A few years ago, I bought a new luxury car. While I had struggled with the decision about which make and model to buy, once I locked in, I had a really good experience. A dealer not too far from my home had my model in stock, and he did an outstanding job of making me feel like I was his only customer. He made me feel like I got a fair deal and seemed to do his best to make the process painless.
Of course, the best time when you’re buying a new car is that moment you finally take the keys in hand, stride out to your vehicle and fire up the brand new engine. I felt that tinge of excitement—maybe even bordering on elation—as I sped through the paperwork on the appointed day. Right outside the floor-to-ceiling glass window sat my new car, gleaming in the afternoon sun. My keys were sprawled on the table in front of me, calling to me. The anticipation grew.
And when that moment came—when I’d signed the last bit of paper and the car was mine—that’s when the sky suddenly darkened.
“Mr. Markey,” said the salesman as he gripped one of those leather folio things that holds paperwork, “I just need one more thing.” He edged around the table so he could be right next to me, popped open the folio, pulled out a pen and showed me what was inside. “In a few days, you are going to get a survey. It will look just like this.” He circled two questions. “This question, and this question here. These will determine my future. If just one customer gives me anything but a 10 on either of these questions, I could lose my spot as a top salesman.”
This illustrates just one of the complexities of allowing frontline employees to participate in collecting customer feedback. Even employees who aren’t at risk of losing their top spot on the sales league tables find it hard to resist influencing customers. They might circle the survey link at the bottom of a register receipt, and write their names and add smiley faces to encourage a friendly customer to give feedback. Or they might even stand over a customer who is responding to a survey on a tablet at the point of sale. In any of these cases, the customer’s input is bound to be biased and could easily mask deeper problems that management might never see.
And yet, despite all the potential pitfalls, some companies manage to collect high-quality feedback on-site. Some even find that they can get high-quality feedback when the employees are collecting it directly. My latest guests on the Net Promoter System podcast provide one example of a situation where this seems to be working
I recently talked to Gautam Mahtani (pictured right), co-founder of Customer Feedback Systems, whose technology enables clients to collect Net Promoter feedback at the point of service. Phil Fagan and Sarah Cooper of HealthCare Partners of Nevada use Gautam’s technology to gather input from patients of the company’s physicians. Patients typically share their thoughts through tablet computers immediately after a provider interaction.
Gautam’s company and HealthCare Partners provide a fascinating case study in point-of-service feedback requests. Many companies would envy HealthCare Partners’ 80% response rate. And the rapid input has allowed the company to improve its processes quickly, whether it’s scheduling more staff during busier hours to reduce waiting times or adding a 24-hour hotline that allows patients to check on prescriptions.
HealthCare Partners doesn’t use the feedback to punish providers or determine compensation. The company doesn’t post the scores to create competition among its clinics. Sarah and Phil say this philosophy has been key to making the program work.
“This is patient feedback to improve the patient experience, period,” says Phil (pictured left).
You can listen to my discussion with Gautam, Phil and Sarah on iTunes or through the player below. Click here to browse more Net Promoter System podcasts.
Few decisions are as vital to a Net Promoter effort as choosing the person who runs it day to day. Bring in an arrogant, detached executive with limited ability to relate to front-line employees or one with flimsy experience but major entitlement, and the effort will be doomed. It’s not uncommon for a company to seek an outside expert—someone who has led a similar, successful transformation elsewhere. Hiring for experience alone, however, often results in missteps, false starts and distrust.
But when you appoint someone who has earned his or her colleagues’ trust, knows what it’s like in the service trenches and thinks like a customer, you can’t lose. This leader, whom we call the customer advocacy officer (CAO), serves not only as the customer’s voice inside the organization, but also as a guide for nervous, skeptical employees.
This infographic nicely sums up the key traits that can make a CAO successful.
It also helps when this person has the humility and perseverance of Omar Hashem, chief customer officer of Saudi Arabia’s National Commercial Bank (NCB). Omar recently discussed with me the challenges he faces running the Net Promoter System of the largest bank in the Middle East. He brings vast experience in financial services and a keen understanding of Saudi Arabia’s population, half of which is under 25 and comfortable with all the technology that Millennials routinely use.
The bank’s early Net Promoter journey was rough. Colleagues questioned almost every aspect of the system. Omar knew he needed to listen with empathy—and push forward with some force. In fact, when faced with naysayers and obstacles, he often sought inspiration from the Pixar film Finding Nemo, one of his daughter’s favorite movies.
