So the Net Promoter 2.0 conference is coming up in February (2-3) in SF, and many of you will have probably already read the new, revised and expanded edition of Fred Reichheld's business bestseller The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World, written with Rob Markey.

It's certainly worth reading; in my view the Ultimate Question 2.0 it is the single most significant business book recently published - both inspiring and practical it's a blueprint for business growth through 'good profits' - profits derived from enriching the lives of your customers.

But for the time-poor among you - and for those who want a quick pre-conference refresher as prep for the conference, here’s a ‘speed summary’ of the key points chapter by chapter

Chapter Summaries: The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World

by Fred Reicheld with Rob Markey (Harvard Business Review Press 2011) 

Preface: The book shows a path to true business growth through sustainable ‘good profits’ derived from consistently delivering a customer experience worthy of loyalty.  Whilst there are many paths to growth, none are as sustainable as consistently delighting your customers and reaping the rewards of enhanced loyalty and advocacy.  This book shows how to use the Golden Rule - treating others as you’d want to be treated - to do this and thrive in a customer-driven world through profitable customer relationships. 

Introduction: From Score to System The Net Promoter System is a management approach to business through ‘good profits’ - ethical profits from enriching lives instead of ‘bad profits’ that exploit customers. It’s about building customer relationships worthy of loyalty by treating customers so well they become loyal promoters of your business. It’s about, in the words of Zappos’ Tony Hsieh, consistently WOWing customers so they come back for more and tell others. Put simply, it’s about happy customers talking. And for leaders, it’s a leadership tool for making happiness your business model, and joining a quiet revolution for building a legacy built on ‘good profits’. As an open-source adaptable and flexible system for generating good profits, many companies have adapted the NPS to their own needs and with their own labels (fast-food chain Chick-Fil-A calls it the Raving Fan Index), but successful implementations all share three key elements;

• Systematically categorising customers into promoters and detractors to produce a net score that monitors the quality of customer relationships, and communicating this throughout the organisation
• Creating 'closed-loop' learning and improvement processes to increase promoters and reduce detractors at an operational level.  If your NPS score drops, investigate the source of bad business - and put it right
• Treating the creation of more promoters and fewer detractors as mission critical at board level.  Developing relationships worth of loyalty is either a strategic priority or it isn’t.  If it isn’t NPS is not for you.

Part 1: The Fundamentals of the Net Promoter System

Chapter 1: Bad Profits, Good Profits and the Ultimate Question Customer-centricity is the path to growth because it drives customer loyalty, helping make a company mission-driven as well as profit-driven.  Companies know, believe in and can recite the catechism of customer-centricity:  “Why do we want loyal customers?  Because loyal customers come back more often, buy additional products and services, refer their friends, provide valuable feedback, cost less to serve and are less price sensitive”.  Bain & Co found that the Loyalty Effect could boost 25-100% profit boost by increasing retention rates by 5%. As a proxy for whether customers believe you are worthy of their loyalty, NPS score monitoring can help drive growth via loyalty. For example, market leaders such as Apple, Amazon and Costco create high NPS scores around 80, whilst average firms have a NPS score of 10-20%.  Overall, NPS leaders in the US (companies with the highest NPS scores in their category) grow at over twice the rate of the category average.  And whilst only 9% of US companies surveyed by Bain & Co have registered sustained profitable growth of 5%+ over the last decade, those 9% have an NPS score 2.3 times those of industry averages.

Chapter 2: The Measure of Success A key challenge of building a business around ‘good profits’ - derived from delivering expectation-building experiences worthy of loyalty, is that you need a simple way to measure customer happiness - and then link it to performance.  It’s got to be simple, practical and actionable.  This NPS ‘Ultimate Question’ - propensity to recommend - is useful because it is both intuitive and adds a critical emotional dimension to the monitoring of loyalty.  It also takes into account the referral value of customers.  It is a good proxy for business made by smiles created. It’s better than measuring behavioural loyalty because behaviour alone (such as retention rates) might hide a trapped 'smile-free' relationship; whilst willingness to recommend (advocacy lies at the top of the loyalty ladder) is indicative of emotional loyalty.  Asking about willingness to recommend is also an easier question to answer than asking about abstract concepts like loyalty.  But it’s not perfect; firms must establish a question that best links to customer loyalty, and can serve as a proxy for whether their business is built on good or bad profits (or losses). 

