Richard's and Laura's Blog

A Defense of Bad Profits

info@netpromoter.com — Mon, 09 Jan 2012 23:08:08 GMT

“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.

Is social influence the new black?

info@netpromoter.com — Tue, 15 Nov 2011 20:31:03 GMT

I recently saw a presentation from ad:tech San Francisco in which the following phrase was used: "Recommendation is the new advertising."

The substantiation for this claim was that 90% of online consumers trust recommendations from people they know more than any other source. This of course starts one to wonder whether advertisers have entered the world of recommendation, in which they can try to influence that recommendation to achieve business benefit. In considering this trend, I've also noticed that the window from Buy to Advocate in most of the advertising models shows this cycle as very short – meaning once someone makes the decision to buy, they immediately become an advocate. This may make for an interesting model, but we all know what happens in between buy and advocate: the customer experiences a company’s brand, product, services, support, etc. And along the way, perceptions are created that either serve to counter that initial buy decision or enhance it.

True recommendation comes from a positive feeling created through a multitude of experiences – it is a natural extension of these experiences, not a manipulation. Understanding these experiences – both online and offline – is still vital to any long-term customer strategy. As we know from word-of-mouth analysis, the value of a Promoter is both their lifetime purchase behavior in combination with their positive referral behavior. The combination of the two yields a total customer's worth. And we also know that the value of that referral behavior has exponentially changed through social engagement. Promoters are referring at greater rates across industries. Undeniably, social influence is growing.

Social media is opening new, unexplored avenues for influence, and permitting promoters to reach a broader audience than ever before. The social web is a critical channel for understanding the experiences that delight promoters (and mobilize them), gaining strategic insight about core issues being voiced by the market, understanding the influence of both active promoters as well as detractors, and prioritizing action accordingly. So as you look at your social media strategy, recognize that the total customer experience is a cumulative activity which manifests itself in positive and negative sentiment about your brand, product quality, and value. This sentiment not so surprisingly can translate to a form of social web "promoters" and social web "detractors" which forms the basis for something we call Social NPS. How Social NPS aligns or calibrates to your structured NPS will be the topic of upcoming thought leadership and technology innovation for us. I look forward to your thoughts, comments, and questions.

The Fifth Law of Net Promoter

info@netpromoter.com — Thu, 13 Oct 2011 16:38:15 GMT

"Hold everybody accountable? Ridiculous!"

W. Edwards Deming

Seems like five laws is one too many? Suffering from “Law Fatigue”? Worried that you have already broken so many laws that you are in danger of being busted by the NPS Police?

If you have endured this far, you are probably looking for a catchy, motivational final law. One Law to "rule them all?"

So the notion of "accountability" doesn't exactly jump off the page as that Law. But put a hold on that judgment, friend. You see, organizational accountability is where the change "rubber" hits the corporate "road".

Organizations, particularly large organizations, have a problem getting stuff done. Put yourself in the CEO shoes for a second - assuming you are not already wearing them. You have a strategic imperative to create promoters. Maybe it's even going to require a massive change in culture, process, operations. If you are one of the majority of companies that isn't a loyalty leader and for whom your company culture wasn't born around the customer experience, this is tough stuff. For the leadership team, the weapons of choice for change across the organization are compensation (reward) and accountability.

Now we have talked in the past about what a blunt weapon compensation can be. A significant number of Net Promoter programs run aground based on compensation strategies around bad data and even worse goals. But that doesn't detract from the importance of accountability as a building block for program success. Getting all the employees to understand their role in the improvements around your NPS is not just about education - although that's important - it's also about tools. Knowing that your corporate NPS is 10%, or 80% for that matter, doesn't hold any one individual accountable. Knowing what the score is for your accounts, or the service calls you took last week, well now we are talking.

To create accountability, you need process and you need data. Process because anything at scale will require consistency of operation and data because people respond to information about their performance, not just collective performance. A consulting report could prove useful for helping get your senior staff aligned around the strategy, or even making a persuasive case to the board, but to engage thousands or employees you will need systems. You will need to measure performance at the most granular, atomic level. You will need to help your organization know that they are being measured, then give them the tools to improve and help them measure their improvement.

And let's not forget, there are already competing ideas for everyone's attention: financials. Most firms do a great job of driving accountability for financial success; sometimes, perhaps often, at the expense of long term customer experience. Your team isn't starting from a blank slate, you could find yourself working against existing performance criteria or established ideas.

With that backdrop, accountability for Net Promoter Score could be a challenge. Make sure you establish it as a key tenant of your program from the start, and put the systems and processes in place to make it happen.