“I kept remembering a fish. Her name was Dory. And there was a scene where they went down deep in the dark. And Nemo’s so afraid,” Omar says. “And Dory just kept singing, and saying, ‘just keep swimming, just keep swimming.’ And that ran through my head through the whole setup period. I just had to keep telling myself, ‘There is light at the end of the tunnel, and you just need to keep swimming.’”
You can hear more about Omar’s story in our most recent Loyalty Insights brief, Who should run your Net Promoter System? We’ve also been the exploring the Customer Advocacy Office and the role it plays in recent Loyalty Insights briefs. You can find the last two here: The Essential Role of a Customer Advocacy Office and The Customer Advocacy Office: FAQs.
You can also listen to my discussion with Omar on iTunes or through the player below. Click here to browse more Net Promoter System podcasts.
One of the best pieces of advice I ever received came from my uncle, a world-class physicist who later became a business executive. My uncle and his wife graciously took me in for seven years while I was a student and just starting out in my career. He liked to remind me that until you can measure something, it’s hard to get better at that thing. Learning (and most of science) depends on reliable measurement.
My latest post on LinkedIn looks at the importance of measuring relationships and interactions.
Read the post here: It’s All Lip Service Until You Measure It
People in the US are intensely loyal to their universities. Alumni brand themselves with sweatshirts, T-shirts and even underwear bearing their college’s name. You’ll find them drinking from mugs emblazoned with mascots and driving cars with rear-window stickers broadcasting their alma maters.
Some super-alums have been known to hire their university’s mascot to appear at their weddings. I even have a friend who had his alma mater’s crest tattooed on his body.
Universities depend on this fierce loyalty. Alumni fund research, scholarships and major capital improvements. They interview applicants, fill seats at football games and help raise a school’s profile. They’re a college’s product, as well as its customers and benefactors.
My latest guests on the Net Promoter System podcast work hard to fan the flames of alumni loyalty at their respective colleges. Linda Reed and Jennifer Cunningham work in alumni relations at Stanford and Cornell, respectively. On the surface, they organize reunions and other events designed to strengthen the bonds among alumni. But on a deeper level, they view themselves as “engagement officers” who work to nurture these relationships so that they endure for an alumnus’s entire lifetime.
They use the Net Promoter System to guide their efforts. While the system was developed to support businesses, Linda and Jennifer have adapted it for use in the academic world. After all, many of the same rules apply. For example, just as promoters tend to buy more from retailers they love, alumni promoters tend to donate more, go to more events and volunteer.
The Net Promoter System helps Jennifer and Linda focus on the things that truly matter to alumni, rather than event planning minutiae, such as the quality of the coffee that was served.
“It’s sort of the analogy of planning the wedding versus planning the marriage,” Jennifer says. “We want a marriage with our alums, and the event is just sort of the wedding. So even if the wedding is a disaster, as long as you have that relationship, you know you’re winning.”
During the podcast, we talk about everything from the history of alumni organizations to how the simple act of following up can help mend a soured relationship with an alum.
You can listen to my discussion with Jennifer and Linda on iTunes or through the player below. Click here to browse more Net Promoter System podcasts.
CEOs mistakenly think they can create a customer-centric culture on their own, but that’s never true. It’s always a grassroots process in which people throughout the organization actively develop and support the company’s culture. Without an engaged, empowered workforce, a company can only go so far. But those qualities don’t evolve on their own — they’re nurtured and reinforced over time by everyone in the organization.
It starts during the first 90 days by setting a tone of teamwork and inclusion. In a recent blog post on LinkedIn Pulse, I talk about the important window of opportunity that employers have during a new employee’s first 90 days at the company.
Read the post: My First 90 Days: Let Me See How I’m Making a Difference
Who likes surveys? Not me.
I hate them. As a customer, they fill my inbox. They make my phone ring. They generally make me feel guilty for not responding, and when I do take the time to respond I’m almost always frustrated by how long they are, how irrelevant many of the questions feel and how much energy it takes to answer them.
As a marketer and customer experience professional, I hate the low response rates. I hate responder bias and ambiguity of the responses. I hate the inevitable debates about methodology, and I dislike the unavoidable defensiveness from executives who feel judged more than they feel motivated to make improvements.
