Fred Reichheld's Blog

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.

Good Intentions, Erratic Execution, Wrong Feedback System

info@netpromoter.com — Mon, 20 Apr 2009 21:00:42 GMT

I grew so frustrated with my shopping experiences at Home Depot over the years that I vowed never to set foot inside any home improvement store with orange signage. In fact, I fully intended to make the company the subject of a blog-rant a year ago. However, I knew Home Depot was making a serious effort at improving customer service - someone even told me they had recently adopted Net Promoter - and I wasn’t sure one more loud complaint from me would be productive. Moreover, the primary reason for my unhappiness was my experience in the store nearest my home. At that store, there was never anyone available who could answer questions, and the self-checkout process was so deeply flawed that most customers failed to navigate it successfully without assistance. However, Home Depot has more than 1700 stores in the US alone, and my store outside of Boston may just be an outlier.

So last week I happened to be driving by a Home Depot on the way to our summer house on Cape Cod, and I decided to give it a try. As I walked in, I was greeted by a friendly rep who asked if she could help me find anything. Indeed she could. I was looking for a water cooler that would match our white kitchen - and I had no idea whether the store even carried such an item, let alone where it would be located. Good news: she took me to the back of the store and helped me find an apparently ideal model in white. The checkout process (unlike at my home store) was painless. The checkout clerk made sure I noticed an invitation on the receipt to submit feedback. She warned that the survey would take 15 minutes but added that taking it would enter my name in an award lottery. Ordinarily, I never bother with these cash register receipt surveys because I have yet to find a real Net Promoter success story among their users. The tiny response rates create an enormous sample bias, so there is no fair way to hold store managers accountable for their scores.

Then came the bad news. When I arrived at our Cape house, I discovered that the water cooler inside the box was not white at all. In fact, the company website informed me that the coolers don’t even come in white - the only white unit is in the picture on the box. So I thought to myself, what a great opportunity to give feedback. That rep, as friendly as she was, did not know the merchandise, and her bad advice was going to cost me an 80-minute round trip to return the item.

But the rep’s error seemed trivial compared to the mistakes made by the designers of the feedback system. The feedback process was much worse than my flawed shopping experience. Frustratingly, there was no way to provide clear and simple feedback about my problem. Page after page of questions scrolled onto my screen, 40 or 50 by my count. Most were completely irrelevant to what I wanted to communicate. Skipping any question, however, made the screen freeze temporarily, and then brought a strongly worded rebuke in a bold orange font. As I struggled through the labyrinth of questions, I realized that this survey had nothing in common with Net Promoter - in fact, it broke almost every rule in my book.

I can’t imagine who would actually finish these surveys. A customer must notice the invitation on the receipt, find the website, and log on with long password codes that link to the specific transaction. He or she must then navigate a 15-minute journey through questions unlikely to have much value to store managers. (They don’t need a customer survey to determine if the aisles are cluttered - they can just patrol the store.) In fact, if I were a store manager and my bonus was held hostage by this system’s scores, I would revolt.

What’s most frustrating to me is that it doesn’t need to be this way. There are several retail companies that are doing this right (Enterprise Rent-A-Car, Advance Auto Parts, and Apple Retail Stores, to name a few). It is distressing that the talented executive team at Home Depot can have such good intentions and yet get this so wrong. For the sake of the NPS brand, I hope they don’t refer to their approach as having anything in common with Net Promoter. Better yet, I hope they will re-read The Ultimate Question and follow its advice to make some fundamental changes in their feedback system.

Getting Results with NPS

info@netpromoter.com — Wed, 11 Mar 2009 22:35:27 GMT

One of my partners at Bain & Company asked me to summarize the most important lessons I learned at the San Francisco Net Promoter Conference. That was a tough request because there were so many impressive sessions, so many insightful case studies, and so many examples of barriers encountered and problems solved. Distilling everything down into a succinct summary of a few key lessons required some time to reflect.