The Fourth Law: Understand how to Improve your Score

info@netpromoter.com — Tue, 13 Sep 2011 17:59:18 GMT

"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 Third Law: Benchmark Against the Competition

info@netpromoter.com — Mon, 22 Aug 2011 10:47:12 GMT

"All the women are strong, all the men are good looking, and all the children are above average."

Garrison Keillor, Lake Wobegone Days

Most performance measure in business are relative. Market share, growth rates, earnings. We benchmark against others all the time. But with NPS, many companies don't really know where they stand, and where they stand could be the ultimate measure of performance.

Several years ago, Bain and Company did some great research to understand how profit pools got divided up by industry, and how NPS played a role in that. They found that every industry had a “bright line”, an NPS score which separated winners from the pack, and that those who entered the winners circle (so to speak) enjoyed a disproportionate share of the profits in their industry. This shouldn't surprise anyone; in most industries profits are not linearly correlated to size or even market share. It's not a fair game - it turns out it's rigged in favor of NPS leaders.

What's really interesting to me, however, was that the bright line that separated the leaders was not uniform across all industries or geographies. Rather, it varied significantly by industry. This should come as no surprise: we usually see that Business to Business NPS results are often significantly lower and less variable than Business to Consumer. We also know that customers compare and formulate perspectives based on their expectations, which can vary according to prior experience and price. We teach customers what to expect in our industry, then we give them relative pricing to help set their expectations around our role as discounters or premium players.

Companies spend precious little time thinking about issues of comparable performance, which seems odd given its importance. After all, knowing what your score is only matters if you have some sense as to what it should be. This disconnect ripples through the corporation in multiple ways. Companies without a clear sense of NPS “situational awareness” will struggle to set appropriate goals, compensation metrics or process. I'd even go as far as to say that measuring NPS without a clear sense of target is worse than not measuring at all.

Part of the problem is the challenge around getting good benchmarks. We do publish benchmark data, so for those industries we cover, you can get an accurate sense of where you should be (and an independent view of where you are trending). But that data will never be detailed enough for some, so they often find themselves doing specific benchmarking studies. Others tell me that they make a benchmark of the data that is published in the book. While I agree it's aspirational to try and reach USAA's lofty NPS goals, it's probably neither feasible nor even desirable, assuming you are not a major insurance provider. Nor is it practical to simply target the top quartile and straight line trend your own NPS towards it as a goal setting technique. You are pretty much assured of falling short initially as NPS just doesn't improve in a straight line.

If you are determined to avoid detailed target setting and outside benchmarks, there is still hope. Stack ranked employee, or region or segment performance provides you with the opportunity to challenge the lower performing segments to raise their game to the average. That alone improves your score and starts moving you in the right direction; although it doesn't help you understand if your entire organization is on track for financial success.

One other thought. Absolute NPS does matter in one important way. Industries with low "threshold NPS" - a low target that gets you in the winner's circle - have fewer absolute promoters than those where only a high score wins. The absolute number of promoters can be thought of as word of mouth capacity, so their absence reduces the overall positive effect for industry participants and the industry in general. By all means, out-run the other guy for success, but to get real organic growth you still need an army of promoters.

Part Two: You DO NOT talk about NPS (The Five Laws of NPS)

info@netpromoter.com — Wed, 10 Aug 2011 15:57:36 GMT

“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.

Great Expectations

info@netpromoter.com — Thu, 21 Jul 2011 11:20:41 GMT

So, Los Angeles survived Carmageddon. Unworthy of any movie plot where LA is usually reserved for the most heinous destruction, (does that say something when those who live there constantly make movies destroying their city?) the 405 freeway opened ahead of schedule. Or ahead of expectations, at least.

It’s tempting fate when so many civic projects go so horribly wrong to ask the question, but have we become a nation of sandbaggers?

My flight gets in on time. We left the gate 20 minutes late. I guess we have the pilot, Captain Dan Dare, to thank for this heroic act. Did he go to the mat with air traffic control to get us a faster route? You can imagine the cockpit conversations:

Co-Pilot: But Dan, think of the fuel burn! Don’t you realize that Jet-A fuel is up 40% in the last year? Think of the profitability per passenger seat, for God’s sake man!

Dan Dare: Dammit, Mike, we can’t let these customers down. The wheels of commerce; families ripped asunder; just think of our NPS! Push the throttle to 11 and let’s get them there on schedule…

When “on time arrival” became an important metric, the airlines simply added time to the schedule so in-bounds performance became an early arrival. They sandbagged. Does anyone think that the contractors on the 405 were shocked and surprised by how well it all went? It’s safe to say that their plan called for the project to be complete well ahead of schedule. Hitting the schedule would have been a failure!

If customer experience is all about expectations, surely this is the way to go. Lowered customer expectations take pressure of the entire system and have the effect of claiming victory where average performance is all that happens. What’s wrong with that?

