Net Promoter Community

Oct 28, 2012

Dear Diary:

I’ve finally cracked it. I’ve been looking for a way to grow companies that doesn’t involve creating promoters. It must be some unique form of advertising model, because companies spend so much money on advertising that it must work better than customer experience, right? Otherwise, it would make sense to plough the money into something boring like better product, shipping, service (yawn). Nowhere near the fun of showing us a catchy Super Bowl ad!

It’s going to involve some kind of enticement to get customers to try products at a massive discount. Once through the door, they will convert to full paying, profitable lifetime contributors. It’s like advertising – doesn’t rely on flakey word of mouth – only different.

Fingers crossed for the Giants tonight!

Oct 29, 2012

Dear Diary:

Despondent! Turns out (as usual!) someone thought of it before me. In fact, worse than that, several people did and convinced investors to give them hundreds of millions of dollars! That could have been all mine! Can’t believe my bad luck. Some company in Chicago called Groupon and, worse still, they seem like they already went public.

Oh, insult just gets added to injury. The have competitors that are doing the same thing. And it’s a brilliant idea: entice customers to club together to purchase at low price, then present the vendor with a whole group of customers all of whom are price driven, discount driven bargain hunters! Just one thing concerns me. I wonder if customers who are attracted by these deals turn out to be promoters when the deep discounts stop? Or even customers? Seem to recall some study that showed that credit card customers switch to detractors at the end of introductory discount deals. That doesn’t sound good. Well, no worries, that would be down the road anyway, as long as the initial group pours in, business looks good for now!

What a brilliant plan.

What about those Giants! Wish I understood baseball. Seems like cricket, but with older looking uniforms.

October 31, 2012

Dear Diary:

Well, wouldn’t you know it? Stole a copy of Dad’s Wall Street Journal this morning and it had some article (of course they charge money. Crain's Businessthey want you to pay for ( about how, apparently these kinds of companies are challenged to keep their business growing. What caught my eye was some comment the journalist-chappie made:

“In addition, it is still unclear if daily-deal customers can be reliably converted into repeat customers paying full price… the daily deal is more about promotion than changing the nature and productivity of online retailing”

Hard work writing these quotes out in full, Diary. But you get the gist. Maybe companies who create regular price promoters will realize more value, who knows?

Happy Halloween.

November 1, 2012

Dear Diary:

Woe is me! It feels like Day of the Dead around here. I ate all our Halloween candy (bought at a discount, of course) and have nothing to show for it except an upset tummy. At the least the Giants parade lifted my spirits. No school today!

I couldn’t resist. Once you watch the video you have to buy the product. It must have been the dancing bear, a staple of any good advertising campaign. So now I get my razor blades from www.dollarshaveclub.com. And, in a small way, I just diminished the value of the Gillette brand.

Of course, it’s not just the advertising that makes this such a compelling offer. Those blades are cheap! And “F**king great” as Mike, spokesman and founder, is quick to point out. But really, this is just an exclamation point on a business relationship trend that is going to turn every business on its head. We are now entering the subscription economy.

Twenty years ago I was working hard to sell personal computers with Dell. Back then, we thought of two types of customer: relationship and consumer.

Relationship customers were typically large businesses, who demanded and financially justified a continuous dialog with their vendors. You didn’t sell them a product, you sold them a multi-year strategy for products with, of course, lot of machines as part of the deal. It was a relationship worth investing in; for your efforts you earned a stream of millions of dollars.

Consumers, however, were thought of as “transactional” customers. You sold them a product. You left them alone. You hoped they didn’t call technical support: if you never heard from them in 3 years that was just hunky dory, it was the kind of relationship you have with a black sheep cousin – you know you will have to deal with them in the future but you can live without the contact until the time is right.

I have no doubt that Gilette thinks of me as a transactional customer. They don’t know who I am after all, and one purchase only leads to another to the extent that I chose to make the same purchase decision next time. But in the subscription economy, I have a relationship with my razor blade provider.

OK, so I wouldn’t describe it as “intimate”. They ship me razor blades. But they know who I am, so they can communicate with me. They know my buying preference (The Executive – “it’s like a personal assistant for your face” - of course!) and most importantly, I’m now their customer to lose. Keep me happy and I will keep buying. They won me once and serve me forever.