Chapter 3: How NPS Drives Profitable Growth The Net Promoter System is only useful if it drives action - specifically investing in customer relationships to build loyalty. Every company would want better relationships with customers if these relationships were free, but high-quality relationships are not free - they require investment, and reducing reliance on bad profits.  So a key step in refocusing a business on customer relationships is to make the business case for doing so; how much is it worth to turn a detractor into a passive or promoter, what would it be worth to raise our relative NPS by 10 points? To make the case for good profits, you need to know the value of loyalty, and that means estimating the lifetime value of your customer segments - promoters, passives and detractors.  Promoters are worth more because they have a higher retention rate, are less price sensitive, have a higher annual spend, are more cost efficient (they cost less to serve than complaining detractors) and refer more.  But how much more are they worth?  To know this, companies need to segment customers by customer type, measure on these dimensions and then compare the outcomes.  Bain, for example, found that a promoter has a lifetime value (LTV) worth $9500 more than a detractor to a US bank. 

Chapter 4: The Enterprise Story - Measuring What Matters Enterprise Rent-a-Car has grown to become the number 1 rental car agency in the US with a singular focus on using the Golden Rule (treat customers as you'd want to be treated) to generate good profits. It attributes much of its success, growing from $2bn in 1994 to $7bn in 2004, to a single question monitoring system to track customer delight (replacing a lengthy an ineffectual satisfaction survey suffering from question creep), that has allowed the company to drive customer loyalty. Through experimentation, identifying and learning from best practice, closed-loop on-the-spot fixes, ranking branches by the quality of experience delivered, and making quality experience a precondition for promotion, Enterprise has reduced neutral and negative experiences from 12% to 5% since 1994, whilst building growth from loyal promoters. 

Chapter 5: The Rules of Measurement Driving growth through loyalty requires an agile loyalty monitoring system - NPS score monitoring can help.  Experience shows that effective NPS score monitoring follows certain principles: Principle 1: Ask the Ultimate Question and Very Little Else, Principle 2: Choose a scale and stick to it, Principle 3: Avoid Confusion Between Internal Scores  ('Bottom-Up' or ‘Touchpoint’) and External Scores (Top-Down, Benchmark or ‘Relationship’ Scores), Principle 4: Aim for High Response Rates from the Right Customers, Principle 5: Report and Discuss NPS Data as Frequently as Financial Data, Principle 6: Learn Faster and Improve Accountability with More Granular Data, Principle 7: Audit to Ensure Accuracy and Freedom from Bias, Principle 8: Validate that Scores Link to Behaviours.

Part 2 Getting Results

Chapter 6: Winning Results with NPS The Net Promoter System is about driving change through a strategic prioritisation and operational focus on customer loyalty - creating more promoters and fewer detractors - by applying the Golden Rule (treating customers as you’d want to be treated) - throughout the organisation. Based on experience of NPS adopters, there are three keys to NPS success

1. Embracing the goal of customer loyalty as a mission-critical priority at CEO and board level, and understanding the economic, inspirational and moral imperative that a focus on driving loyalty offers
2. Hardwiring NPS monitoring feedback into key decision processes and integrating it into operational priorities throughout the organisation to create closed-loop learning and improvement.  In other words, not treating it as a metric, or parallel program is critical to success
3. Adopting NPS as solution for driving long-term customer-centric cultural change, rather than a short term program or initiative, and realising the change must touch every part of the organisation