In the competitive market space, it’s a dangerous habit. The market has a tendency of revising expectations suddenly and radically, often through new entrants. Establishing a low bar creates a culture of mediocrity and comfort. In an environment where, as Andy Grove* famously put it, “only the paranoid survive”, this seems a high risk approach.

So, by all means, manage customer expectations. Buy yourself some breathing room. But don’t lose sight of the real nature of performance and become consumers of your own mythology. Set the internal metrics higher, expect great performance. We should see a lot more projects completed ahead of schedule.

*Andy Grove is a Hungarian-born American businessman, engineer, author and a pioneer in the semi-conductor industry. In 1968, he co-founded Intel Corporation. During his tenure as CEO, Grove oversaw an increase in Intel's stock value by 2,400%, making it one of the world's most valuable companies. As a result of his work at Intel, and from his books and professional articles, Grove has had a considerable influence on the management of modern electronics manufacturing industries worldwide. He has been called the "guy who drove the growth phase" of Silicon Valley.

Five is Right Out* – Part One

info@netpromoter.com — Mon, 18 Jul 2011 13:30:16 GMT

“Three shall be the number thou shalt count, and the number of the counting shall be three. Four shalt thou not count, neither count thou two, excepting that thou then proceed to three. Five is right out.”

Instructions for the Holy Hand Grenade of Antioch - Monty Python*

We all spend a lot of time dealing with the sophistication of Net Promoter but it’s worth, on occasion, reminding ourselves of the merits of getting the basics right.

With this in mind, and with all humility, I offer my Five Laws of Net Promoter as a starting point for discussion. If we need a simple compass to program success, I hope this may help us stay on the right track. Or, you may decide that “five is right out”.

The First Law of Net Promoter: You need to know your score, and it needs to be trustworthy
The Second Law of Net Promoter: You must act immediately on customer feedback
The Third Law of Net Promoter: You need to know how you rank against others
The Fourth Law of Net Promoter: You need to understand what to do to improve your score
The Fifth Law of Net Promoter: Your organization needs to be accountable for their score and improving it

Well, there you have it. Simple enough?

Let’s start today with The First Law of Net Promoter...

I will bet that any competitive manager who reads just about any article on NPS will have this question pop into their head: what’s our score? It’s part of our makeup to want to keep score and if you buy into the potential value of NPS, you are drawn to this question like an accountant to a GAAP** statement. For many companies this is where the pilgrimage starts and, for a sad few, where it ends. Because this deceptively simple first law is a bear to follow if you are really ready to trust your data.

Trustworthiness defies a numerical definition. Response rates don’t get you there: many consumer packaged goods companies make major decisions on the basis of 10 people in a focus group. If 9 out of 10 people in your largest account respond but the CEO doesn’t, you may still consider the data untrustworthy. And for skeptics, no customer data is good enough for decision making.

No, it’s a subjective measure. Your data is trustworthy when you are willing to make major decisions based upon it. And only you, or your management team, can figure out exactly where the bar is set. For some, the plural of anecdote is data – a handful of customer comments is sufficiently affirmative to drive a revolution in their business. For others, years of statistically sound data won’t get them there.

We do know that corporate data is a quagmire. Large sophisticated corporations whose CRM systems are chock full of inaccurate or outdated information and for whom customer profitability financials are out of sight – these are the rules, not the exceptions. 30 years of information technology have left us often more confused than when we started. For these companies, their Net Promoter data might, in fact, be the only data they can trust at all. At least they know there is a human being at the other end of the survey, and someone who cares enough about them to provide an opinion. I’ll take that over a GAAP statement any day.

So those are my thoughts on the First Law. Laws Two to Five to follow soon!

*”Five is Right Out” is a quote taken from Monty Python and The Holy Grail, a British comedy film from 1975 that takes an irreverent look at King Arthur and the Knights of the Round Table. The quote refers to the usage of the Holy Hand Grenade of Antioch. To use the grenade, you counted to three, before throwing it. Five was right out – as in too many numbers, too long a count. Other highlights of the film include the coconut-shell horses, the black knight, the knights of Ni and their fondness for shrubberies.

**GAAP: Generally Accepted Accounting Principles refers to the principles used in accounts throughout the U.S. The principles allow a fairer and simpler comparison between the financial positions of different companies. Several organizations contribute to the development of GAAP, most notably the Financial Accounting Standards Board. Though GAAP is not legally binding in itself, the Securities and Exchange Commission requires that all publicly-traded companies follow the principles.