We have seen the subscription economy pop up everywhere. Netflix (subscriptions) replaced Blockbuster (transactions). Pretty much all new software (including Satmetrix, I hasten to add) is sold as a subscription. Amazon has turned EVERYTHING you buy into a variable subscription with Prime. We get wine by subscription. We lease our car. Your entertainment (DirectTV) is a subscription and your phone service is an all-you-can-eat subscription. I have friends who would like to turn their teenage kids into a subscription. Customers like subscriptions: they’re simple, predictable and reduce the workload. You can get on with a life that doesn’t involve shopping for razor blades.

But the subscription economy changes our relationship with promoters and detractors. Now, the lifetime value of every customer is easy to quantify, and the costs and benefits of retention are amplified. In the subscription economy, churn is the new black, and NPS is the predictor of churn. Once you start thinking of your customers as a lifetime opportunity, you quickly see the economic distinction between promoters and detractors.

As Mike would say, “The party is on.”

I’m test driving a clever device called the “fitbit ultra”, an electronic pedometer that advertises “real time activity stats so you know how close you are to your goals”. The “ultra” designation refers to the fact that this version will actually exercise for you while you sit in the bar. At least that was my hope: when I hear that technology will help me lose weight, I cling to the notion that someone will solve the problem in a way that involves, well, less sacrifice on my part. Sadly, the fitbit merely measures my feeble efforts, it doesn’t even lie about them to me (another important design feature that I have thoughtfully submitted). Gaming the result is not supported.

One of the most intriguing features is an ability to measure my sleep efficiency. Up to now, I hadn’t thought of my sleep as being particularly inefficient, but in an era of hyper productivity, it makes sense that I should care, doesn’t it? So I eagerly awaited the results. After a trial of several weeks, I know with reasonable certainty that I have a sleep efficiency of 90% or higher. I will sleep well, knowing that. Or perhaps I won’t.

That’s the problem you see, measurement without context is not very useful. Measuring myself over time, I suppose that an improving trend would be a good thing. If my efficiency goes from 94% to 96% then it’s presumably better. Of course, if it turns out that an efficiency of less that 98% means the likelihood of narcoleptic-like shutdown on the freeway, than my scores should be a call for more drastic sleep improvement activities, such as watching CSPAN or reality TV shows.

What I really need to know is this: what is a good score? Is my 94% last night adequate to meet by goals? Is there some kind of linkage between sleep efficiency and overall health, so I know it’s a metric that matters? How volatile is it – should I expect major improvement or will it take me years to get that couple of % points?

Data without context, metrics without meaning. What gets measured may get managed, but measurement alone has value that is often less than zero. Sound familiar?

P.S. for a fascinating view on how mobile technology and data can change people’s behavior, with further implied learnings for NPS programs, read this wonderful piece in the Atlantic Monthly.

Perhaps it’s because this is my first opportunity to vote in a US presidential election, I’m fast becoming a political junkie. Hence my excitement to see data on presidential Net Promoter Scores pop up from our friends at BigInsight the other week. I suppose it should come as no surprise in an era of a jaded political public, it’s still eye popping to see such low NPS for the two leading candidates.

According to the data, we have Barack Obama at -80.7% NPS and Mitt Romney at -59.3%  NPS. If you are reading this blog and are unfamiliar with the methodology (hope springs eternal that people read this at all), the simplest way of thinking about these numbers is this: virtually (not quite literally) nobody would recommend either of these candidates. Marginally fewer people feel so negative about Mr Romney than they do about Mr Obama. To put in context, these scores are really bad. If they were businesses, we would invite them to speak at our conference just so we could figure out how they stay in business.

But for now, how about some idle speculation as to what this means?

First, we are not loyal to our political alternatives. If these politicians were a business, they would be losing customers so quickly that they would be out of business before you can say hope, change, or “I’m Mitt Romney and I endorse this message”. It means their customers (voters) are prone to switch choices if they get a better offer. Which leads to the next thought:

This is living proof of the importance of relative NPS over absolute NPS, or the “don’t outrun the bear, outrun the other guy” punchline. In the absence of customer choice, the least worst gets the business. -60 and -80 might be a race to the bottom, but a race it nevertheless is. As a side note, industries with such low scores typically yield low participation (unless they are monopolies), and here we have an effective duopoly created by significant barriers to entry. The NPS theory fits just fine.

We should not be surprised then, by low participation rates. Customers don’t want any product in this industry. However, and rather unique to this situation, participation might be driven more by a desire to avoid the other guy winning, so people are more likely to vote against candidates with these scores than for them. Unlike regular goods, there are, after all, significant “externalities” here. You can’t opt out of consumption of the product (government, taxes) even if you can opt out of the selection of the product (voting). You can try, but Wesley Snipes illustrated the challenge with doing that, and he even knows kung fu.

