Net Promoter Community: Richard's and Laura's Blog : 2010 : May

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Richard's and Laura's Blog

May 2010

Word of mouth is the same, or better, in China. Except it's in Chinese

Posted by RichardOwen May 6, 2010

In a recent HBR blog, McKinsey consultants Magni and Atsmon point out that in China, to paraphrase the famous maxim on politics, all word of mouth is local. They further suggest that word of mouth is a more powerful force for Chinese consumers than for their equivalent in the US or UK.

As Net Promoter Score is essentially a word of mouth measure, this intrigued us. Would NPS be more powerful in China than the west?

We know that there are cross cultural differences in NPS – we (Satmetrix) publish benchmarking if that’s important to you – but this question goes further, suggesting a higher correlation between NPS and growth in the middle kingdom.

I’d suggest the jury is still out on this one. As nations modernize, consumers tend to build higher levels of trust in brands which has the effect of reducing their reliance on word of mouth. If I show up in a new city, I don’t ask locals if the Starbucks is any good in Dallas, I just assume that the brand carries their promise. It is only when brand proliferation and choice saturates the marketplace that people refocus their efforts on recommendation.

Or at least that’s the theory. Maybe a society being thrust rapidly into 21st century consumerism with it’s local, social infrastructure still intact will never unlearn the practice of reliance of word of mouth over word of advertising.

2506 Views 2 Comments Permalink Tags: wom, china, nps

The New Normal: Another reason to be at the top of the NPS curve

Posted by RichardOwen May 5, 2010

Dave Rich makes the point in a Forbes article that loyalty to firms is declining, based on the commentary around Accenture’s 2009 Global Customer Satisfaction Survey. Without knowing all the details around the survey – who was asked, what products or services they purchased, etc.– it’s hard to support or deny these claims. But on the surface, it raises some interesting points.

Rich points to the fact that 69% of respondents have switched on one service or another over the last year. Let’s take that at face value and assume that this really is a change (I don’t know if it was up on prior years) or at least is relatively significant. What are the underlying factors that might have contributed to such a move?

The biggest two drivers of customers changing products, brands or services are informational barriers and switching costs. If customers don’t know about superior alternatives, they can’t choose them; if the switching costs are higher than the benefits, they won’t switch even if they might like to.

We have seen a massive change in the nature of informational barriers over the last decade as the Internet removed the last available fig leaf for businesses to avoid comparison, and social networking provoked peer-to-peer product comparisons. Even if – as I suspect – social networking is currently overstated in its impact on word of mouth (loud, but not accurate), the trend is pretty clear.

As informational barriers fall, competition increases and brand loyalty is threatened. After all, anyone making a profit is (theoretically) a signal to attack their markets. What about switching costs? Again, competition forces the reduction of these costs over time – it’s hard to lock customers in if your competitors are advertising lower switching costs and your customers are well informed of their choices.

Accenture’s observations should not come as a great surprise. The bad news is, it won’t be as easy to hold on to your customers. The good news is that it’s easier to grab your competitors if you are an NPS leader.