"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.

“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 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).

“It would appear that we have reached the limits of what it is possible to achieve with computer technology, although one should be careful with such statements, as they tend to sound pretty silly in 5 years”
John Von Neumann (1903 – 1957)*

‘Tis the season to be making predictions, and I’m not going to miss out on the annual opportunity to be proven wrong and demonstrate the world’s unpredictability. As smarter people than I have already made most of the well thought-through predictions, I’m going to try a different tack; my challenge is to come up with predictions you have not already thought of, or at least not heard somewhere else. This of course, increases the probability that they are simply wrong. Anyway, there are seven of them… as always your feedback is welcome! Here are the first 2...'

#1 Net Promoter Fusion

This is a trend that I believe is set to accelerate in 2011. It seems too self serving to simply say that Net Promoter will continue to gain adoption in 2011 (which it will) so perhaps a more interesting observation might be that it won’t be as distinctly “Net Promoter” as it was in the past. I believe that more companies will claim to be adopting Net Promoter, but when we look at their programs they may have little in common with prior years. This is not your father’s Net Promoter.

This is in part because NPS has always been a big tent. Beyond the standard calculation, and the notion of promoters, passives and detractors, there isn’t much else that is absolutely “standard”. Lots of companies run their Net Promoter programs with lengthy questionnaires that look more like traditional programs; adopt focus groups in support of their understanding of loyalty and otherwise do stuff that they have been doing for years without the benefit of the moniker.

On the other hand, some of our favorite staples of Net Promoter Discipline are well practiced in programs that don’t care about NPS. Closed loop action planning, verbatim analysis, widespread distribution of data to front line employees etc. can still be executed with the most arcane and compounded set of loyalty metrics.

During 2011, companies who claim to focus on NPS may find themselves with more in common with those who don’t, than with those who claim a similar methodological choice. So what? Well, it’s a timely reminder that companies are wise to stay clear of perceived methodological purity solely in the name of a flavor of customer loyalty program. Get the basic principles established and stay true to them, but don’t be worried about being wedded to chapter and verse.

#2 The Social Media Sandbox

The majority of industry pundits point to the inevitability of social media as a lynchpin of your customer experience program. And certainly there are lots of firms willing to sell you solutions – many quite useful – to the “opportunity” presented by twitter, facebook and their ilk. But in 2011, significant corporations will continue to treat social media as a sandbox; an opportunity to experiment and learn in an (ideally) fairly safe environment. In short, we will make less progress than we imagine.

The hypothesis that social media is primetime for customer experience has lots of supporters and few willing to disagree. If you are selling solutions, your incentive to push the idea as mainstream is obvious, but lots of companies desire the publicity from being on the cutting edge – or at least making sure they are not seen as social media luddites. So a stream of exciting ideas and case studies is virtually guaranteed. Don’t read that as an indication that the kinks are worked out.

We can expect a few, well publicized examples of major brands engaged in sharp swerves, if not u-turns, based on micro-communities of vocal social media users. These groups are now quite powerful relative to their size and, once empowered, are hard to ignore. Only time will tell if the choices companies make will be the right ones. We can also expect companies to experiment with social media favoritism: you might get a more rapid response to a problem by tweeting than calling the established 1-800 number. The consequences of such service bias are hard to estimate. 15 years of call avoidance efforts around use of the internet might look silly if we just found a new route for creating calls, and many firms will be hoping that their customers don’t catch on to the notion that going through the support operation is less effective than micro-blogging your unhappiness.

What is a well intentioned customer experience leader to do? By all means join the experiment, try a few simple ideas and see what you learn. But it’s pretty tempting to let others do the heavy lifting and make the mistakes. 2011 might be a year to watch and learn.

* John von Neumann (1903 – 1957) was a Hungarian-born American mathematician who made major contributions to a vast range of fields, including set theory, functional analysis, quantum mechanics, ergodic theory, continuous geometry, economics and game theory, computer science, numerical analysis, and statistics, as well as many other mathematical fields. He is generally regarded as one of the greatest mathematicians in modern history.

Obviously not, or we wouldn't be asking...

The MIT Sloan Management Review poses this question and at first glance you would assume that this is a leading question. After all, “yes” makes for a short article.

However, the question raised reminds us of the reasons that most companies employ Net Promoter and why it creates change. Let’s start with the five questions posed by the article:

1. Can middle managers accurately describe your customer promise?
2. Can all members of your senior executive team name the three things that most undermine trust among your existing customers?
3. Is your brand really the best option for customers? Will it continue to be next month and next year?
4. Have you embraced any novel ideas that have produced significant innovations beyond the
   familiar during the past year?
5. Have front-line staff posed any uncomfortable questions or suggested any important improvements to your offering during the last three months?