You might expect an industry with such poor existing vendors to attract new entrants. As I suggested, there are significant barriers to entry here, but enough negative NPS can force change. The Greeks, for example, have reacted to very low NPS levels of their politicians (we don’t have the data, but I don’t think I’m far out on a limb) by selecting an alternative form of government where you get to have multiple inconclusive elections, then dig up the old drachma printing presses. We wait with bated breath to see how well that turns out.

But for me, the implications of low NPS are the same for politicians as they are for businesses; the absence of promoters means you need to substitute adverting spend as a means to fill your leaky bucket of enthusiasm. In the last presidential election year, 2008, the two candidates (McCain and Obama) spent $587m on advertising, about half the spend of General Motors, one of the largest advertisers in the world. And GM had revenue to offset that spend; the political candidates have to raise funds like a charity would. GM has notably skipped facebook this year, but our candidates are embracing social media in full force, perhaps thankful that Mark Zuckerberg has not come up with a “dislike” button (creative design submissions welcome). What is the term for the inverse of “viral” anyway? I’m desperate to learn their sparkscores.

2012 will certainly be an interesting year, can’t wait to see the final NPS scores in November. Oh, and who wins the election might be interesting also.

" …'Ere, he says he’s not dead. Well, he will be soon, he’s very ill. … I’m getting better! No you’re not, you’ll be stone dead in a moment. …I think I’ll go for a walk You’re not fooling anyone, you know"

Monty Python and the Holy Grail 

Surveys are the worst possible solution to the data collection problem, until you consider the alternatives, the joke goes. The punchline is that there are no alternatives. It’s fast becoming time to reconsider. 

Fact is, surveys are on a steady, but inevitable, fall from grace. I will illustrate my case through example. Google "Nielson Box" and choose images. Take a look at the pictures, it’s like looking at stills from one of those fashionable TV series set in the 50’s (which presumably Nielsen measures) when a computer could conveniently fit into a small living room (if you had the air conditioning, which you didn’t). It’s not the future, but it was the only available tech at the time. Advertisers showed you commercials, you watched (yes son, we watched TV commercials back then!) and advertisers had to figure out if they got value for money (good luck with that). Then came click through ads and you didn’t have to guess as much. Next, coupons attached to your facebook page that will not only enable the promoter to track your exact purchase, and that of your friends, but also probably whoever you stood in the line next to at Starbucks this morning. OK, I made that bit about Starbucks up, it’s not shipping yet. 

My point is this: the means to understand the effectiveness of promotions is shifting from the universe of analog, imprecise, measured by guesswork technology, into a world of “big data”: precision, measurability, real time. It’s not a surprise, it’s telegraphed. 

Surveying is reaching a zenith. Gone are the antique days of the clipboard, today we have … the digital clipboard! Low cost equals ubiquity. Fancy a beer tonight? Let’s survey the gang. We are getting saturated. 

In the short term, there will be a flight to quality. No, you can’t survey me and ask me if I did travel on the flight after all, or did I buy your product, you need to figure that out in advance. I won’t spend 30 minutes filling in your crazy complex questionnaire, especially if I suspect you won’t do anything with it anyway. Come to think of it, you didn’t do anything with it last time I sent it in. Please don’t make it look visually cheap: it’s a form of your market communication after all, what does it say about your firm? Oh, the ad at the bottom of the page is a nice touch, very professional. BTW, your colleagues in another department just surveyed me the other day to ask about the best color palette for the new microsite design, so I’m tapped out for the year.  

The bar is getting raised, and the companies that can’t leap it will find that nobody shows up for the party, or worse, only the folk who want free beer.  But that’s all today. In the long run we can see that surveys will be less important. Because your customers have already told you what they think.  

On the phone with your contact center. In email to your sales team. And above all, in the social web, to their actual friends, Facebook friends, LinkedIn friends-I-want-a-job-from, etc. Worse for you, unlike many survey responses, someone might actually be watching these comments. 

Now, our technology relies on survey data to work. And we are not seeing any sudden let up in demand for surveys. But, just because your uncle Frankie told you that Blockbuster stock was a buy in 1990 didn’t mean he was wrong at the time, just that you should keep an eye on the future while getting what you need to get done today. We will need surveys for the foreseeable future, but we need to start building our expertise around a future of social media, massive unstructured and unprompted data streams and, above all, customers who talk to each other at a time and place of their choosing, not ours. 

