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Net Promoter Community > Richard's and Laura's Blog > 2008 > August
 

Ok, there are too many tongue-in-cheek opportunities for pointing out the coincidence between John Denver's famous homage to the mountains and the Democratic National Convention starting today. What we can say with some confidence is that it doesn't refer to their chosen candidate's Net Promoter Score.

 

Not that this may matter in the election, Senator Obama's competitor, Senator McCain, appears to be in worse shape. BIGresearch has done the, well, big research on the topic and if you check out their news section you can get the scores. If you just want the headlines, Obama stands at 44.4% and McCain at 45.9%.

 

 

Negative, that is.

 

 

Yes folks (I'm told this is how you address people in a campaign), voters do not seem to be in a mood to recommend candidates to one another. Which, if you think about it, is pretty grim financial reading for politicians. Word of mouth is a vital part of running for office - think of the cost and emphasis around grass roots efforts and the party faithful. The "center for responsive politics" estimates that a candidate will have to spend around $500m to become president this year. Our guess is that the economics for candidates does not differ that much from that of a business - positive NPS or large ad budget, your weapon of choice. And we know it's all about relative scores, not absolute, but if so many folk are detractors you would expect "new entrants", right?

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I was slow to pick up MetroPCS's NPS focus on their quarterly investor conference call, but it was a pretty good story for them.

 

 

The wireless industry is now aggressively duking it out for customer retention and growth, and NPS appears to be the battleground of choice. Our benchmarks continue to show a tight pack at the top, with the sole exception being SPRINT who lags the leadership group - and have financial performance to prove it.

 

 

METRO doesn't quote their NPS on their call (they make reference to it being "high") but makes a big part of their story the connection between low churn rate, customer satisfaction and customer referrals etc. 30% year on year subscriber growth is a nice story.

 

 

What I like about this story is their non-use of contracts. As a disclaimer, I don't use their service so I don't know if it's as good as advertised. But with a business model of low switching costs (no contracts) they neatly avoid the classic bad profits pitfalls of companies who enjoy the "loyalty benefits" of locking their customers in. Furthermore, with churn rates of below 5%, those contracts don't look as valuable as just plain old good service. Perhaps the lack of locked in customers actually forces them to think hard about how to retain them?

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In case you missed these, a few colorful and contrasting posts from around the web.

 

 

I really liked this post from Local Motors. Not sure his definition is quite correct (although I like the way he thinks about it) and the website is pretty cool if you are into cars.

 

 

Home Depot is apparently measuring Net Promoter Score and reports it in their earnings call. Only on a financial call would someone talk about a 480 basis points improvement in NPS. Vocabulary notwithstanding, they are thinking about it the right way: benchmarked against other retails and a measure of how business investments are starting to impact their customers favorably.

 

 

I've seen conflicting data in the press around the NPS for Microsoft Vista. You can decide for yourself if you think Vista has a majority of promoters, but I will say this for Microsoft: NPS is getting into the fabric of product design. I especially like this reference from the Access development team on their blog tying their product innovations directly back to NPS scores. Nice work.

 

 

Finally, in the category of Net Promoter detractors, I could not resist this link, where the author suggests a better approach than NPS might be the new gymnastics scoring system we have been watching in Beijing. Really? Perhaps they should have read "A ten isn't necessarily perfect in new scoring system for Gymnastics," in the New York Times. That article goes on to quote Mary Lou Retton as saying, about the new Olympic system, "It's hard to understand," she said. "I don't even understand it." Indeed, about the old system she said: "It's simple. People get it, and you don't have to explain it."

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"Answering the ultimate question" - our upcoming Net Promoter book - is now posted on Amazon.com. It's going to be some time before it ships, but hey, it's already discounted. So much for list prices, but this blog is not about a shameless plug for the book. OK, it's not only about a shameless plug for the book.

 

 

The discussion around marketing the book highlighted the dramatic impact Amazon has had on the publishing industry. A full 80% of the sales of that book will likely be through the one website. That's an amazing concentration of business for any industry, but the short period over which this has occurred makes it even more impressive.

 

 

Amazon is an NPS leader. Our database of industry NPS performance puts them right up at the top of any list of e-commerce players. Furthermore, they have embarked over a sustained period in putting customer experience at the top of the agenda.

