Net Revenue Score is not a new Net Promoter Score®

I’m always open to a debate on the pros and cons of any business approach but it’s better if the person on the other side has done their research. That way we can have a thoughtful debate.

Unfortunately John Greathouse has jumped to a few conclusions when he penned his article in the Wall Street Journal: Startups Should Focus On Their NRS — Net Revenue Score. There are quite a few items that need review including:

Mis-Understanding Net Promoter Score

John states:

The higher a company’s NPS®, allegedly the higher its customer satisfaction.

This may be true but it is incidental.

The key relationship is actually between NPS and revenue. The higher a company’s NPS the higher its revenue growth rate is likely to be. This is the very basis for why organisations use NPS.

This is key as he goes on to say how important revenue is later in his article and criticises NPS for not being revenue relevant.

On the “allegedly” side, you don’t need to believe me about the link between NPS and revenue, check out this whole page of Net Promoter Score® Success Stories and Case Studies for evidence in different industries and business sizes.

To take one example:

Allianz operating units with a high NPS have a higher overall compound annual growth rate (CAGR) than those with lower overall NPS scores.

Net Revenue Score is where it’s at

”entrepreneurs should focus on improving their Net Revenue Score by driving incremental sales via referrals”

No one’s denying that revenue is important, not as important as margin, but still important.

It would be good if John had explained how to calculate his new “Net Revenue Score” so we could discuss his idea. Maybe in his next post?

Influence: The Psychology of Persuasion

Covered in John Cialdini’s book is the idea:

When a consumer verbalizes a future action (or inaction), it is likely that their subsequent behavior will be consistent with their words.

John suggests that you should not ask customers the “would recommend” question, just in case they won’t and then, to be consistent, don’t recommend you in the future.

I don’t accept this application of Cialdini’s finding. However, even if you do, it doesn’t make much sense to ask John’s suggested replacement question:

”Will you refer a colleague to us?”

That will be similarly tainted.

More importantly, using the Net Promoter approach is not only about asking questions but taking action.

Companies who effectively use Net Promoter will be proactively contacting unhappy customers to solve their issues and access the value generated by the Service Recovery Paradox.

In this paradox, customers who have a problem with a company, and have it actively rectified by the supplier, are more loyal than customers who never had a problem in the first place.

So, far from those non-recommenders being a drag on the business they can actually be converted to loyal customers and be an overall lift.

Don’t Solicit Feedback From Un-Happy Customers

As an extension to this idea:

…startups should not ask customers their propensity for future promotions when such inquiries might result in a negative response

This is a great way to close your eyes to understanding how your business could change and improve to better serve customers. If the whole Lean Startup approach has taught us anything it is: always be learning.

Test and learn should be baked into the business process. By not listening to customers with negative opinions you lose a good proportion of that valuable information, reducing the speed of change and chance of success.

For instance feedback may identify a segment of customers to whom you shouldn’t market because they will be unhappy and drive negative word of mouth for your business. Far from a negative this is a great outcome as you have improved your understanding of the market.

Or maybe you will identify a latent flaw in your product or service that will prevent you from being successful.

Regardless, only receiving feedback from happy customers is not a smart idea.

Besides how do you decide which customers will respond positively? There is no practical way to, apriori, know which are the happy customers.

An Indirect and Passive Question?

Here John feels that the Net Promoter question is too weak to be useful and a more actionable question is needed.

Unfortunately he misunderstands the Net Promoter “would recommend” question as a word of mouth marketing measurement tool. It’s not.

Instead the “would recommend” question has almost nothing to do with actually generating recommendations for a company. It is all about how the respondent feels about the company in question and therefor whether the customer has loyalty to the company.

That is what NPS measures.

And that is much more valuable than the “propensity of someone to make a recommendation at some nebulous future date”

BusinessLeadersGuideCTA

Want to build trust with your customers? Recommend a competitor.

Harry Antrim as Mr. R.H. Macy

Amy Scott sent me through her Christmas article and I liked it so much I asked her if I could publish it on the blog. Luckily her answer was yes so everyone can benefit.

Over to you Amy…

Want to build trust with your customers? Recommend a competitor.

When you first see this you must be thinking “Are they crazy why on earth would I want to give business to my competitors?”

But this isn’t as daft as it sounds. [Read more…]

Predicting American Airlines’ Net Promoter Score® Using Twitter

ohw_airlines

In this recent post by Fonolo American Airlines was hammered for having an outstanding (in a bad way) number of Twitter users complain about being on hold with them.

This got me to thinking:

How good is crowd data at predicting the Net Promoter Score for an organisation?

As it turns out it’s a pretty good indicator so let’s review it in detail. [Read more…]

Zappos Service is for Zappos, not You

pizza625

We’ve all heard the stories of famously customer focused organisations where staff have gone wildly above and beyond customer expectations to create raving fans.

At Zappos, one famous (albeit perhaps apocryphal) tale is the story of a customer service person having pizza delivered to customers who were sitting online talking to their contact center. [Read more…]

[Guest Post] Employee NPS: An Early Warning System for Managers

employee-net-promoter-score

employee-net-promoter-scoreI’ve talked before about Employee NPS (eNPS) as a great way to collect feedback on how your staff feel about the organisation.

