail employees review feedback in their pre-shift huddle (the “daily download”) from customers they served the prior day. Nothing does more to engage team members than hearing applause from customers in front of their peers.

Of course, Apple Retail also surveys employees every three to four months to determine how the company can make each store an even better place to work. Apple calls this program Net Promoter for People (or NPP), and it represents a radical break from the standard employee satisfaction survey process. First, it focuses on finding solutions to problems that employees believe must be addressed if they are to delight more customers. Second, it helps the front-line team members at the store have a productive dialogue. Instead of generating a statistical key-driver analysis that leads to top-down “improvements,” it provides the basis for mandatory all-hands meetings, usually held on a Sunday night. Attendees review the store’s NPP results, discuss them to ensure accurate interpretation, and identify the issues most vital to that store’s success. Store leaders then recruit teams of employees to consider each high-priority issue and to develop alternative solutions, which the teams then present to leaders over subsequent weeks. Each store adopts the best solutions and communicates actions taken back to the team. Then the team gets to evaluate effectiveness on subsequent NPP surveys.

This NPP process not only leads to productive dialogue and grass-roots solutions; it also is a great professional-development experience for all concerned. It clarifies the notion that the leader’s job is not to make employees happy but to put them in a position to earn happiness. And unlike conventional employee surveys, the process focuses on delighting customers. Sure, some stores adopt measures that help employees remain motivated, such as providing remote break rooms for employees in mall stores that were designed to handle modest customer traffic and are now bursting at the seams. But the central objective—the objective that makes all investments in employees possible—remains front and center: creating more customer promoters.

During my keynote at the upcoming Net Promoter Conference in London, I will review some of the other cutting-edge practices that are revolutionizing the process of earning employee loyalty. These emerging solutions represent a fundamentally important advance in the Net Promoter System. The goal of a leader should be to help employees earn happiness by playing valued roles on teams that delight customers. The survey tools and processes (the eNPS toolkit) required to pursue this goal have little in common with the solutions currently proffered by the so-called experts in employee satisfaction and engagement.

Targeting Greatness with NPS: The Rackspace Journey

info@netpromoter.com — Thu, 05 Jan 2012 17:17:34 GMT

At the upcoming Net Promoter Conference in San Francisco, Rackspace CEO Lanham Napier will discuss how his firm has utilized NPS to pursue greatness. During our recent CEO Roundtable* Lanham explained:

For us, NPS is a greatness metric. It’s a value statement about what our company wants to become. We have lots of metrics for our business but most all of them measure bigness—how big our revenues are, how many employees we have, how many servers we have in our datacenters, how big our profits are, how big our market capitalization is. But to achieve our aspirations, what we really need most is a measure of greatness. Net Promoter tells us how often we are delivering what we call Fanatical service—service so great that our customers lives are enriched and their businesses generate better results.

Too many companies these days never go beyond those traditional measures of bigness. They attach budgets and bonuses to the measures, so employees naturally come to believe that growth alone is what really matters. By focusing innovative energy on bigness rather than greatness, companies eventually fall into the trap of bad profits and bad revenues. Growth inevitably stalls as customers search out better alternatives.

Ironically, when a company focuses on greatness, it usually grows bigger. Rackspace, with its emphasis on achieving greatness, is growing at more than 30% per year and has become the leader in its target markets. The firm’s market capitalization has increased more than fivefold since its IPO in 2009. By focusing on greatness (through the lens of Net Promoter), it has outpaced the competition.

In 2009, I joined the Rackspace board of directors and have had the privilege of observing Rackspace’s journey toward greatness up close. One of the lessons I’ve learned is that simply measuring Net Promoter at the corporate center to generate aggregate metrics for senior execs, the board and big investors is not the key to greatness. Rather, the real key is distributing that measurement capability to each front-line team so that team members can track how close they are coming to greatness each day—and then make the appropriate course corrections.

A good analogy is the way that global positioning systems (GPS) have expanded their impact on our lives as the technology evolved from central control to a distributed model. In its early days, GPS was revolutionary, but it was limited to centrally controlled missions. For example, NASA used GPS to guide missiles, and naval operations could use it to provide navigational aid to captains of aircraft carriers. Today, GPS is available through millions of smart phones and inexpensive consumer devices. Just about anyone can determine their current location, the distance to their destination, and the best route to take—not just aircraft carrier captains, but lone kayak paddlers, drivers, and joggers.

Think of NPS as your company’s GPS for greatness. It lets each individual team discover how close they come to greatness—as measured by 9s and 10s from the customers they touch each day, each week, each month. Through closed-loop feedback, they can determine the adjustments required to “recalculate” and home in on their destination. That is the real power of NPS; that is how companies like Rackspace are revolutionizing the quest for greatness. NPS provides a guidance system that can transform the pursuit of greatness from a theoretical conversation about heroic leadership into a practical grass-roots effort.