Chapter 7: Economics and Inspiration: The Dual Imperatives The Net Promoter System is like an arch built from two pillars - one economic and the other inspirational. Both are needed for success for driving growth through good profit. The economic pillar is about understanding the business case for investing in customer loyalty, and requires calculating the return on investment on creating more promoters and fewer detractors. It requires having the CFO embrace NPS, and understand why investment in loyalty makes good business sense - and why good profits are more valuable than bad profits. The inspirational pillar of NPS is about helping organisations enrich peoples lives by providing a simple decision rule or ‘heuristic’ - the Golden Rule - for taking decisions across the business, as well as a simple feedback solution - the NPS score - for monitoring how they are living up to this mission. By putting the Golden Rule - ‘is this how I’d want to be treated?’ - top of mind of the business, the NPS makes customer-centricity personal, drives loyalty creation, as well as simplifying complex issues whilst making ethical business decisions communicable, measurable, and actionable. 

Chapter 8: Close the Loop with Customers Key to success in driving cultural change and customer-centricity through a focus on customer loyalty using the NPS a core part of daily workflow and core decision processes within the company. Most organisations want to become more customer-focused and the Net Promoter System is a simple solution for achieving this cultural change. Not only does the NPS provide a simple decision heuristic - the Golden Rule - that can be used be used to inform decisions across every level of the organisation, the NPS also hardwires the voice of the customer into the organisation by providing creating customer feedback loops at the front line, mid and senior management levels. Closing the loop at the front line involves monitoring customer experience with NPS and then following up with as many detractors as possible, ideally within 24 hours of the experience. Insights and learning from this ongoing exercise are then pooled, and shared with frontline staff and used to inform decisions. Closing the loop for mid-level managers requires using NPS feedback to create products, services and processes designed to attract and retain high value customers. Closing the loop for senior executives involves setting up a forum for senior teams to talk with customers, and setting NPS targets as a strategic object for business units. 

Chapter 9: Organise for the Long Journey The payoff of NPS - a customer-centric organisation generating good profits through a single-minded focus on customer loyalty - can be substantial. But the commitment required is substantial too. Based on the journey of successful NPS companies there are 7 key requisites of success: 1/ Assign the Right Leaders and Position Them for Success. 2/ Pull The Organisation Together 3/ Reorganise Around the Customer 4/ Hire & Fire the Right People 5/ Be Careful About Linking NPS to Compensation 6/ Don’t Skimp on Support from the IT Department 7 / Never Give Up

Chapter 10: The Road Ahead Building a Golden Rule business thriving on ‘good profits’ is a long road with opportunities and challenges. Two key opportunities include using NPS as to monitor employee experience and loyalty, as Apple, Rackspace, JetBlue and Bain, and developing new NPS monitoring tools using social media; Facebook and Zynga have adopted NPS internally, can their platforms be used to monitor NPS?  However there are some key challenges too; dealing with legacy systems not built with customer-centricity and the prioritisation of customer loyalty in mind, overcoming internal and external resistance from those with vested interests, and ensuring score reliability. In dealing with these opportunities and challenges it is important to keep front of mind the purpose of the Net Promoter System - as a solution for creating a customer-centric organisation that prioritises customer loyalty with decisions that enrich lives, rather than diminish them.

Should Leboutin's new cosmetically-enhanced Barbie be our Net Promoter mascot?  Read on to find out...

20 Questions to Brainstorm your Brand out of Recession

As marketers come under pressure to do more with less, here's a practical way that a Net Promoter perspective can help.  Use the marketing logic of Net Promoter (what other people say about you is more important than what you say about yourself) to set up a collaborative workshop of colleagues, partners and promoters - and run a "Purple Cow" brainstorm.