Now that I have had time to ponder, I would say that the most important lesson is the remarkable level of progress that can be achieved with NPS. Walt Bettinger, CEO of Charles Schwab, showed us that his firm achieved a 50 point improvement in NPS between 2004 and the end of 2008. In that same period, Schwab’s retail business moved from a position of negligible growth—indeed, it was one of the weakest performers among large brokerage firms—all the way to top of the industry. In 2008, Bettinger added, Schwab’s net new assets exceeded the combined net new assets for all of its major competitors. Now that is impressive progress!

John Heyman, CEO of Radiant Systems, described how his company transformed its culture through its implementation of Net Promoter. Radiant Systems supplies retailers and hospitality firms with automated cash registers and related front-of-shop systems and is the leader in its industry. Heyman described how his team managed to improve NPS from negative 37% in 2005 to plus 38% in 2008, while growth accelerated to more than 25% per year. We heard similar stories from senior execs at Zappos, Logitech, and Intuit, among others.

What did all of these success stories have in common?

The CEO owned the NPS initiative personally and made sure it became a top priority for the entire leadership team.
A process for closed-loop learning was established for front line teams. Executives engaged directly in conversations with detractors and promoters to fully understand root causes and likely solutions.
Bad profits were identified and eliminated.
Reliable measurement processes were developed to establish accountability for front line teams and for executives.
Net Promoter implementation was viewed in terms of transformational change management, not simply a process for continuous improvement
NPS became more than a report card for the customer experience; it became the practical scorecard for how well the firm was living up to its core values.

Yes, the most important lesson I learned in San Francisco is that when leaders follow these rules, they can generate remarkably impressive results.

Don't Miss San Francisco!

info@netpromoter.com — Thu, 11 Dec 2008 19:15:36 GMT

I know travel budgets are tight, but if I were you I wouldn't miss the opportunity to join us in San Francisco the last week of January for the 2009 NPS Conference. After all, referral from loyal customers may be the only way many companies can grow in this difficult economy. So NPS is more timely than ever, and the San Francisco conference should be a great investment.

Walt Bettinger, CEO of Charles Schwab, will kick off the meeting with the story of Schwab's remarkable NPS-powered turnaround. You may have noticed Schwab's full-page advertisements in the Wall Street Journal, New York Times, and elsewhere showing how the company is outstripping the competition in terms of growth. Walt will take you behind the scenes and explain how his firm improved its Net Promoter Score by 50 points and so revitalized its growth.

Tony Hsieh, CEO of Zappos.com will be reviewing his successful strategy for growing this internet shoe retailer to more than $1 billion in sales by earning superior customer loyalty. One doesn't often hear the terms internet retailing and superior service in the same breath, but Zappos has shown that this formula does work, even in today's tough economic environment. Hsieh doesn't even measure average customer hold time for his phone reps because that might distract the reps from their primary mission: providing such outstanding customer service that customers become promoters for life. Instead of devoting large amounts to marketing and advertising, Zappos gets better revenue results by spending that money on delivering superior service.

David Henry, CMO of Logitech, will also be joining us in San Francisco to explain how he has integrated NPS into the engineering and product-focused culture of this computer peripherals superstar. Brand management at Logitech really boils down to figuring out how to ensure that the vast majority of customers for their various brands actively recommend to friends. You will learn how Logitech is dealing with the challenges of channel management, product development, and customer support--all with the help of the Net Promoter management framework.

And before I run out of space, I have to mention that Brad Smith, CEO of Intuit will be describing his firm's progress with NPS. Since Intuit was one of the first firms in the world to adopt NPS, Brad's presentation will be particularly enlightening to those who are only one or two years into their Net Promoter journey. Incidentally, if you're wondering whether NPS can be helpful to your career, Brad ran the division at Intuit that most effectively embraced the Net Promoter tools and framework--and his rise through the ranks has been meteoric.