*Rob Markey and I hosted the CEOs of Rackspace, Intuit, Schwab, Bain, and eBay for a Roundtable discussion about their experience with NPS. We will be releasing shortly a series of videos from that session.

Profiting from the Golden Rule

info@netpromoter.com — Tue, 15 Nov 2011 20:13:36 GMT

The following post originally appeared on the Harvard Business Review Blog Network.

Listen in on MBA classes and corporate conferences and you will hear a lot of talk about the need for inspiring missions, ethical behavior and transcendent purpose. And judging from the “core values” statements in most annual reports, the vast majority of business leaders want their companies to grow by enriching the lives of their customers and employees.

And yet, this can often sound like so much fluff in the real business world. Our system of financial accounting rewards quarterly profits, but struggles mightily to place a value on ethical behavior. Even accounting rules specifically dealing with reputation — goodwill and intangible assets — are subject to frequent rule changes and endless debate.
Perhaps the accountants are just overcomplicating a basic idea. Reputation is earned through the simple, age-old concept of the Golden Rule: treat others as you yourself would want to be treated. Each time you live up to the Golden Rule, your reputation is enhanced; each time you fail, it is diminished. And the mathematics of long-term financial success — revenues, profits, cash flow — square perfectly with this scorecard.

We all want to be treated with honor and respect in ways, large and small, that enrich our lives. Such experiences not only make us happy, we want to share them with people we care about. By recommending an experience, we’re signaling our trust that our friends will be treated similarly. Recommendations also signal to businesses how customers view their relationship with the company. When customers feel so well treated that they enthusiastically recommend a company to friends, they are promoters. When treated so badly they recommend avoiding the company, they are detractors. Both have direct and measurable economic consequences.

This is the concept at the heart of the Net Promoter system, which my colleague Rob Markey and I describe in our book, published last month. The Net Promoter system focuses the entire organization on generating promoters, who buy more, stay longer, refer friends and even provide useful feedback and ideas. It also helps minimize the number of costly detractors. A recent research project we conducted found that across multiple industries, the company with the leading Net Promoter score typically grew more than twice as fast as their competitors.

That should keep the accountants happy. But for companies, executives and employees, there’s also an inspirational dimension: the system provides them with a practical way to measure how consistently they treat people right. You might call it the Golden Ruler.

That’s how Walt Bettinger, chief executive of Charles Schwab, describes his company’s Net Promoter system when recommending it to other CEOs:

“First, I ask them if they believe in the importance of the Golden Rule — that ancient moral and ethical principle that we should treat people the way we would want to be treated. They always nod emphatically and say, ‘Yes, of course.’ So then I ask them what they do to measure how consistently they and their organization are living the Golden Rule each day. Their typical response: ‘Well, it would be great if we could measure it, but there’s no practical way to do that.’ To which I reply that there most certainly is a way. In fact, at Schwab, we have been using the Net Promoter System to measure our Golden Rule compliance for more than five years, and it works brilliantly. Net Promoter is the first screen I open when I boot up my computer each morning. It lets me know for each part of our company how we are performing in living up to our core values. By making NPS a top priority, we have become a better company — not just in terms of living our core values, but also in terms of profitable growth.”

Bettinger is not alone. CEO Dan Cathy explains the winning strategy at Chick-fil-A in similar terms: “We strive to deliver something for which there is unlimited demand–being treated with honor and respect. There seems to be a very limited supply of that in today’s world.”

These CEOs have not discovered a new concept: in one form or another, the Golden Rule is a pillar of most of the world’s great religions and it also lies at the heart of secular ethics. Business ethicists Paul Lawrence and Nitin Nohria describe the Golden Rule as an expression of the basic human instinct to bond with others.

The challenge executives face is how to put the Golden Rule into practice, especially when the lingua franca of financial accounting pushes the business to focus on short-term profits. “[M]orals are such a central and pervasive aspect of human life that we badly need a scientific way of understanding them,” Lawrence and Nohria write.

As CEOs Bettinger and Cathy have discovered, a Net Promoter system provides one framework to do that. When properly installed and operated, it delivers financial growth. But it also shows that those MBA class discussions and annual report rhetoric aren’t just fluff. If you build a way to measure it, you’ll find that it really does pay to be good.

The Love Metric

info@netpromoter.com — Thu, 18 Aug 2011 18:55:59 GMT

Rob Markey and I had the pleasure of speaking with Intuit CEO Brad Smith this week in preparation for our upcoming NPS CEO roundtable. (The roundtable will be taking place in late September, so keep an eye out for video highlights shortly thereafter.) We asked Brad if he could comment on some of the benefits Intuit has achieved with the Net Promoter system. His response warmed our hearts.