A Purple Cow brainstorm - inspired by Seth Godin's marketing bestseller 'Purple Cow' (on the art of being remarkable) - has a single focus; how to make your value proposition(s) truly remarkable.  The rationale is simple; most products and services are Brown Cows, that is, quite unremarkable - not worth talking about.  But in order to cut through today's recessionary caution and marketing clutter, brands - more than ever - need to be truly remarkable, in the same way a 'Purple Cow' would be, truly remarkable.  This is pure Net Promoter thinking, and backed up with Net Promoter evidence - in a pan-European multi-category study last year, we found that nearly 80% of all variation in Net Promoter Scores is explained by how remarkable your customers find your product or service experience. Which explains why 80% of the 30 newest entrants to Interbrand’s top 100 brand list owe their success to selling remarkable experiences rather that advertising clout.  Experiential brains, not advertising braun is what you need to succeed in marketing today.

So here's 20 brainstorming questions, distilled from the Purple Cow, to help put the magic of being remarkable back into your brand.  Try brainstorming with no marketing terms or jargon – it gets in the way of clear thinking about delivering remarkable experiences.  Of course, a Purple Cow brainstorm won't replace the need for a systematic solution - like Net Promoter - for making your brand remarkable, but it might help as a useful catalyst for leading your brand out of recession.

Purple Cow Brainstorm

1. To warm up, imagine your product or service is a person, and you have to write a job reference for them – what’s remarkable and worth recommending and what isn’t?
2. Now draw up a simple customer wish list.  Are there any gaps you could fill between what people want and what they’re getting today?
3. Make two lists, one of the top reasons to recommend products/services in your market and the other of top reasons not to recommend.  Can you spot any opportunities?
4. Think about the current leader in your market – if you could change just one thing about it in order to make it more remarkable, what would that be?
5. Think again about what the market leader is doing, then focus on doing the opposite.
6. Make a list of very good products in your market.  The opposite of remarkable is very good (because very good is bland), what would you do to turn these very good products into a truly remarkable products?
7. Take another look at the top ‘reasons to recommend’ in your market; these are what make products remarkable.  What could you do to own one of these reasons to recommend?
8. Who currently makes the most remarkable products/services in your industry?  What would they do if they were in your shoes to make your product more remarkable?
9. Focus on the two key groups who will drive your sales – your most profitable customers, and opinion leading customers.  What would you have to do to make what you sell remarkable to them?
10. List all the customer suggestions and customer complaints you’ve heard, what could you do to address them?
11. Forget demographics for a minute – list the big social networks and communities in your market (associations, clubs, employers, institutions).  Could you make a special edition of your product for one of these networks or communities?
12. Remarkable products are often controversial and outrageous – what would a really controversial or outrageous version of your product look like?
13. If you were going to make a parody or spoof of your product or service, what would it look like?  This will give you a clue to what could be remarkable about your product.
14. Imagine you could get a world class designer to redesign your product, who would it be - and what do you think they'd do?
15. Packaging and presentation can make a product/service, and remarkable packaging and presentation can make a product or service remarkable. What can you do to make your packaging/presentation more remarkable?
16. Imagine you are your most loyal customer advocate - what could you do to make them rave even more about your product.
17. Think of ways you could build a competitor to your own product with costs 30% lower?  If you could, why don’t you?
18. Imagine you are making a highly exclusive limited edition of your product for your 20 best customers – what would be remarkable about it?
19. Remember that convenience is king – what could you do to make buying, using or disposing remarkably easy?
20. Imagine you’ve woken up as a maverick, with no respect for the company way of doing things today – what the first thing you’d change about your product?

So Yahoo's social network expert Duncan Watts, author of Six Degrees, doesn't rate 'influencers'.  Armed with computer models, he's challenging the idea that innovation and marketing dollars work harder when they are invested with the trendsetting lead users in your category. Better to cast your net as wide as possible and cater to the mainstream majority ("mass seeding") rather than focus on fickle influencers and even more fickle network effects.

So what does this have to do with your Net Promoter strategy of achieving increased growth by putting the voice of the market at the heart of the business decision-making process? Well, it's all about deciding whose voice you should be listening to. Should you listen preferentially to lead users (influencers), because they act as gatekeepers to mainstream adoption, or should you listen to the mainstream majority because they make up the volume?