The Disgruntled Traveller

info@netpromoter.com — Thu, 26 May 2011 13:52:18 GMT

A math quiz for my 11 year old son:

It is 419 miles from San Francisco airport to Las Vegas airport. And 2 miles from Las Vegas airport, terminal 2, to your hotel room. If the average speed of a Boeing 737 is 560 mph in cruise, and your average walking speed is 3 mph, how long will the total journey take?

Of course, it’s a trick question. The answer is, ALL NIGHT.

If you could walk from the terminal at Las Vegas to your hotel room, without being roadkill, it would only take you 40 minutes. Of course, you can’t do that. The airport planners, car rental companies and hotels work to ensure that, when Southwest airlines proudly announces that “the safest part of your journey is over” as they land, they could also add “the shortest part of your journey is over”.

Las Vegas, like many airports, has constructed a “consolidated rental car facility” which they proudly announced was “for your convenience”. This is great news, as I had been thinking that having the car rental facility within a short walk of the gate had been very inconvenient in the past. Now it’s located in a neighboring state, Kentucky, and is accessible by a bus ride (see prior postings on airport buses). By the time we arrived, Hertz was doing a cracking trade (at 11:30pm), and required 30 minutes of waiting time before service, during which they processed five other customers at their 3 desks. It’s hard to figure out what people are doing in these situations, but from the safety of the queue a well trained eye can hazard a guess:

The nice elderly couple wearing the “Visit Wisconsin” sweatshirt was negotiating a hostile takeover of Hertz Corporation;

The very young man whose brand of car should have been “Fisher Price” was clearly a mathematics genius building a simulation of his journey to optimize the returned fuel level under multiple traffic scenarios;

The couple at the front of the line was renting a fleet of midsize cars, one at a time. Upholstery choices seemed important to them.

Or something along those lines...

The hotel was not much better. In Vegas, it’s standard practice to provide a DNA scan as part of the check-in procedure, presumably so they can track you down if you dispute the Pringles weight activated sensor in your mini-bar. And yes, I’m still sensitive about the jury’s decision against me on that one last time.

But why is it so hard? What’s slowing us down?

Choice is one factor, information and trust is another.

Southwest Airlines really does understand this. They don’t have complicated offerings. I never have to figure out if I’m flying on a “J” class of ticket so I can understand my upgrade options – although having said that, I don’t even know why I’m asking, I already know the answer. They have a simple solution to a simple problem, moving people safely, cheaply and quickly from one location to another.

I can check in online. Boarding is simple and fast. They will even sell me a place at the front of the line – Business Select, although one such passenger arrived onboard to be shocked by the lack of “first class seats.”

“All seats are First Class” said the flight attendant. Beautiful.

For a de-humanizing process, i.e. flying, Southwest makes it feel, well, almost human and doesn’t make you feel dumb.

Car rental, by comparison, has too much choice, too little information, and too little trust. The eager renter faces difficult options: what class of car do you want? Surely not the same class you selected when you booked online! Is this your current address? Or is, by chance, your address the same address that you entered in your booking under the field “address”? We need to know!

Now for the tricky part. Her face a mask of concern, the agent informs me that I have insurance options. She cryptically adds “in case something goes wrong”. The insurance choices carry names that everyone would instantly recognize if they had a 30-year career in the insurance industry: Loss Damage Waiver for example. And there is a handy, laminated sheet to sub-reference the necessary legal clauses. To reinforce the serious nature of the contract you are entering into, the wall behind the agent has a section devoted to liabilities, and, of course, fuel choices. As usual, I declined the recommendation to take out short term “put” options on an exchange-traded-fund-tracking-light-brent-crude-oil. But keep those Black-Scholes* calculators handy kids!

The plethora of complicated options stems from the complexity of the legal transaction, coupled with the desire of the company to up sell the buyer. But it’s a mess. BMW only offers 2-3 choices of model for a $60k automobile, why do we need to make so many choices for a $100 rental? Choice has value in customer experience, but needs to be handled in a more effective fashion. Simple communication? Online choices to streamline “real time” processes?

Simplicity often wins the customer experience battle. Simple is fast. Simple is clear. Keeping it simple isn’t stupid, it’s hard work, but worth it. Over the last 30 years simple solutions like Southwest, Apple’s iPad, Google or Zappos have been winning the customer experience battle. As consumers, we are trained to believe that complexity is a cover story for bad profits – and often it is.

As I unlocked my rental car, the fellow next to me was taking photos of his rental choice, presumably to document the condition of the car when he took the wheel. He got the message.

*The Black–Scholes model is a mathematical model of a financial market containing certain derivative investment instruments.

An Unnatural Act

info@netpromoter.com — Mon, 09 May 2011 16:00:38 GMT

During a conversation with a customer, the following exchange really struck a chord with me.