See you at the Net Promoter Conference in London in June, for Net Promoter 2.0

“I’m bad to the bone”
George Thorogood

Investing your entire 401k in Enron stock.

Marketing Las Vegas as a “family friendly” destination.

Microsoft Bob.

Amongst the worst business ideas ever, customer experience zealots add “dependence on bad profits”. For the Net Promoterati, the label of “bad profits” is wielded like a medieval mob scene accusing an unpopular villager of witchcraft. It’s time to break out the pitchforks and torches.

I’m here to tell you it’s all wrong. Leave bad profits alone. What did they ever do to you? (Except reduce your NPS, of course.)

The latest assault on bad profits is from the UK government. Say what you want about murderers or perpetrators of mayhem, the British media hath no fury like a consumer wronged. It is thus that the BBC gleefully informed me that the government is working to stamp out the practice of charging fees that are “in excess”. Consumer groups welcomed the news. “Drip pricing” is going to be regulated. No, we are not charging for drips, it’s the unconscionable practice of revealing more and more incremental pricing as you go through the purchasing transaction. (for a humorous, but rude take on this, see the following Fascinating Aida video).

What’s next? Regulating the shipping and handling when you get “free” additional Shamwow products?   Overdraft fees. Interest rates that you might think come with a broken kneecap clause. Exorbitant roaming fees if you use your mobile phone while overseas. The government needs to step in and put an end to it now! Any government, please. 

My fists turn white with rage. Well, at least I’m mildly upset. I welcome bad profits. We need them to create opportunity and differential performance: your bad profits are someone else’s large, untapped customer base. 

Of course, I’m not in favor of deceptive practices. Forcing transparency is a legitimate role for regulators and nobody would condone dishonesty. But think for a second where “bad profit regulation” leads us.  

Take airline fees for bag check-in. Ban them. It might cost the airline $10 to fly your bags from San Francisco to New York. That might even turn out to be the flight you are on (no extra fee, yet). If they choose to charge you $50 it’s time to call in the Feds. Or MI6 perhaps. Surely airlines should only make profits from selling seats on the plane! Overpriced drinks and airplane internet services look pretty profitable also, why are they not free with the flight? Time to force airlines to adopt single-dimension pricing strategies. Then we can get after the banks, no way we should have to pay overdraft fees. Or at least, they should be something more reasonable – after all, providing an overdraft is not really a business good is it? Not like, say, buying virtual livestock on Farmville. Which should also be free, or at virtual cost, while we are at it. 

I hope the problem is obvious. What constitutes fees, bundled versus unbundled products and services, “unfair pricing” – what’s fair margin on a Gucci handbag? – all these aspects of good and bad profits need to be resolved by the market, not by regulation. Sure, force disclosure. Ensure costs are not hidden from the customer. But then let customers decide. 

Bad profits are a massive source of innovation and entrepreneurial activity. Netflix built a business due to Blockbuster’s overdependence on late fees. Southwest Airlines relies on “bags fly free” as a differential pricing strategy. Skype persuaded us that almost any profits on phone calls would prove to be bad. 

If you don’t like the particular flavor of profits you generate for a business, take your business somewhere else. It’s quite possible that others don’t share your priorities and feel that it’s a reasonable way to make money for shareholders and deliver value to customers. The market will decide and, if those profits really are “bad”, you can bet the next Scott Hastings will be building a company to capitalize on them.

"Reality is that which, when you stop believing in it, doesn't go away."- Philip K. Dick

Economists have micro economics and macro economics. Net Promoter leaders have micro NPS process and macro NPS process.

Micro processes, or operational processes are all about closing the loop, activating promoters – they are focused on the individual, customer or business. It’s customer experience improvement based on the “don’t just stand there, do something” school of management – and it works. To an extent.

You see, customers love companies that show commitment. Remember the old adage that a well executed service recovery actually improves the customer perception of your business? Well, it works to the extent that customers don’t get exhausted by a company constantly executing flawless recovery of errors that shouldn’t have happened in the first place. After a while, they just want to see the “Maytag repair man” strategy (the guy who has no real job to do because apparently the hardware never breaks) and not the “we try harder” approach. They want Yoda – “do, or do not… there is no try.”

Companies that focus entirely on tactical closed loop execution for detractor recovery risk making the same error in judgment that the lookout on the HMS Titanic made when he bragged “just wait until you see the turning circle on this baby at full speed”. Tactical execution just isn’t enough.