A case can be made for both -- but I'd add that it's the voice of the money we should really be listening to -- hardwiring the voice of your most profitable users (or the category's most profitable users in the case of new product development) into the business, rather than that of average or lead users. Why? Because it's profitable users, not lead users or average users that drive profits. If you want to segment further, then the Net Promoter Grid (below) will direct your listening to profitable promoters (because of the extra referral value they represent) and profitable detractors (because of the risk value of losing them).

An interesting example of putting this into practice is the leading UK cosmetic brand 'Simple', which has recently set up an online 'promoter panel' of high-spending brand fans to help them innovate.

Rather than try coolhunt influencers such as trendsetting fashionistas for the panel -- the company is following the money and putting the voice of profitable promoters at the heart of their business decision-making processes. Feedback (rewarded by an online e-shop selling Simple products at staff prices to panel members) has already led to the development and successful launch of a new product.

So if you get the opportunity to spend time with profitable users, lead users, or average users -- I say follow the money.

If you are one of the increasing number of companies adopting the NPS as a corporate objective, then your salary may already be linked to improvements in your company's Net Promoter Score (NPS). But here's a technique anyone can use to get a salary rise using the psychology behind the NPS.

To describe the technique -- known as the Hawthorne Effect -- it's best to go back in time... to the 1920's, and to the Hawthorne production plant of Western Electric, just outside Chicago. Researchers from MIT and Harvard were investigating the link between working conditions at the Hawthorne plant and employee productivity. To do this, they tested a number of new working conditions, inviting employees to give their opinion on whether they should be rolled out. The researchers found that whatever it was they asked employees to feedback on, employees recommended it.

For example, when employees were asked what they thought of brighter lighting in the factory, they recommended it, and when asked to trial it, their productivity increased. However, when employees were asked for their advice and feedback on subtler lighting conditions, they recommended that too, and productivity increased. Confused, the investigators re-ran the research, progressively dimming the lighting, but participants remained loyal to whatever it was they were asked about, and productivity kept increasing until the light was no brighter than moonlight! The peculiar effect was confirmed in a separate round of research, this time asking for employee advice on shorter and then longer working hours. Again, whatever it was that employees were asked their opinion about, they recommended it.

The researchers finally realized that what was happening had absolutely nothing to do with what they were asking people their opinion about, and everything to do with asking them for their opinion. They called this effect the Hawthorne Effect: the effect of asking people for their advice on creating loyalty and advocacy. What was happening was that the research participants felt flattered and privileged to be involved in research on a new initiative -- and this biased their view towards whatever it was they were testing.

For nearly a century, the Hawthorne Effect has been something of a bane in customer research; it systematically occurs and biases research findings towards whatever is being tested. In focus groups, the Hawthorne Effect can be extremely strong -- after 90 minutes of involvement in a new product concept, participants often leave the group passionate advocates of what they have been asked their advice on. So asking people for their advice increases recommend-ability; i.e., NPS.  But what's this got to do with getting yourself a salary rise?

To see the power of the Hawthorne Effect for yourself, try using it to get a salary rise. Rather than asking your boss for the salary rise you no doubt deserve directly, first ask them for their advice on something. It doesn't matter what it is you ask advice on (new shoes to buy, where to go on vacation, restaurant to visit...), the important thing is to be seen to be listening to them, and then thanking them for their valued advice. Then hit them with the request for a salary rise. The chances are that treating your boss as your personal advisor, you will have triggered the Hawthorne Effect and they'll be significantly more likely to agree to your salary rise request. By asking them for their opinion you will have not only created goodwill but also flattered their ego, and at a subconscious level, they will feel indebted to you. This psychological indebtedness makes them significantly more likely to agree to whatever it is you are asking of them!