“Our CEO is starting to talk about the company being customer-centric”

Good news, right? Change starts from the top and all that. Net Promoter programs need executive sponsorship. And this is a very big company! Think of the opportunity.

“I don’t believe him.”

Four little words. Volumes of meaning. What those four words actually meant was:

“We say we care about the customer, but we don’t.“
“I’m skeptical we will ever change that view.”
“Our CEO will never put the words into action.”

The phrase “putting customers first” has become a bromide, a placatory statement.

I recently sat in a conference of the 100 top managers of a significant UK business as the top executive led his recap of their (successful) financial year. I heard the term “free cash flow” 6 times in 20 minutes. People were happy. Stock price got a mention. Then the #2 executive did something quite remarkable, something they had never done before. He welcomed two major customers onto the stage, sat them down and asked them if they would recommend his firm. In a display of mutual corporate courage, he asked two people – who he knew to be detractors – to nail their colors to the mast in front of the firm. It was like asking a gladiator if Caesar was a wise leader in front of 100,000 screaming Romans. And the gladiator says, “To be honest, I’d rank him 6 out of 10.”

You could have heard a pin drop. I was eyeing the exits, planning to use the tea-trolley lady as a human shield.

It’s hard to drive customer experience programs in businesses because it is an unnatural act. Selling product is a natural act. Manufacturing and shipping product is a natural act (although in the days I ran a plant I managed to make it look otherwise!) What is unnatural are these two actions: 1) sincerely committing a business to change culture without a massive forcing function, such as a crisis and then: 2) implementing a program which asks everyone to turn over rocks, find an unpleasant truth, share it with everyone and commit to acting to address it.

If you are running a customer experience program, my guess is that it takes a force of will to keep it going. No matter how successful it has been, no matter how obvious the proof points, you are only one change in management away from killing the entire effort. And that’s just talking about outright assassination. Equally likely: de-emphasis, funding cuts, process shortcuts…the slow death could be worse. The inertia of the business is such that it regresses away from a successful program unless force prevents it from doing so.

Let’s call it The First Law of Net Promoter Sustainability: “A company without an established customer centric culture will kill its customer centric programs without significant opposing force.” A corollary to the Law is that companies with an established culture don’t even think they have customer experience programs. There is nothing to kill because it’s not a program, it is business as usual.

This means that conventional leadership approaches don’t work so well. The well established executive practice of jumpstarting an initiative with focus and sponsorship, then backing off as the program gets established – “we have that nut well cracked” – is a high risk strategy as a slide in focus can be hard to spot day to day.

My advice is this. If you think you have it under control, when you think you have tamed the beast and everyone is on board – don’t turn your back.

Konichi-wa, and would you like a bowl of Miso with your cash withdrawal?

info@netpromoter.com — Tue, 26 Apr 2011 12:38:56 GMT

I wrote this a few weeks ago, but with the events in Japan it just didn’t seem right talking about customer experience there when there are so many, more important, issues facing them. Revisiting it, however, I’m reminded that the quirky nature of business in Japan (to western eyes) is one of the most endearing aspects of the country for me. So we publish this blog with all possible respect to our friends in Japan and our best wishes for their recovery from this tragedy.

Time-warp back to 1990…walk into a bank in Tokyo, hoping to get cash, and your experience is something like this:

Stand in line.
Greet the teller.
Fill in a form.
Watch (and you can watch, it’s all in plain sight) as no fewer than 5 different employees move your paperwork around the back office.
Enjoy a steaming bowl of Miso. Ok, so this part isn’t true, but you do have time.
Your “documents” arrive back at the teller who will hand you your cash.
Everyone will bow profusely. They will be extremely polite.

They will, on short, demonstrate exemplary customer experience, Japan style, circa 1990. You will be a promoter.

Then something disruptive happens. The ATM arrives.

When you think about it, the ATM has two basic advantages:

It’s fast.
It’s available 24-7.

The Japanese might argue that having a digital version of a “cash-okemon” character based on a cute 10,000 yen bill, bowing digitally and singing the company song, might also be a plus. I beg to differ.

So when the ATM was introduced in Japan, in the 1990s, naturally the retail banking industry saw this as a huge opportunity for customer experience innovation. Customer self service! Reduced cost, streamlined process and a sharp increase in customer delight, all based on a simple proven technology and proven business model. They instantly transformed their industry…

Oh no, they didn’t!