 

 

We are always interested in companies who defy "temporal economics" and make long term customer investments at the expense of short term profits. It wasn't that long ago that Amazon was being panned by the financial community for lack of profitability, but this didn't stop them continuing their focus on an outstanding customer experience. Fast forward several years and many industry commentators see Amazon as the potential big winner in electronic commerce, witness the recent article in the economist.

 

 

Now Ebay is starting to drive Net Promoter the battle may well and truly be joined. Electronic commerce may be the industry where NPS differentials translate into financial advantage fastest.

 

 

Oh, and did I mention our book?

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Last week I flew on Kingfisher from Bangalore to Trivandrum. Not, I might add, a regular commute for me.

 

As the airline industry is in such a mess here in the US, it was interesting to experience an airline in India. Especially interesting to experience an airline that spun off from a beer company.

 

 

Emerging economy airlines have not always been a great experience, as anyone who has flown within China or Russia can attest. What was interesting for me was two things. First, the quality and attitude of personnel on the plane was consistently impressive. Second, the CEO's commitment to a quality experience (communicated in both print and video) felt sincere. Now, who knows for sure, but so many times, the pronouncements of "customer first" from airline execs just don't feel like they have any emotional commitment. Or perhaps we are just too jaded.

 

 

However, speaking as a jaded passenger, I got the distinct impression that this guy meant it. Certainly the front line staff seemed to buy into the idea.

 

 

Other than an interesting anecdote, what's the point of this? I believe that superior customer execution will reshape the airline industry but not in favor of the existing domestic carriers. International airlines will gradually eat up the profitable business flying passengers globally, leaving the US carriers to fight for a commoditized and increasingly miserable domestic market.

 

 

It's already happening. The most profitable airlines in the world have not been US based, but are overseas operators such as Singapore Air. Funny coincidence, they are also the airlines with the best reputation for service and the highest NPS. Kingfisher, and others, will soon by flying into the US and taking passengers away from incumbents on international long haul.

 

 

But is it a level playing field? Don't the overseas competitors have advantages that enable them to execute better? Clearly they have the same aircraft - Boeing or Airbus product, and they buy the same Jet fuel. The only differences they might enjoy would come from staff, or competitive pressure in their choice of routes.

 

 

Clearly, they have the edge in staff. In global competition, a positive attitude at lower pay scales in India will beat poor attitude with high cost in the US. This does not auger well for employees of the US carriers. But the US carriers would no doubt argue that difference in local competitive conditions favor these overseas firms.

 

 

I disagree. The US domestic market is riddled with non-competitive elements that favor the large US carriers.From the scandalously obvious such as the Wright Amendment to the lack of genuine open skies deals and restrictions on foreign ownership, the game is rigged in favor of incumbents. The biggest anti-competitive factor is the lock on gates. A recent approach in New York could be the biggest game changer in that regard, as they consider auctioning off their gates at major airports. The ferocious opposition of the major airlines should be a good indicator that they are on the right track.

 

 

All this speaks to why the airline industry does not behave like an industry with it's cost structure and model should; common cost basis meaning differentiation around customer experience. NPS is not always a leading indicator of growth in non-competitive industries and we should think of the US as only partially competitive. Globally, things may ultimately provide different - competition, better customer experience, best NPS wins.

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Maeve Naughton blogs about the Net Promoter Certification in a recent post. I've had the pleasure of joining several of the certification classes to date, but Maeve sums up it up better than I could.

 

What is the point of training like this? After all, it's not a particularly great business. It's hard to scale, to say the least - pulling together senior folk to spend time teaching is not necessarily the most productive use of their time.

 

 

However, if Net Promoter has a weak spot, it's the lack of well developed frameworks and techniques to make it work in practice. Actually, scratch that. It's the belief that you don't need these tools to make it work. Corporations big and small continue to trivialize their implementation of Net Promoter programs and are surprised when corporate transformation isn't as simple as applying a trivial mathematical calculation to a single question in a survey. We know from the studies we do that this doesn't get results but it's a proving a tough idea to break from.

 

 

So, even bringing a few hundred companies up to a level of knowledge that gives them a good chance of success is a terrific investment in the future of Net Promoter.

 

 

Oh, and while we are at it, the real secret to success has been that it's not the instructors just doing the training. The classes teach the instructors, and each other. The answer is out there somewhere....

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