"In my 25 years of experience in business, I have never seen a more powerful approach.“ Brad explained why it’s so powerful for Intuit: “NPS breaks down the silos and organizational boundaries so everyone can focus on the customer. From the board of directors and external audiences all the way to product engineers and frontline phone reps, NPS helps drive our culture toward our True North. It helps us stay on mission—to be a growth company that improves people’s lives.”

Rob and I had read an article in the June 2011 Harvard Business Review by Roger Martin, dean of the University of Toronto’s Rotman School of Management, entitled “The Innovation Catalysts.”

Dr. Martin wrote, “Intuit’s transformation arguably began in 2004, with its adoption of the famous Net Promoter Score . . . developed by Fred Reichheld, of Bain & Company.”

So we asked Brad if NPS had indeed played a role in Intuit’s accelerated innovation process. Brad replied, “Our product guys have completely embraced Net Promoter, but they don’t usually call it that. They call it the love metric. They use it as a threshold to determine if a product design is good enough. Will customers love it so much that they will recommend it to friends?”

I can’t wait to hear more from Brad about the love metric at the September CEO roundtable. In the meantime, I hope readers will visit our website to learn about the other exciting developments that will be taking place around the September 20th launch of our new book, The Ultimate Question 2.0. In particular, I recommend viewing a brand-new three-minute video in which we provide a sneak preview of the book’s contents.

Measuring Corporate Responsibility with NPS

info@netpromoter.com — Tue, 12 Apr 2011 08:24:16 GMT

I live in a suburb west of Boston where people regularly tear down perfectly good four-thousand–square-foot homes. They toss all the waste—wood paneling, flooring, windows, carpets, nails, and the kitchen sink—into the dumpster to be hauled off to the landfill. They build a brand new eight-thousand-square-foot house in its place. Then, of course, they ostentatiously separate their plastic bottles from the glass and paper on their weekly dump runs. This superficial commitment to environmentally responsible and sustainable practices fairly reeks of irony.

I see something similar in the corporate world. Companies seize on ideals like stewardship and sustainability to burnish their reputation and image through public relations campaigns. Meanwhile their core businesses continue to pollute their surroundings by flushing precious assets and resources down the sewer.

But there’s a deeper issue here as well. With all due respect to the environment, it seems to me that the most precious assets over which a corporation should exhibit good stewardship are the lives of its employees and its customers.

Maybe it’s time to rethink corporate responsibility and return to the fundamental idea that the primary duty of a company is to the lives of the investors, employees, and customers that it touches. Do the company’s actions enrich those lives or diminish them? The Net Promoter system makes it possible to measure this core responsibility. People whose lives have been enriched tend to become promoters. Those whose lives have been diminished typically become detractors.

The overall picture painted by this Net Promoter diagnostic image is not very pretty; promoters barely outnumber detractors in most companies today. Most leaders have learned to interpret their horribly unimpressive Net Promoter scores as a barrier to profitable growth, which is completely true. But there is an even darker interpretation. Let’s put aside the corporate carbon footprint for a moment and consider what the scores imply about the human footprint created by the average company today. It seems to me that companies cannot feel good about any kind of stewardship until they start to demonstrate serious progress on creating more promoters and fewer detractors among their customers and employees—until, that is, they demonstrate a serious commitment to enriching the lives they touch directly.

Frugal Wow Redux: Eat Mor Chikin

info@netpromoter.com — Fri, 07 Jan 2011 13:55:31 GMT

It is surprising how often I hear about Chick-fil-A from my friends, even though I live in Massachusetts where there are only a couple of Chick-fil-A restaurants. For example, I was sitting in Bain’s Boston headquarters with the partner team that oversees the firm’s internal Net Promoter process (Bain gathers NPS feedback from its major clients on a regular basis). During a break, I happened to mention to the partner representing our Dallas office that I had invited Dan Cathy, the president of Chick-fil-A, to speak at the upcoming NPS Conference in Miami.

My partner exclaimed that his family simply loved Chick-fil-A and visited the restaurant in his Dallas neighborhood almost every week. He then confided that it was really his three-year-old son who was the biggest fan. Whenever the family got in the car on Saturday, the three-year-old would ask if they could visit Jose the mop-man. My partner explained that the first time they visited their local Chick-fil-A restaurant, an employee named Jose was mopping the floor, and when the family entered, he welcomed the young boy with a big smile. With a wink at the parents, he asked the youngster if he could help with this mopping chore. A moment later, the boy was full of giggles as Jose gave him a ride around the lobby on top of the mop. Now, every time they come back to the restaurant, the son looks for Jose—who welcomes him by name—and they find some important job to work on together.

There are lots of ways you might label this kind of behavior. I’ve heard names like “random acts of kindness,” but I really don’t believe it was random. Maybe intelligent kindness or caring service would be more accurate. Personally, I like to think of it as an example of frugal wow. It didn’t cost the store very much to have Jose make the little boy feel special. It almost certainly made Jose feel better about his job when he made that youngster smile. It probably made the other customers in the restaurant smile too. It probably energized Jose so that he was more productive, and it undoubtedly topped up his reservoir of good will to share with other customers and crew members. Then there is the very tangible value of having repeat customers who tell these happy stories to family, friends, and neighbors.