Net Promoter is not a silver bullet to address these issues, but it does take a step forward towards several of them. For example, if a classic failing of companies is the inability of senior management to identify the top three things that undermine trust, you would expect any decent NPS root cause review with senior management to call out those three items. In terms of brand fit, the more interesting question relies on a segmentation model: for which of our customers IS our brand the best option and for which group ISN’T it? As you segment your NPS by behavioral or other segmentation criteria, again, the relative NPS between segments should be a strong lead as to where your brand is the best option.

But the question around front line staff is clearly where Net Promoter shines. Anecdotal voice of the customer information and closed loop processes serve to both engage the front line (they are part of coming up with solution and hence “important improvements”) and act as “aircover” for taking customer issues up the organizational chain.

So Net Promoter, through engagement with both senior management and front line employees, works hard to address the two information gaps that characterize the idea behind the information failure that’s at the heart of the article. A timely reminder of the right focus of your program.

There is a tendency in most companies to rush to set NPS targets and goals. This usually comes from a very good place. Leaders want to emphasize that customer loyalty is important - I agree, of course - and including it in goals is the signal that most organizations use to let employees know something is important.

The challenge comes, however, when you connect NPS to compensation before your program (and your data) has reached an appropriate level of maturity.

Target setting is appropriate only when you feel you have trustworthy data. I come back to this issue of trustworthy data a lot, because it is so critical and so often overlooked. If you don’t feel your data is accurate, reliable, and representative of your customer base, then it is very difficult to argue that you will have confidence in setting targets around the Net Promoter Score, or related feedback. For many organizations, making their CRM systems and customer databases accurate, and obtaining feedback from the right customers can take at least 6 months—often longer.

Let’s assume you’ve crossed that first chasm of trustworthy data. Then how do you approach the challenge of setting appropriate targets?

Below are some approaches that we have used at Satmetrix. Ultimately, the path each company chooses is dependent on the organization’s philosophy about target setting in general. The list below is by no means exhaustive, but it’s a good place to start.

Set targets based on improvement goals.

In its most basic implementation, some companies require every group to improve by a similar number of points on the Net Promoter scale -for example a 3 point improvement. Although this seems like an appropriate mechanism there are a couple of challenges with this methodology.

First of all, individual business units, stores, or functions that start with low scores will generally improve more than those at the top of the range. A good solution is to ask the top performers to maintain or improve on the margin, while setting more aggressive goals for the bottom scoring units. For example, a businesses with a negative 40 Net Promoter Score might reasonably expect to see a 10 point improvement in a year’s time with appropriate actions are taken, while a businesses with a 70 NPS might only expect a 2 to 3 point improvement.

Secondly, if you operate in multiple countries, you will need to consider cultural differences in how customers use numeric rating scales such as the 0 to 10 scale that is the basis of Net Promoter. If you treat all countries and geographies equally, you will be penalizing countries in which we generally see lower averages and ranges for NPS. My group has published reports on this topic that show the ranges for about 40 countries around the world where most global companies do the majority of their business. By comparing with that type of data, you can determine whether, in fact, your country and regional scores are meeting expectations or not relative to cultural norms in each market. If you can get direct competitive benchmarks in each country, even better. But this data gives you a way to level the playing field across many key geographies.

Set targets based on historical performance.

While this also seems like an appropriate mechanism, you can imagine scenarios (not uncommon) where the score is declining. Unlikely that you will want to use the "trend" function in excel to set targets when performance is declining.

In this case you have several options - you can set the target at the highest score the company or unit has previously achieved, or set goals to move back to that level using a rolling average of some sort.  Either way the message you are sending is that scores must improve.

Set targets based on statistically significant improvement.

Although I am a fan of using statistics, as it takes some of the debate out of setting targets, this approach should not be used in a vacuum. We typically apply multiple mechanisms to get to the right targets – start with some reasonable growth goal, ensure it is statistically different from last year’s performance, and consider things like cultural influences.

Set targets on improvement or movement in the Net Promoter categories or "buckets".

For example, depending on the distribution of your Promoters, Passives and Detractors, you might consider moving X% of Passives to Promoters, or consider eliminating Detractors (or nearly so). Why I focus on the distribution is that some lucky companies with 2% Detractors would waste time and money trying to solve the Detractor problems, vs. moving your Passives to have more Promoters.

Set targets based on the key drivers of Net Promoter.

With this approach,  you are focusing the organization on the "levers" to pull, and key operational actions and KPIs that will ultimately improve the Net Promoter Score, instead of focusing everyone on the score itself.  For some employees, this approach has the advantage of creating specific goals they feel closer to - and can more easily control, such as improving their responsiveness, or thinking of ways to make their organization easier to do business with.

These are just a few techniques we have used. I think you can see that setting the right goals is not a "one size fits all" proposition. But when you have trustworthy data and can connect NPS goals to the core business strategy, the customer’s voice can serve as your company’s ultimate rallying cry.