They put the ATMs inside the bank, effectively subjecting them to bank opening hours (hint: the Japanese banks did not have a liberated view on banking hours) so effectively neutralized advantage #2

They put bank staff in front of the ATM to help customers, and protect them from a dangerous and difficult encounter with a rabid touch screen, effectively neutralizing advantage #1

Of course this is old news today but illustrates the fact that technology alone can’t convey advantage in customer experience; culture rules supreme. Ask Japanese bank employees why they do it this way (I did at the time); the answer was not what I expected. No stubborn notion of change resistance for the sake of it. No job protection (no need, banks never let anyone go anyway but that’s another story). Nope, these folks didn’t capitalize on the technology because they believed, in their hearts, that good customer service was all about what we, today, would recognize as lousy customer service. And worse, if asked, their customers would agree. Right until someone offered them the alternative.

Is there, you might be thinking, a moral to this tale? Or even, heaven forbid, some lesson about Net Promoter?

Innovations in technology lose out to culture.
Stubborn change resistance is easy to overcome compared to moving people’s beliefs, even if they are, as it turns out, misguided.
New entrants (in Japan it was the US banks) have an advantage over incumbents at trying new approaches for these reasons.
Customers don’t always tell you they are about to mass migrate because they haven’t yet experienced a radically superior experience. Their expectations are fixed in the short run.
Innovations in Net Promoter philosophy tend to play out exactly as above in established above.

Ganbatte kudasai!

Hello, Old Friend! Who Are You Again?

info@netpromoter.com — Sat, 16 Apr 2011 08:12:23 GMT

There are always timely reminders that companies still can’t get the basics right. I’m ready to rant.

Earlier this week I was a guest at the Loyalty Live conference in Las Vegas, hosted at the Monte Carlo hotel. A great event for Credit Unions implementing NPS, and a reminder that the credit union industry really does understand their customers and the importance of customer loyalty. But I digress. My point here is the follow up survey from the hotel.

I didn’t like my hotel room. I LOVED my hotel room. Monte Carlo has refurbished its top floor into a branded “Hotel 32” experience. Even by other superlative Vegas hotel experiences (Vdara, Mandarin etc) they have done a fabulous job. My hosts were kind enough to get me an upgrade to that floor, and I wish I could have stayed there all week. So I was keen to provide (positive) feedback.

Monte Carlo dutifully sends me an email link to a survey. Timing felt about right; obviously triggered by my checkout.

So let’s recap. The hotel has my email address. They have a record of my stay. They know the room I stayed in. They know I checked out on Tuesday morning. According to the invoice, they know that I consumed bottled water from the minibar. Being Vegas, they probably have a video camera that has tracked my every movement around the hotel.

But according to their survey, they are not so sure:

"Please confirm which month you checked in for your recent visit"

If the answer had allowed open text, I would have been able to reply: "the same month when your receptionist took my credit card, asked me for photo ID, started your invoice cycle, and took my order for room service." I won’t go on.

The survey didn’t get much better (wrong scale for NPS, while I’m ranting), so I’m not whining about just one question. The Monte Carlo values my feedback. They want me to invest my time in helping them. But they don’t know when I checked in, or are not confident enough to rely on their own data. Their carefully executed, segmented branding and experience strategy for "Hotel 32" doesn’t apply to their survey. They are confident enough to address their email to "Richard" – hey, we’re all friends here – but it's skin deep.

Asking your customers to provide information that you should know is one of the great crimes of customer experience management. In some circumstances, with indirect sales for example, this information is genuinely hard to come back. But in other situations it’s hard to fathom. A hotel not knowing when I checked in? The car rental agreement where I provide my address, telephone number, email, mobile phone, social security, first childhood pet’s name, favorite color, grandmother’s maiden name, blood type and hair color (before grey) and YET – when I get the rental counter – I need to provide it all over again!

The Airline not knowing what flight I was on: "Have you travelled recently with xxxAir?" Yes, I was in 32B, the middle seat, remember? You seemed keen enough to verify it at the security line.

You want a relationship with me? Stop with the questions. If I’m forced to ask my wife "when did we get married?" I’m not going to have a relationship there, either.

Amazon and Netflix "know" me well enough to recommend movies to me. Google "knows" me well enough to target ads. And I don’t have to provide DNA samples to use their services.

Don’t ask your customers for data that they think you should know.

There’s no second chance at first impressions!

info@netpromoter.com — Wed, 09 Mar 2011 14:16:15 GMT

You never get a second chance to make a first impression. If you are in the hospitality business, you might think that the first impression is at reception. Or perhaps you consider the visual impact of the hotel entrance as a starting point.

But in many instances, and to your eternal shame, it’s the shuttle bus.

For airport hotels, the shuttle bus is the transition from the tender mercies of the airport/carrier system into the care of the hotel. The airport doesn’t run the shuttle bus, the hotel does. And yet, the experience is so incredibly varied for such a simple idea. You just need to get me the last mile (or perhaps a couple) in safety, comfort and yes, a reasonable timeframe. Doesn’t seem too much to ask, does it?