Just writing about this story is making me smile. Which proves the power of frugal wow. Jose’s frugal wow is rippling out from that Dallas restaurant and spreading smiles all the way to Boston. One of the things I find so remarkable about Chick-fil-A is the frequency and variety of creative frugal wow stories that I encounter. I’m hoping that Dan Cathy can explain why he thinks this is happening—and what he and the other corporate execs in the Atlanta headquarters are doing to encourage this kind of behavior so it continues to occur with increasing frequency in Chick-fil-A restaurants across the country.

Banking on Bad Profits

info@netpromoter.com — Wed, 15 Sep 2010 14:04:01 GMT

Bain will soon publish the latest NPS for retail banks in North America. The situation is grim indeed. Large banks with national branch networks have now stumbled into negative NPS territory. Not surprisingly, those banks achieved absolutely no growth in deposits. Actually, this is quite surprising given the ocean of excess liquidity sloshing around the globe. Money is sitting on the sidelines awaiting some signal that it is safe to jump back into the stock market.

Why haven’t these banks received a share of these funds? The answer: customers don’t like the way they get treated at the banks.

Customer detractors complain about bad service and nuisance fees. This provides a classic illustration of the double-whammy effect of bad profits. The first-order effect is the direct impact on customers. Customers hit with fees resent them and become detractors. The second-order effect of bad profits is they demotivate employees. This second-order effect is often more powerful. That’s because, although only some customers get hit with fees, almost every employee cringes in humiliation when fees are levied or policies implemented they consider unfair or abusive. And they end up dealing with the complaining detractors, lowering motivation a notch further. When employees aren’t proud of the way customers are treated, they are not inspired to deliver great service.

The New York Times reported last month that a federal judge “ordered Wells Fargo to pay California customers $203 million in restitution for claims that it had manipulated transaction to maximize the overdraft fees it charged. Instead of processing transactions in the order in which they were received, Wells Fargo put through the largest to smallest. In a stinging 90-page opinion, United States District Judge William Alsup wrote that the practice was unfair and deceptive. The bank’s dominant, indeed sole, motive was to maximize the number of overdrafts and squeeze as much as possible out of customer who spent more than they had in their accounts…The judge also accused Wells Fargo of going to great lengths to hide these practices while promulgating a façade of phony disclosure. “

Ouch!

Of course it is completely unfair to pick on Well Fargo since most large banks have adopted this practice. But just because everyone is doing it does not make it right! Bad profit practices have convinced branch and phone personnel that no matter how loudly executives proclaim their commitment to ethical behavior and putting customer interests first, they have no intention of walking that talk. Management exhortations to branch staff to turn customers into promoters ring hollow when detractors are being generated by bad profits policies created by those very same executives.

Until leaders get serious about confronting bad profit policies and beginning to wean their firms off this ugly addiction, they cannot earn the loyalty of their employees. And without employee loyalty, there will be little customer loyalty. Today, large US banks have more detractors than promoters. Something has to change. A good place to start would be to begin lining up those bad profit policies against a wall, and blasting them into oblivion. Otherwise, it will be the banks themselves headed toward that fate.

The World According to FRED

info@netpromoter.com — Tue, 24 Aug 2010 12:28:24 GMT

Most days of the summer, you will find me walking along Cape Cod’s Shining Sea Bike Path, where the vista over Vineyard Sound inspired the poetry of Katharine Lee Bates, author of the words to “America the Beautiful.” There continues to be something magical about the setting and the way the sea sparkles in the sunlight. This special place also happens to be where I do some of my best thinking. During one walk along the path, it struck me that the only way to really change the way people were treating one another in business was to help change the way they measured success, both organizational and personal. That eventually led to the creation of the Net Promoter System. Granted, there is a long way yet to go, but the progress on NPS over the past few years has been most gratifying. Hundreds of the world’s major companies—and likely many thousands of smaller firms—have begun to measure their success with NPS.

And now, as the hips on the rosa rugosa turn a deeper shade of scarlet and the marsh mallow blossoms herald the beginning of the end of summer, I again find myself asking some of those perennial existential questions that seem to come with the season. You know the kind: Why do we exist? What is our purpose? And so on. One particularly thorny one got stuck in my head: Why in heaven’s name did my parents name me Fred?

Fred. There were no noteworthy relatives on either side of the family by the name of Fred. And I couldn’t think of any particularly famous Freds that might have inspired my parents’ selection. There were no US Presidents by that name. Millard, Grover and Calvin, yes, but no Fred. There weren’t even any vice-presidential Freds, although that group managed to include a Chester, a Hannibal, a Hubert, and a Spiro. In fact, my parents never mentioned any Fred-logic that made sense to me. So I decided I would have to find (or invent) my own explanation. I paced up and down the Shining Sea bike path pondering secret codes and mnemonics that might be hidden within those letters F-R-E-D. And I am happy to report that I think I found the answer.