So companies need to figure out the macro process; how to identify the major shifts in their business that will be required in order to generate high levels of promoters. They need analytics, they need insight and they need data. They need root cause.

It’s a common misconception that NPS philosophy is deeply ambivalent around the issue of data analysis and diagnostics. While there are some  - very few in my experience – companies who never go beyond asking one or two questions of their customers, the vast majority of NPS practitioners develop techniques for mining diagnostic information in one way or another. These tools range from the traditional - a few insightful diagnostic questions embedded in a survey, to the absurd - dozens of complex questions that look more like a college entry exam, to the edgy - data mining of social media data to determine trends and meaning.

As a technology company we have our own preferred techniques of course, and we think you can get quite a lot for quite a little (burden on your customers). But the big point here is that you need to understand what you will do to change the existing dynamic of your business. And there is an art to this; attitudinal data doesn't lend itself to easy interpretation as, say, financial data sometimes does. It feels closer to "reading the tealeaves" rather than analyzing data and goes some way to explaining why there is a market research industry in the first place.

I must have witnessed over 100 strategy sessions around action planning. The only observation I can make with certainty is this: any strategic insight with a sporting chance of changing your enterprise is better than relying entirely on closed loop, or micro NPS techniques exclusively. You really need to know if there are "Detractors, Dead Ahead!"

“The second rule of Fight Club is: you DO NOT talk about Fight Club!” - Tyler Durden, Fight Club

The Second Law of Net Promoter is “You MUST talk about NPS!”

Well, maybe not, but not far off. Actually, it’s more like “you must act immediately on customer feedback”. This is a little unkind because everyone acts, to some degree, on customer feedback. And “immediately” is quite subjective, isn’t it? But it's the spirit of the second law that we should focus on.

If you asked people what they least liked about taking surveys, they might come up with:

• “Too long. I successfully cultivated a small stalactite cave while filling in the answers”
• “Stupid questions they should know the answer to already. Did I stay in a hotel that they are asking me to rate? If I didn’t it was an amazing lucky guess on their part”

But, in the context of this blog:

• “What’s the point?”

Sure, we say we are grateful for their feedback. But we don’t reciprocate. Worse, we have trained people to expect nothing, so why should they invest in us? In ancient times, before 140 character limits meant something to a writer (yes I’m that old) researchers would gather data by making lots of phone calls. Consumers would welcome these calls, as this coincided with a low point in domestic culinary expertise and the decline of quality TV journalism, so having your dinner or TV show interrupted by a stranger was a welcome break. How the hours would fly by, helping the hapless researcher (for it is they) understand exactly why we could use a firmer door latch on our Frigidaire Rollermatic. We would end the call confident that our opinions would be represented in the form of a detailed annual report that, in a pinnacle of decisive momentum, the CEO of the firm would pound the table demanding action or heads would roll!

This never happened.

In reality, we have systematized the lack of serious action around customer feedback. Not through deliberate neglect, although I’m sure there are cases where this happens, but partly through process, and partly through the genuine difficulty in making the kind of hard decisions customer feedback entails. The process problem stemmed from the original, research driven goal of voice of the customer data. Even in a good research process, the transmission mechanism from feedback to action is too slow and disconnected for your average customer to perceive. In an era where systems respond within minutes, or days, these processes often are simply too slow. Watching the Google+ beta in action show us just how incredibly responsive a company can be to making changes in their product in response to feedback – in close to real time. That’s the kind of bar that we have trained social media era customers to expect.

Data gathering and analysis – along with the insights that come out of it – is well designed to turn a big ship slowly in very deliberate and well reasoned moves. Customers want instant gratification.

The good news is this: customers are still so impressed with a company that indicates any responsiveness to their survey input that they will forgive much of the lack of content in the response. In other words, you can still get points for trying! Of course, this is not my prescription. If you don't have a plan to respond rapidly - hours or days, not months - with some kind of indication of learning, you are probably best not asking for feedback at all. But absent a good answer, at least provide evidence that you are listening. It's respectful at the very least.

This will change. As systems become more responsive, expectations will adjust. The other day, I sent an enquiry for a demo to salesforce.com. Now, we are already a customer, so this should have set off a whole series of interesting actions - and it did. Within an hour I had a voicemail and email from a sales rep making sure I had what I needed. If companies can be that responsive to a sales opportunity, we had all better be ready to be that responsive to feedback.

P.S. note from the year 2015 to myself in 2011: being hyper-vigilant and hyper-responsive to tweets but un-responsive to solicited feedback didn't sit well with customers in the long run.