Airport hotel customers are professionals. Think George Clooney in Up In the Air. They have high airline status so they can check in quickly. They fold their clothes with military precision so they can pack for a week’s travel and 3 climates in a rolling-cabin-case, all to save a few minutes in baggage claim (or a few hours depending on your luck). They are Hertz #1 club members. In short, they have business travel down to a fine art, all with the goal of minimizing down time. They don’t plan on spending more time getting from the terminal to the hotel than it took to get from New York to Atlanta.

Enter the hotel shuttle bus…but I’m getting ahead of myself. First, we need to think about airport hotels.

The whole point of the airport hotel is to provide quick and easy access to and from the airport. We’re not staying there for the luxury or breakfast-buffet options. If marketed as an “Airport Hotel” we may reasonably expect it to have fairly close proximity to the airport. Look – I can see it from the airport exit! Even better, from the runway as we taxi! It’s THAT close, I can almost touch it!

However, two universal rules always seem to apply to airport hotels.

However physically close, there must be no practical way of walking to the hotel. And if this rule is shamefully broken, there must be no smooth path to enable rolling luggage. Even Sherpa Tensing would give up on traversing the freeway/parking lots/swamp/minefield (mountain?!) that lies between the airport and the airport hotels.
To get there, you must take the shuttle bus. The local cab drivers, even if willing to break the rules and take such a short fare – “I waited 20 minutes to get to the front of the taxi rank – for THIS?” – must be coerced into refusing the journey. Some system of collusive rules must conspire to prevent any other option.

So that leaves us with the bus. Shuttle bus schedules operate in a system that has been modelled by operational research experts. The colder the outside temperature, the less frequent the cycle. Apparently, buses must slow down with cold weather. This ensures you only wait a long time when it’s too cold to wait a short time.

The routes are cleverly designed so that the bus will make multiple hotel stops and – here’s the sophisticated bit – will always reach your hotel last. This is designed to present you with all the alternative forms of accommodation that you declined because it was too expensive for your travel policy. I can now perform flash-card recognition of every entrance to Chicago O’Hare hotels in less than 15 seconds.

The bus must be driven either very slowly, à la Mr Magoo, or in the style of Mario Andretti, presumably to make up the time you spent waiting for the bus in the first place. There will be no seatbelts.

You probably have your own favorites. Mine is the “Hotel Hopper” system. Devised for London Heathrow Airport hotels, the transportation officer responsible has obviously never set foot in an airport, on a plane – let alone a bus! Is this the same Brit who, 100 years earlier, divided India from Pakistan without having been to India?

In a transport system that can whisk you to central London in 15 minutes on the Express train, it can take 45 minutes to reach a hotel visible from the runway. And you pay for the privilege because the buses seem to be run by the same people who offer double-decker bus tours of the city. Apparently, visiting 10 other hotels en route is worth a few quid.

Why should you care? If you run one of these hotels, your customer arrives cranky and frustrated. That’s the first customer experience they have of your brand. Aren’t you missing an opportunity?

Your Quick Translation Guide to Net Promoter Conference Communication

info@netpromoter.com — Tue, 01 Mar 2011 18:26:32 GMT

There is a danger in trying to be humorous, especially when you have personal experience of how hard it is to deliver a great presentation. Nevertheless, when I discovered that Alan Ruben had penned a classic on scientific seminar presentations, I couldn’t resist attempting a translation for those of us who labor to create material for the Net Promoter conferences. I hope you enjoy this in the spirit in which it is intended, fellow presenters…

When the speaker says: I’m pleased to give you this talk this morning because I always enjoy sharing our Net Promoter success with peers from across the world.

The speaker really means: Miami in February beats NYC any day!

When the speaker says: This has been an incredibly exciting year for us.

The speaker really means: My cardiologist is insisting this is my last presentation on Net Promoter, and my spouse organized an intervention.

When the speaker says: To be fair, there has been some debate in the management team about this point.

The speaker really means: We have an army of mortal enemies amongst our sales force, and they are so very wrong.

When the speaker says: This led us to ask a different question.

The speaker really means: Our budgets ran out.

When the speaker says: I’ll just talk briefly about this.

The speaker really means: I will talk about this for at least an hour. I am unaware that time is finite. I am your overlord.

When the speaker says: This result was completely unexpected.

The speaker really means: This result pissed us off. Two of our program team cried.

When the speaker says: At this point, I went back to the best-in-class practices.

The speaker means: At this point, I instructed my program manager to go back and actually read the books.

…Although, actually, the speaker really means: At this point, I instructed my program manager to go back and read the books, but he just posted some queries on netpromoter.com, so I had to read “Answering the Ultimate Question” for the first time.

When the speaker says: I don't need audio visual tools or an internet connection; I'm just going to give a "chalk talk."