The Net Promoter System is much more than a score. It embodies a philosophy so basic that it can be captured in just four words: Foster Recommendation, Eliminate Detraction. FRED! That must have been it. My parents were magically anticipating the philosophy that would underlie NPS, and that’s why they gave me this otherwise inexplicable name.

OK, so FRED doesn’t scale the poetic heights of purple mountain majesties or alabaster cities. But everybody loves an acronym, and acronyms like LASER (originally Light Amplification by Stimulated Emission of Radiation) have become part of the language. And doesn’t FRED provide a laser-like focus on a good way to run your business and maybe your life? Someday, perhaps, FRED too will become a popular mnemonic—a reverse acronym if you will—morphing from common name to shorthand for a code of conduct worthy of loyalty. And if organizations continue to adopt this philosophy of FRED, America (and the rest of the world) will indeed be Beautiful.

The Power of Frugal Wows

info@netpromoter.com — Tue, 22 Jun 2010 14:05:27 GMT

During the recent London NPS Conference, a number of companies reported creative methods of delivering “Wow!” experiences to customers in an economically responsible fashion.

David Speakman of Travel Counsellors, for instance, described the “Golden Habits” that his most effective agents employ—inexpensive but thoughtful acts of kindness such as thank-you notes and welcome-home phone calls. By building these frugal wows into its IT systems, the company makes it easy for all of its counsellors to remember and implement the practices. Where a typical travel agent touches a customer several times each year, the Golden Habits help Travel Counsellors’ agents touch their customers far more frequently, and in ways that bring delight.

Rackspace does some similar things. One Racker described the company’s practice of sending a mini-Racker T-shirt to customers who are welcoming a new baby into the family. Another Racker said that, when a customer is pulling an all-nighter, someone from Rackspace will call a local restaurant and have a pizza delivered, so that the night is a little less arduous.

Listening to these creative ideas for wowing customers, I got to thinking about my daughter Jenny’s recent experience when she moved to a new city. We had long been loyal Lexus customers, and I advised her to stop into the local Lexus dealer whenever she had problems with her car. It turned out that the first problem she faced was the transfer of license plates. One of the screws that our own Lexus dealer had used to attach the old Massachusetts plate would not budge.

The new dealer told her that fixing it would be no problem, but that the cost would be $200. Jenny gave me a call because she was astonished—think negative wow—by the price. I agreed that it seemed outrageous, and advised her to grab her new plates and get out of there. She then drove to the corner garage that her new roommate had recommended. When the mechanic saw the situation, he assured her that there was a simple fix. He drilled out the old screw and had the new plates installed in a matter of minutes. When she offered to pay him, he refused to accept any money. He told her that he just wanted to welcome her to the neighborhood.

She was so pleasantly surprised that she has told this story dozens of times to friends and neighbors. And you can imagine how much of her business—and how much of her friends’ and neighbors’ business—will be going to that garage compared to the Lexus dealership. In fact, after buying six Lexus autos in a row over the past decade, we recently defected to Audi. That distant bad experience may have been the last straw for us.

Anyway, back to my daughter. By investing just a few moments with her, that mechanic created a memorable and welcoming wow experience. And he built the foundation for a long and profitable relationship.

The question that I hope more business leaders will be pondering is this: How can we ensure that front-line employees are constantly looking for innovative ways to wow customers without spending too much money? When they do that, it energizes a company’s growth. Frugal wows are not only highly profitable, they are also inspirational, for customers and employees alike.

Do Opposites Attract?

info@netpromoter.com — Mon, 19 Apr 2010 17:00:01 GMT

It seems ironic that the wireless provider with the lowest NPS score in the business has teamed up with the highest-ranking hardware manufacturer. But there it is: AT&T’s exclusive contract to support Apple’s iPhone makes for one of the oddest couples around.

The laggard here is AT&T, which just won the dubious distinction of coming in dead last in the latest Satmetrix NPS survey of eight major cell phone providers. AT&T‘s NPS was barely positive at 9%—37% promoters minus 29% detractors. Contrast this to top-ranked Verizon with an NPS of 41%, 55% promoters and 15% detractors. (The disparities in subtraction are due to rounding.) The 32-point gap that separates the two typically reflects serious performance problems for the loser.

AT&T’s top-performing partner, of course, is Apple. Satmetrix’s survey of consumer electronics companies put Apple far in the lead: its NPS of 78% (81% minus just 4%) is 42 points higher than second-ranked Toshiba. The survey didn’t cover mobile-phone manufacturers. But given the iPhone’s dramatic growth and Apple’s overall scores, it’s a safe bet that the phone would get outstanding Net Promoter ratings.