Of course, the Hawthorne Effect is also a quick and powerful way to boost your company's NPS. Simply set up a customer advisory board and invite your most profitable customers to offer their advice on your strategy, product or marketing. Do it online, and you can make the Hawthorne Effect not only fast but also cost-effective and scalable, creating an army of 'promoters' because you are listening to what they have to say. In the B2C sector, Procter and Gamble are doing this on an unprecedented scale and have recruited more than 750,000 consumer advisors in the US to their two online consumer advisory panels. Regular emails ask consumer advisors for their advice on anything from new product concepts to whether a blonde or a brunette should appear in the next ad. The panels generate insight, loyalty and advocacy -- are reported to boost sales by up to 30%! For a quick solution to boosting your NPS, think Hawthorne Effect.

Google 'The Ultimate Question' and Fred Reichheld's new book currently comes in at #3.  The first two slots are excerpts from the unconventional travel guide, The Hitch-hikers Guide to the Galaxy, which explains the little-known truth that the Earth is in fact a giant organic super-computer tasked with finding the Ultimate Question (to which the answer is of course, 42).

Fortunately, we now have Fred, which means we now know that the Ultimate Question is 'Would you recommend us?'  But does this Ultimate Question (UQ) make understanding the Ultimate Answer of 42, or any other number that pops out of a Net Promoter survey for that matter, any easier?

That's the problem with raw numbers, and some say NPS results; they're of limited diagnostic value.  Sort of like your doctor telling you your cholesterol level - but not telling you what do about it.

As the marketing director of a big brand FMCG group kindly pointed out to me recently, he personally couldn't give a pair of fetid dingo's kidneys about knowing his net promoter score; what he wanted to know was what he could do to improve it -- and thereby unlock growth, in order, ultimately, to get a bigger bonus (some marketers do candour).

Now of course, doing well on the UQ all comes down to delivering brand experiences that exceed expectations (the key to triggering recommendations), which is why customer experience management and innovation are key.

Unfortunately for many marketers, optimising customer value (and thereby boosting recommendability) too often falls outside their remit -- marketing today is often synonymous with managing marketing campaigns -- promoting stuff rather than improving it.

So does this mean that the UQ and the NPS are about as useful to marketers as the aforementioned pair of kidneys?  No, I don't think so -- because promotion is part of the brand experience.

If your marketing campaigns deliver delight by exceeding expectations, and thereby get talked about, the overall recommendability of your product or service (NPS) should improve. And if this happens, your campaigns will drive revenue growth, and you'll get a bigger bonus.

So with a view to finding marketing-based Ultimate Answers to the Ultimate Question, here's a starter checklist for campaign tactics likely to boost your NPS.

1) R&R Pre-Testing: Send your agency back to the drawing board if campaigns don't score well on 'remarkability' and 'impact on recommendability'

2) Push Buzz Buttons: Use the psychology of buzz -- embed the 6 buzz buttons that increase recommendability into campaign material

- Authority -- as used by expert
- Likeability -- as used by celebrity
- Majority -- the most popular
- Scarcity -- limited edition/offer
- Reciprocity -- helping you to do what you do
- Consistency -- for people who (do what you do)

3) Viralize your Ads: Post your ads online when they pass the FUSE test (fun, unexpected, sexy or exciting), in a pass-along format, just before they go into traditional media

4) Viralize your Ads 2: Use the CDC (Centers for Disease Control) guidelines on media contagion -- infectious communications that trigger word of mouth/copycat effect

- Repeated exposure
- How-to information
- Sensationalist language
- Graphic imagery
- Attractive user-imagery
- Results focus
- Simplistic Explanations

5) Digitalize PR: Make sure you add new media influencers (bloggers, webzine editors, forum moderators) as key PR interlocutors -- and post materials to a campaign blog

6) Listen with DM: Add a simple questionnaire to direct marketing campaigns -- by showing you are a 'listening brand', you'll increase recommendability

7) Co-create: Get lead users and prospects involved in producing promotional material -- involvement creates loyal stakeholders only too ready to recommend

8) Up-weight sampling: Re-align your promotional mix in favour of the one tool that most directly drives recommendability -- product sampling

Can you think of any more?  Ideas welcome! Please post a comment below.

Blogmaster note: Dr. Marsden is author of Advocacy Drives Growth