The speaker really means: Me caveman! When me done talking, me hunt mammoth!

When the speaker says: This was just a first wave of NPS data

The speaker really means: I don't believe these results. I didn't even intend to show them to you, but this slide was prepared by a soon-to-be-ex team member who ignored my explicit instructions to leave this out.

When the speaker says: If we're right, this could be a significant business insight.

The speaker really means: We're not right.

When the speaker says: This is a social media “skunk works” program.

The speaker really means: This is what I wish we were working on full-time, but no one wants to fund it. I can’t even maintain a Facebook page for pete’s sake!

…Or: I want to give you the impression that we're also doing incredibly innovative work, though I'm not going to show it to you.

When the speaker says: I've even put together a video for you to watch.

The speaker really means: I'm about to click a button in PowerPoint, at which time nothing will happen. A room full of people who think they're smart -- including you -- will try to help, but no one will succeed. I will assure you that the video was interesting and important and move on to the next slide.

When the speaker says: I'd like to thank a number of people.

The speaker really means: I will now take my time naming team members you've never heard of while you stare at their group photo and decide who is the hottest.

When the speaker says: I'll gladly take any questions you may have.

The speaker really means: Please, please don't ask anything difficult. I'm looking at you, 90-year-old, Methuselah, Nobel laureate-author of 10 books on customer experience in the front row. If you raise your hand, I'll pretend I don't see you and call on the timid-looking fresh out of college MBA tweeting at the back.

Net Promoter Predictions for 2011: Part 3

info@netpromoter.com — Fri, 07 Jan 2011 12:38:50 GMT

"The Americans have need of the telephone, but we do not. We have plenty of messenger boys,"

Sir William Henry Preece (1834-1913)*

You will not have seen these last two predicitions anywhere else…or, at least, I predict that you haven’t!

5. Rethinking Customer Rankings: Big Brother has a Product Endorsement for you!

Customer rankings may have been pioneered by the likes of Amazon, but they have become pretty mainstream. Entire sites (think Tripadvisor) have built their business around the notion of an open pulpit for customers to opine on products, services, hotels - you name it. And it’s valuable stuff. You can’t help but be drawn to the advocacy – or lack thereof – that comes attached. We have learned to live with the natural limitations of the medium – significant sample bias for example – because it’s just so authentic, and we do love a strongly argued opinion. On just about anything.

Right now, you can read 101 customer reviews on Amazon of a PNY 1GB SODIMM Memory Module; yes, an add on memory chip for your computer. You would think this would be a pretty binary post; it either works or doesn’t. But you would be very wrong. There is alot to comment on (and most of it very positive, by the way).

But the novelty can wear off? How useful is this information?

When it comes to matters of personal preference, not very. Take hotels for example; a popular hotel depends a lot on your budget and definition of “luxury”. To some, a cheap clean budget hotel is going to be #1, for others it’s nothing short of the Ritz Carlton that will do. Both customers could be right, but both could be wrong in the context of what makes the best choice for me.

What we need is published customer feedback in the context of our own personal tastes, and the good news – if you can call it that – is that we are furiously populating the web with information about our personal tastes. Social media sites already have enough information about our tastes and friends to be able to filter details about products and services and provide us with a customer ranking from people just like us. Or at least what we declare to Facebook is “just like us”. Expect highly personalized guidance on purchasing as commerce guidance, based on customer reference, has the potential to replace significant advertising resources on the web.

6. As Economies start to Recover, Business will risk Forgetting the Lessons of Customer Loyalty in a Recession.

Tough times have a habit of getting you to focus on basics. If customer acquisition is hard, companies naturally focus on customer retention. Does that mean that, with economic recovery a possibility, acquisition will become easier? If it does, will we stop worrying about retention?

At a macro level, it seems unlikely that we will return to the “go-go” acquisition years of the 90s (the Chinese market being an exception). But for many individual firms, a strong rebound in business is likely to take management’s eye off the retention ball. Loyalty is a longer term leading indicator; if short term business is good, it’s human nature to shorten horizons. At the level of an individual company, customer loyalty has a habit of becoming counter-cyclical with the economy.

On the other hand, we are experiencing a generation of managers who lived through “the great recession”. There is every reason for them to remember the lessons learned; to use better economic circumstances to build a solid foundation for good profits. An improving economy is exactly the time to create loyal customers.

Best of luck with your Customer Experience Program in 2011!

* Sir William Henry Preece (1834-1913) was a Welsh electrical engineer and inventor. Preece was an empiricist, relying on experiments and physical reasoning in his life’s work.Upon his retirement from the British Post Office in 1899, he was made a Knight Commander of the Order of the Bath (KCB).