Perhaps AT&T’s contract with Apple has helped it prop up results despite a substantial disadvantage in NPS. But at some point, Apple will almost certainly develop an iPhone for the Verizon network. And companies with top-ranked NPS typically work effectively together as partners, in large part because they share a cultural value of focusing on customers. So an eventual Verizon-Apple partnership is likely to lead to an abrupt shakeup in the wireless marketplace—a shakeup that AT&T’s investors and leadership team are not likely to find comforting.

How did Verizon generate such a lead versus AT&T despite its failure to win the iPhone? I happen to know that Verizon has been concentrating on improving its NPS for several years (see my blog from September 24, 2007 detailing my experience with Verizon). That work has paid off in handsome improvements in customer loyalty—witness Verizon’s climb to the #1 ranking in NPS.

What should AT&T do to avoid calamity? Well, executives might look to some of the NPS success stories for lessons on how to make quick progress in creating more promoters and fewer detractors. Charles Schwab is the current champion, to my knowledge, with an astonishing improvement of 70 points—from -35% to +35%—over a four-year period (see my blogs of October 21 and November 13, 2008).

But this kind of change can happen only if the senior leadership team follows the Schwab example: making NPS a mission-critical priority that touches all parts of the business, from operations and finance to marketing and human resources. If leaders view NPS as nice but not vital—merely a customer service initiative—then progress will be modest at best.

Will AT&T realize that it needs to get serious about creating a customer-focused culture and improving its NPS relative to Verizon? Only time will tell. But one thing is certain: this case study will be written up in the history books. And it will become the legacy of the current AT&T leadership team.

CTCA: Leading the Way with NPS in Healthcare

info@netpromoter.com — Fri, 19 Feb 2010 14:55:09 GMT

If you were among the 450+ attendees at our recent NPS conference in NYC, you had the treat of hearing Steve Bonner, CEO of Cancer Treatment Centers of America (CTCA), explain how his organization targets what he calls the “Mother Standard”—the kind of care you would want for your own mother. By using the Net Promoter Score as its primary gauge of that standard, CTCA has been able to make steady progress. Steve explained that his Board of Directors reviews NPS trends for each of CTCA’s hospitals near the beginning of their meetings. In fact, these are the first numbers that get reviewed by the Board, before any of the financial reports.

Only one thing happens prior to the review of NPS data, and that is a visit from a current patient who describes his or her experience at a CTCA facility. The Board rotates the location of its meetings so it can learn about the full range of facilities.

Hearing from a current patient helps to center the Board on its true mission: taking such good care of patients that they would recommend CTCA to a friend or relative. Board discussions could easily lapse into PowerPoint graphs full of numbers, as they do at many companies. But when a customer is standing in front of you, it’s a little easier to remember that the numbers that count most are those that reflect the customer’s experience.

I noted to Steve that I was puzzled at the slow adoption of NPS among health care providers. The sluggish pace is especially puzzling since so many of their important vendors and partners—including Sodexho, Philips, Medtronic, GE, and Siemens—have already adopted Net Promoter systems. Steve replied that, as healthcare becomes more competitive and consumer choice expands, more healthcare leaders will realize that the old-fashioned approach to measuring customer satisfaction (long surveys, low response rates, slow cycle times, no closed-loop feedback) are severely inadequate. But today, health care is just not as competitive or as consumer-focused as it needs to be.

In the meantime, forward-thinking organizations such as CTCA have been utilizing cutting-edge tools such as NPS to create a competitive advantage that will be difficult to overcome. By taking customer loyalty seriously—and by turning customers into promoters—CTCA has driven its Net Promoter Scores well above 80% and sometimes above 90%. The company is leading the way toward customer-centered healthcare by treating customers the way everyone feels their dear mother deserves to be treated.

I wonder what the NPS would be at the hospital where your own mother, father, or child will next be treated? Don’t you deserve to know?

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NPS in Healthcare

info@netpromoter.com — Tue, 15 Dec 2009 20:09:40 GMT

My dermatologist is a very smart guy. So at my annual check up, I asked him what lessons he has learned about applying the NPS framework in healthcare. He told me that the big insight for his practice was that he had been spending way too much time focusing on detractors. Most of them, he concluded, were simply not going to be happy doing business with him no matter how much extra attention he provided. These inherently grumpy patients were ruining the office atmosphere for other patients, they destroyed the motivation and enthusiasm of his nursing and administrative staff, and they were eating up a lot of his personal time and energy. So, he decided to help them find other physicians. The result, he told me, was that his practice started to grow and flourish like never before. The cost of detractors was far greater than the accountants could measure, but investing to fix detractor problems was not necessarily the best way to reduce this cost.