Now I have run out of space, so I can't fully comment on the more than a dozen other speakers from firms like eBay, Swiss Reinsurance, GE Healthcare, MARS, PWC, Bain... the list goes on. This group represents the strongest lineup of any NPS conference since our first conference two years ago. And with the exponential expansion in the experience from the Net Promoter community to be shared at breakout sessions, over meals, and in the halls, you just can't afford to miss out. If you believe customer loyalty is the most efficient way to grow, particularly now, don't make the mistake of missing this event. Hope to see you there!

NPS at Schwab II: Lessons for Recessions

info@netpromoter.com — Thu, 13 Nov 2008 19:12:17 GMT

Whenever someone asks me how fast improvements can be made in NPS performance, I point to the remarkable example of Charles Schwab, described in my previous blog. But Schwab's extraordinary improvement wasn't the end of the story--this is an ongoing saga. Today the company is confronting a challenge that others may be facing as well.

CEO Walt Bettinger told us at the Forrester Financial Services Conference that Schwab's Net Promoter Score is the first thing he looks at when he comes to the office in the morning. The reason, he said, is that it provides such a clear picture of the health of the company's business. But as the stock market began its recent precipitous drop, he noticed that Net Promoter scores were declining. It wasn't because of anything under Schwab employees' control--customers were understandably less happy with their broker when their asset values were shrinking. The same thing was going on at competitive firms. NPS was dropping throughout the industry, along with the market.

Bettinger and his team realized that the real objective for NPS is not an absolute score but a better score than the competition. And Schwab conducted periodic market surveys to determine the company's relative NPS performance. But employees found their declining NPS demotivating, and managers had to work hard to put it in perspective. NPS for most firms declines in a recession, they pointed out. The important goal was to improve relative to competitors.

Even with this perspective, however, employees' ability to evaluate NPS-oriented improvement initiatives was more difficult. The periodic industry surveys were not frequent enough for rapid learning, and were certainly not ideal for holding branch teams accountable. One obvious solution was to focus branches on their rankings relative to peer branches within the Schwab network. Absolute NPS might decline because of the recession, but a manager could still strive to be a top-quartile branch.

The non-branch portions of the organization also needed a timely metric, and Schwab discovered an excellent solution. Managers noticed that the average NPS of Schwab and key competitors correlated closely with movements in the S&P market index. So they now track their NPS progress relative to the market on a regular basis.

In recessions and times of market volatility, most companies will need to develop a proxy for competitor scores if possible. A stock market index may work in your industry. If not, search for a readily available economic statistic that seems to correlate with the average NPS for your industry over time. Then you can keep your employee teams focused not on the (sometimes) unavoidable declines in NPS but on the productive mission of improving NPS relative to the industry. By all means, continue to do periodic research to track relative scores versus competitors. But to maintain constant attention, rapid learning, and motivation, report NPS relative to the proxy that best captures industry NPS trends. This will let you focus on creating more promoters and fewer detractors, even through the difficult challenges of a recession.

NPS at Schwab I: Lessons for a Turnaround

info@netpromoter.com — Tue, 21 Oct 2008 23:12:41 GMT

I spoke at the Forrester Financial Services Conference in New York City this past summer. It was a particular pleasure for me because I also got a chance to hear Walt Bettinger, Charles Schwab's new CEO, describe how his firm utilized Net Promoter in its remarkable turnaround.

I had already heard pieces of the story from a variety of sources. Schwab began describing its client loyalty strategy and reporting its Net Promoter results to stock market analysts several years ago, and the press had picked up on what the company was doing. But this was the first time I had heard the entire story told in a public setting. Walt reviewed the dark days of 2004-2005, when he was president of Schwab's retail business. Schwab was losing share. Its economics were collapsing. Pundits were predicting that the firm would not survive as an independent. Chairman and founder Chuck Schwab felt compelled to replace his CEO and personally lead the turnaround effort. The company's Net Promoter Score at this time was negative 35%!