However, as I’m not an expert in organisation design it’s been difficult for me to muster the arguments for replacing or even augmenting the existing very long annual employee engagement surveys so often used by organisations.

But recently I was chatting to Beatrice Hofmeyr, who is an expert in organisation design, and she was just as keen about eNPS, and for the same reasons!

Beatrice agreed to discuss using eNPS and how/why it is so effective. [Read more…]

Most People Don’t Understand Sample Size

Equation

bigstock-young-business-man-holding-his-53002933You’ve spent weeks working through the numbers to unpick what customers are saying. After checking through the data and analysing a range of root causes, you have created a really practical plan to solve a key customer issue.

The PowerPoint presentation you’ve created nails each of the points you want to make. It starts right up front with the bad news: Net Promoter data for the business group in question.

Before you walked in, you were fully prepared for this meeting, so how is it that 3 minutes in you’re under attack on the very first slide? A senior manager is pointing accusingly at the screen: “I don’t believe that NPS – you don’t have a big enough sample size.” [Read more…]

Surprise: Rob Markey and I agree on Net Promoter® Benchmarking

delight-the-customer

delight-the-customerAnyone that has been reading this blog for more than a couple of weeks knows that the subject of Net Promoter benchmarking gets me fired up.

In talking to clients and prospects the question of “what’s a good Net Promoter score” almost invariably arises. Many times I have had to choose my words carefully when I tell people don’t waste your time on external Net Promoter® benchmarks.

I’ve also been careful to explain that not everyone agrees with my views on this topic.

One of the people who disagrees with me is Rob Markey (Bain Partner and co-author of The Ultimate Question 2.0). Clearly he knows something about the subject.

Well, recently when chatting to Rob for one of his Net Promoter System podcast interviews he took me to task on my anti-benchmarking views and, surprisingly, we came away in a violent agreement.

He outlined the specific scenarios where Net Promoter benchmarking is useful and I agreed with every one of his points.

[Read more…]

[Guest Post] 4 Insights Into Building a Better Organisational Structure With Customer Feedback

Auto_mechanic_tools

Auto_mechanic_toolsThe only reason we collect customer feedback, including Net Promoter ® is to understand how we can improve the customer experience and lift profits. Often this impacts the organisational structure, but driving change in this area can be difficult.

Beatrice Hofmeyr having identified this issue and is doing something about it. She is currently collecting practical, best practice techniques from real Australian organisations. In today’s guest post Beatrice provides some great early findings from the project.

Please welcome Beatrice Hofmeyr…

[Read more…]

The Practicalities of Giving Frontline Staff Net Promoter Targets

linking-nps-sale

bigstock-Dart-in-bulls-eye-of-dartboard-16555100“If you don’t give us a 9 or 10 on the survey you receive it will mean we have failed”. On the surface it was an odd way to end my check out process at a well known hotel chain but one I suspect that many of us have experienced. It’s called score begging and it’s an indication of poorly set front-line customer satisfaction targets.

One of the critical success factors for NPS or customer feedback success is ensuring that everyone in the organisation has the score in their personal goals. But applying that idea to front line staff is difficult and if done poorly, as you can see, it drives the wrong behaviours.

To me it is clear that you must link NPS/CSAT to performance review outcomes at least as strongly as you link other hard metrics: revenue, average handle time (AHT), etc. If you don’t staff, quite rightly, deduce that NPS is nice but what you really care about is AHT and sales at all costs.

Not having a strong CSAT/NPS goal is at the heart of many issues in the customer experience. If you’ve ever been relentlessly handed off between operators in a contact centre you have felt the effects. You know they have a tight AHT goal and it’s more important to keep their personal AHT down by shuffling you to another operator than to solve your problem. [Read more…]

[Guest Post] Can Technology Delight Customers? Yes and No.

Bob Thompson

bigstock-Social-media-on-smartphone-60749657Like it or not, the world is going digital. Websites were just the beginning. Now we have social media, smartphones and so on. The only conclusion I can reach is that more of our lives will be spent interacting with technology of one kind or another.

The conundrum: People are more likely to create memorable experiences, which is essential to drive genuine loyalty. In CustomerThink’s research, we find that friendly, well-trained, and knowledgeable employees are key factors what customers perceive to be excellent experiences. Only humans can express empathy and solve problems creatively, so it’s not surprising that interactions with people are more memorable.

New technology can be a positive surprise — I still think it’s amazing that I can buy and receive a Kindle e-book from Amazon in less than one minute. But as Jon Picoult of Watermark Consulting notes: “When technology helps fuel a delightful customer experience, it usually doesn’t take much for other firms to copy that technology.”

More typically, automation is used to make customer interactions more efficient, consistent, and less memorable. So if you’re not careful, you can automate your way to a faceless company with no personality whatsoever!

The solution is to understand the three important roles that technology can play in delightful customer experiences. Let’s use the analogy of a great movie, where the audience experience is delivered by the star, supporting actors, and a “key grip” to manage lighting and camera movements. Obviously only the actors are seen on screen, but without great support behind the camera, a film won’t be delightful to watch. [Read more…]