I feared I had used up my allotted time on this conversation—but the doctor seemed interested to talk further about NPS. So, I asked him why NPS adoption had progressed so slowly in health care. It is so clearly relevant; the notion of treating a patient in a way that makes them want to recommend friends and family seems perfectly suited for doctors, hospitals, clinics...just about any health care provider. Not only that, major suppliers to the healthcare industry such as GE, Philips, and Siemens have all adopted Net Promoter. Awareness among healthcare executives must be growing.

My doctor agreed, but then opined that perhaps the reason for slow adoption had to do with fear. In his view, the senior executives of hospitals and the like were more concerned with staying out of trouble and keeping their lucrative jobs than they were with building a truly great culture that could provide extraordinary quality care and reasonable prices. I was skeptical. Sure, measuring NPS in any business requires courage. It is one thing to talk about moving from good to great at your Board retreat, but to actually report how many customers are promoters, passives and detractors turns this high-minded concept into a sobering (maybe threatening?) challenge. But it doesn’t make sense that healthcare execs would have less courage than leaders in other industries.

Hopefully, we can get some answers to this question at the upcoming Net Promoter Conference (February 1-2 in New York). I plan to ask keynote speaker Steve Bonner, CEO of Cancer Treatment Centers of America, what he thinks about NPS in healthcare. Bonner’s organization has demonstrated impressive results using Net Promoter. So I want to ask Steve: Why haven’t more of his peers adopted NPS? Are they too focused on fixing detractors (like my dermatologist early on)? Do they think the current customer satisfaction surveys are sufficient for creating promoters—or has the government tied their hands with a measurement process that stifles innovation? Do they fear what NPS might show about the state of their current operations? Or do they simply feel overwhelmed with the amount of turbulent change and complexity?

I can’t wait to learn more from a seasoned industry executive like Steve Bonner about what Net Promoter advances we can expect to see in the healthcare arena.

The Wow Ripple Effect

info@netpromoter.com — Wed, 14 Oct 2009 16:45:39 GMT

I remember a business-school class in which our professor asked if we could think of any situations where other customers had a major influence on the quality and value of the overall customer experience. It didn’t take long to figure out that the caliber of customers who frequent a business - and the way they treat employees and one another- often play a vital role. In air travel, consider the difference between a flight where you’re sitting next to a noisy jerk on his cell phone and one where your neighbor sits quietly and maybe offers to share his newspaper. At a baseball game, a beer-swilling loudmouth can ruin the experience, while an avuncular neighbor who explains the nuances of infielder positioning to your kids can enhance it. In a hotel, you might have a thoughtful neighbor who keeps his TV volume low or an idiot who slams the door at midnight. In fact, other customers create a big part of our experience in retail stores, fast food, hospitals... most businesses, in fact.

This brings me to my last flight on JetBlue. A speech by one of the company’s execs alerted me that it had adopted Net Promoter, which of course made me pay close attention to my experience. The first difference I noticed was that the customers standing in line seemed friendlier. (It reminded me of my last experience on Southwest, which also happens to use Net Promoter.) One reason for the good cheer in the JetBlue line was that the check-in stations were fully manned and the queue of customers melted at an astonishing pace.

When I took my place in the security line, I was amazed at how friendly and contented the passengers seemed. Again, the line was moving rapidly. Even the security agents were friendly and helpful. One was chatting with people in the line - and instead of yelling admonitions about liquids and computers to everyone, he was exercising some judgment. He gave detailed instructions to the people who were clearly not frequent flyers. For the customers who knew the drill, he was simply friendly and wished us safe journeys.

At the gate, the agents seemed genuinely enthusiastic and totally in control. The chief gate agent explained the boarding procedure in a clear and friendly voice. Customers actually followed the rules and boarded when their seats were called. They moved into their seats quickly and avoided clogging the aisles. When I got to my seat, a lady was struggling to lift a heavy carry-on into the overhead bin. Before I could offer to help, the flight attendant scurried up and lifted it for her - with a smile. I had been in a similar situation recently on one of the major airlines. There, the agent offered not a helping hand but a scolding admonition about union rules, OSHA regulations, and her bad back.

I noticed a fresh wave of spontaneous helpfulness and goodwill break out among passengers who witnessed this act of thoughtful kindness. Other passengers began lifting bags, holding children, and generally behaving like good neighbors. It struck me that what I was witnessing was a chain reaction of helpfulness. In a closed community like an airplane, acts of kindness tend to get noticed and multiply. The same goes for acts of rudeness.

What I subsequently learned from a JetBlue exec made me realize that all this customer goodwill was not just luck. The executive confided that flight attendants are trained to watch for specific opportunities to brighten a customer’s day, and lifting a bag into the overhead compartment is one of them. I already knew that those acts of kindness motivated employees, and that their positive energy would lead to better service. But what I had overlooked was that customers pick up on these thoughtful actions - and since there are far more customers than employees, it is the ripple effect of goodwill and thoughtful actions spreading exponentially to other customers that really makes the difference. And talk about frugal WOW - this costs the airline next to nothing!