In its 2006 annual report, Schwab described how loyalty formed a cornerstone of its philosophy: "We want individual investors to feel so good about their investing outcomes--and their entire experience with Schwab--that they recommend us to their friends and family." Walking the talk, Schwab's leaders developed a reliable monthly NPS for each branch and began holding branch mangers accountable for their ranking. Bettinger himself personally interviewed scores of detractors and defectors to understand the root causes of their unhappiness. He insisted that bad profits (in the form of infuriating account fees) be eliminated over the next 24 months. Schwab became a founding member of our NPS Loyalty Forum and augmented these quarterly best-practice sessions with a series of internal conferences on NPS called Schwab-fests. The company integrated NPS into employee training. It created an employee engagement/loyalty process with NPS. The list goes on and on.

The results are impressive. By the summer of 2007, Schwab's NPS had improved by more than 50 points to +23%. Its stock price surged, and it became a growth company once again (revenue had dropped at a compound annual rate of 5% between 2000 and 2004). If anyone has heard of another turnaround of such impressive dimensions, I hope they will leave a response after this blog entry.

WOW?

info@netpromoter.com — Tue, 23 Sep 2008 23:34:54 GMT

Some people claim that the key to earning loyalty is to WOW your customers. I don't know about you but to me that language seems a little bit over the top. "WOW" sounds like a mantra from some pop-culture guru, not a serious business proposition. And yet any company implementing NPS must find a way to convert customers into promoters. This usually requires doing something noteworthy--something so surprising that customers take notice and talk about it to others.

Why so? Isn't it enough to remove defects and consistently satisfy customers? Given the way the human brain is engineered, unfortunately, there is a good chance that customers will come to expect that flawless execution--and hardly notice it. With so much data pouring in from our five senses, the only way our brains can cope is to rely on pattern recognition. Instead of registering every bit of data, the brain simplifies its processing requirements by recognizing patterns. Then it can attend to other issues, paying little attention to individual bits of data or events--unless they are inconsistent with the pattern.

So if the customer's experience fits a perfectly predictable pattern--perfect, that is, from the perspective of a zero-defects engineer--it is probably boringly predictable to the customer and will therefore be ignored. That raises the bar. To create promoters, companies must not only minimize errors, they must also innovate. They must break out of the pattern that their customers' brains have come to expect.

The New York Times recently ran an article about some research on successful relationships. A leading social scientist who had been observing marriages concluded that for continued harmony, a spouse needs to positively surprise his or her partner an average of five times for every disappointment. I'm not sure if this 5:1 ratio is the same for successful long-term business relationships, but it makes sense that we need to provide positive surprises for customers far more often than we disappoint them. And given that we are all human, we will certainly deliver negative surprises upon occasion no matter how much we work toward zero defects.

So finding innovative (and economical) ways to delight customers is a vital process for earning loyalty and creating promoters. But is it wise to refer to this core process as WOW? Doesn't this serious idea deserve more serious language? A quick poll at our last meeting of the NPS Loyalty Forum (a group of NPS practitioners that meets quarterly to share best practices and solve implementation challenges) identified a range of different labels they use for WOW customer experiences: positive outlier, differentiated, premium value, extraordinary, delightful, remarkable, noteworthy.....the list goes on.

I wonder which of these names does the best job of capturing the essential idea. Maybe the name is inconsequential. But naming things implies a taxonomical hierarchy of relationships. This framework then underpins the creation of knowledge. For example, scientific progress in biology didn't take off until Linnaeus created a process to assign a single name for each species. Would the six sigma process quality efforts have achieved such powerful reductions in error rates if the program had instead been labeled OOPS? WOW just might lack the gravitas required to achieve serious management attention. We can't afford to let this vital process get pigeonholed as vacuous marketing-speak. I would welcome comments from any netpromoter.com community members who have suggestions regarding the best language for labeling this process for generating the positive surprises required to create promoters.

Making the Golden Rule Relevant

info@netpromoter.com — Wed, 13 Aug 2008 17:40:09 GMT

What could be less controversial than the Golden Rule? "Treat others the way you would want to be treated if you were in their shoes." This intuitively attractive notion is a cornerstone of most of the world's major religions. It is an idea that we all encounter in childhood, and most of us adopt it as part of our moral compass.

Believe it or not, however, many sophisticated philosophers and ethicists reject the Golden Rule as hopelessly self-referential, simplistic, and superficial--the apotheosis of uncritical thinking. That is why so few college courses focus on the Golden Rule or examine its application in solving the challenges of our adult world.

And maybe the critics have a point. How do you know how others would want to be treated? Sure, you can make your best guess--but can you ever really put yourself completely in someone else's shoes? Critics point out that what might be right for us will not necessarily be right for others. (They note that a sadist is simply a masochist following the Golden Rule.) I may love chocolate, but are gifts of chocolate the right choice for all of my friends--even those trying to lose weight?

So maybe what we really need is the Platinum Rule: treat others the way they want to be treated. But that isn't wholly satisfactory either. What about the abusive customer who makes unreasonable demands? Should employees accede to those demands because that is how the customer wants to be treated? What about the elderly pensioner who thinks she wants a high-yielding investment product? Should the slick investment advisor invoke Platinum--give the customer what she wants--to justify selling the pensioner a high-risk, front-end-load investment product that the advisor knows full well is inappropriate for someone her age?

It seems to me that Platinum works no better than Gold when it comes to hard-and-fast rules. The goal should not be to slavishly optimize either side of a relationship. The right approach requires putting yourself in the other person's shoes without forgetting what you know from standing in your own shoes. The investment advisor, for example, should apply his full range of financial expertise to figure out the best way to delight the customer in a way that also makes the advisor himself happy.

We know when we are happy; the trick is learning how well we are doing in making the other person happy. With no grade, there is no way to hold our feet to the fire, no way to make the Golden Rule relevant. No way, that is, unless your company implements Net Promoter. NPS takes the guesswork out the Golden Rule. With NPS, you can track how many customers are promoters, passives (slight failures), and detractors (serious failures). By probing these results, studying best practices, and setting tough goals, we can learn, improve, and make the Golden Rule relevant to our daily priorities and decisions.

The Great Debate: Should NPS Drive Compensation?

info@netpromoter.com — Tue, 17 Jun 2008 20:16:59 GMT

There is a debate raging across the Net Promoter community about whether to link Net Promoter Score (NPS) to management and front-line compensation. There are good arguments pro and con. The pro group (which includes some notable firms such as GE) argues that if customer loyalty is to be taken seriously, then the NPS metric must be measured rigorously and hardwired into bonus calculations. After all, most bonuses today are determined by short-term financial results. If these financial incentives aren't balanced by NPS, we will be forever trapped in a cycle of bad profits and declining growth. Moreover, any CEO who extols customer loyalty as a top priority, yet fails to hold employees financially accountable for earning superior loyalty, is sending a loud signal that loyalty is nice but not vital.

That's a powerful argument, but the con side's rebuttal is equally forceful. In many businesses, they say, the instant a hard link is established between NPS and bonuses, managers and employees will inevitably learn to game and manipulate the numbers, thereby corrupting the system. The reliability of the metric will decline, and so too will the lessons and insights that can be derived from the stream of NPS data. Look at what the car dealers have done to satisfaction scores. What is to stop the sales rep in any business-to-business venture from pleading for a higher Net Promoter Score from his customers, bribing them with favors, or even threatening them with retribution?

Some people in the con camp add that companies with a long history of embracing loyalty as a core value have no need to link it to compensation. They argue that many of a company's core values (being honest, supporting the team, putting customers first, and so on) aren't linked to compensation in this direct manner. Why should loyalty be any different?

Some firms would like to establish a link between NPS and compensation as soon as their processes for gathering reliable feedback have evolved to include an appropriate set of safeguards against gaming and manipulation. In the meantime, they try to derive as many benefits from NPS as they can while avoiding the hard link. Yet there remains that nagging question: Will we ever develop a robust and reliable system until we put it under the pressure of real accountability for results--complete with direct links to pay and promotion?

This is indeed a new science, and the entire community would benefit from hearing about your thinking on this topic, along with the experiments and experiences (both successes and failures) that have led you to your conclusions. I hope you will share your opinions by replying to this blog entry.