Three Winners Have NPS in Common

info@netpromoter.com — Thu, 02 Jul 2009 19:04:18 GMT

Forrester Research recently announced the three winners of its first Voice of the Customer Awards at the company’s Customer Experience Forum in New York City. Chosen from among 40 applicants, the winners were a U.S. division of Experian, the credit-services firm; the Progressive Group of Insurance Companies; and the client insight division of Vanguard, the investment company. I am usually a bit skeptical of awards like this. The grading can be quite subjective, and there is always the natural human temptation to give special treatment to friends and clients. But I think these three firms truly do deserve recognition for their dedication to listening to customers and taking actions to earn customer loyalty.

One reason to take the awards seriously is that all three companies are dedicated practitioners of the Net Promoter discipline. All have participated in Bain’s NPS Loyalty Forum meetings over the years, and all have attended the Net Promoter Conferences sponsored by Satmetrix. The firms’ applications and acceptance speeches testify to the importance of NPS in establishing a rigorous process for listening to customers and in measuring results. (The applications can be viewed at the Forrester links listed at the end of this blog entry.)

For each of these companies, Net Promoter provides both the fundamental framework and the metric to convert good intentions into measurable progress. I hope other firms will examine and consider adopting some of the best practices that have been generously shared by Experian, Progressive, and Vanguard. While their lines of business are very different—credit information services, property and casualty insurance, and mutual funds/investment services—the common themes of how to build customer loyalty remain consistent. All of the firms 1) carefully track which customers are promoters, passives, and detractors; 2) learn the root causes for the ratings through careful listening and analysis; 3) establish priorities and take action based on these insights; and 4) measure the impact of their actions through regular Net Promoter Score updates. This is the basic process for improving customer loyalty in any business.

Kudos to Forrester for putting a spotlight on these excellent company examples!

Here are the nomination forms from the winners. They're worth downloading!

Experian

Progressive

Vanguard

Excited About London

info@netpromoter.com — Tue, 19 May 2009 14:06:22 GMT

Yes, I am excited about the upcoming Net Promoter Conference in London, and I will tell you why.

Sure, it’s partly the gardens. During that first week of June, British gardens are breathtaking. The horticultural world is preened to perfection for the late May Chelsea Flower Show—and by early June the crowds have diminished and we can stroll through those incomparably beautiful garden spaces in relative solitude. Those Brits really know how to make things grow. (The secret, they say, is not just the wet weather; it is the voluminous quantities of manure they bury in the soil!)

Oh, and the other reason for my excitement—at each of the previous London NPS conferences I have discovered a new Net Promoter success story of startling originality. Last year it was Travel Counsellors, an entrepreneurial company that followed the principles of NPS and has now grown to more than 1000 travel agents in an otherwise moribund industry. Travel Counsellors will play a major role in my next book. The company’s successful application of NPS has already influenced dozens of Bain and Satmetrix clients.

Of particular interest at the upcoming conference will be the presentation by Virgin Media CEO Neil Berkett, who will explain how his company managed to increase its Net Promoter Score by 20 points, resulting in a 30% decrease in customer churn rates. One step that Virgin took to enable this progress was to begin ridding themselves of bad profits. Unfair fees and charges run rampant in the phone/internet/TV industry, and I will be very curious to know how Virgin managed to kick the historic addiction to these unseemly practices (referred to by many customers by various names for cow, horse, and chicken manure).

On a personal note, I suspect I will be sending a synopsis of the Virgin story to my own cable TV provider, because this is one company that desperately needs help in building customer loyalty. Despite major investments designed to improve customer service, it continues to wallow in bad-profit practices. For example, it charges ridiculously high “list” prices to customers unless they are sufficiently diligent to request whatever package price is in their best interest. I noticed not long ago that my bill had increased by 35%, but I was too busy at the time to dig into the reasons. When I finally got around to calling customer service, the rep explained that my package rate had expired. All I had to do was ask for the current package rate and I would reduce my fees by over 40% this time (but no, the amount I had been overcharged during the previous past six months would not be refunded—sorry).

The frustrating part of this story is that my cable provider seems genuinely interested in improving its tarnished reputation. The company is hiring good people, training them, and providing them with sophisticated tools. But then it puts those employees in humiliating situations, where they have to explain and justify pricing policies that are abusive, manipulative, and dishonest. As you might expect, the company’s strategy to improve customer loyalty is not working. It remains mired at the bottom of the most-respected company rankings.

Virgin Media will be explaining in London how it managed to eradicate historic industry practices designed to extract maximum value from customers whatever the cost in diminished goodwill (of both customers and employees). Virgin’s NPS program absorbed feedback from customers and front line employees, identified the policies that most frequently inspired manure metaphors, and buried them. Maybe that explains why Virgin has risen to the top of the growth charts.

Find out more by joining me in London.