Richard Owen, my latest guest on the Net Promoter System podcast, also hates surveys. He even expects they will eventually become obsolete. However, he runs Satmetrix, a company that other businesses hire to send surveys, collect responses and evaluate the feedback. How does the CEO of a survey company envision a survey-less future? Here are some snippets from our discussion:
On the decline of surveys as a feedback tool:
“Surveys are likely to decline in effectiveness over time. Surveys are becoming prolific, and as they become more prolific, people are getting saturated with requests and you have what the columnists like to call tragedy of the commons. … And when that happens, our response rates to any particular company starts to decline. And if it declines enough, we end up in a position where you actually start to get adverse selection. The only people left responding are the people who maybe you didn’t want to respond in the first place.”
On the rise of social media as a feedback source:
“Unstructured social data, unstructured internal data, is a huge story. I still think it’s being written. I think that there’s some great work being done. I really like the results we see. But I don’t think that’s to say that it’s a mature spaceship by any means. I think there’s going to be continued breakthroughs and evolution there, and new ideas coming out of it.”
On the feedback companies collect on their own websites:
“Companies are typically running their own communities, tech-support communities. They’re getting a lot of customer conversation going in those things. And that’s really high-quality conversation. By definition, it’s about their product or brand. They often even know who it is that’s saying it.”
On the importance of closing the loop:
“Closing the loop and detractor recovery have always been a great way to engage people. And contrary to people’s initial expectations, it’s not a negative experience. Everyone I talk to who does it says they’re always incredibly empowered by that. … And customers always react very positively to it, even if they don’t suddenly go from detractor status to promoter status, their reaction is uniformly, ‘You’re listening to me. I appreciate the effort you’re making.’”
You can listen to my discussion with Richard on iTunes or through the player below. Click here to browse more Net Promoter System podcasts.
How do you choose a doctor or a hospital? Whether you’re pregnant and sizing up hospitals for your delivery or looking for a dermatologist to examine a mole, you will probably seek recommendations from your friends and family.
That’s because your health—and the health of your family members—is crucial. You need reliable information about how to get the best care. And healthcare is so personal that you probably want the perspective of someone you really trust.
Historically, healthcare providers have focused more on what they term “clinical outcomes” than on patient satisfaction or loyalty. But the world is changing. The cost of care rises every year, so governments and insurance companies are pressuring consumers to choose the most efficient providers. Regardless of whether healthcare is provided by private companies or by the government, quality of care has become a political issue of significant importance in many countries around the world. And yet it’s generally been tough for healthcare providers to know how well they’re meeting patients’ needs in a way that helps them improve.
In the UK, healthcare is provided by the National Health Service. In the early to mid 2000s, the NHS began to promote patient choice of providers within the system, partly in response to persistent complaints about quality of care and a sense that patients should be in charge of their own care.
In 2012 UK Prime Minister David Cameron took the controversial step of declaring that patient voice in healthcare would be a central theme of his administration’s priorities. Now, after treatments, NHS providers ask patients for feedback about their experience. The results are public, allowing other patients to make informed decisions about where to seek care. And providers can use the feedback to improve their approach.
I talked to Andrew MacPherson, who leads the strategic projects team for the National Health Service in the Midlands and East regions, in August. During our conversation, which recently aired on the Net Promoter System podcast, we discussed the Friends and Family Test, the National Health Service’s name for its customer service effort, and other challenges that are unique to healthcare.
Here are some excerpts from our discussion:
On the impact of the Friends and Family Test:
“The fact that every single hospital in England, every month, publishes statistics around the patient’s experience in that proceeding month—I think that’s quite a significant. … It makes the patient experience and the acceleration of what’s right and the alert to what’s wrong much more immediate on a day-to-day basis in one of the largest employers in the world. So I, I think that’s quite phenomenal.”
On the technology the NHS is using to collect and share feedback:
“We’ve had a range of mechanisms being introduced ranging from all the familiar ones from tech space, Web, to iPads, etc. One of the areas where we’re having a lot of traction and success now is around text-based feedback. Because quite a few clinicians, hospitals and general practitioners already have appointment reminder systems operating on a text messaging–based platform.”
You can listen to my discussion with Andrew on iTunes or through the player below. Click here to browse more Net Promoter System podcasts.
Cummins Inc. makes diesel engines. It’s an old-line manufacturing company with a storied history, and it’s been a leader in its business for almost 100 years.
But what makes Cummins really distinctive is that it competes against its own customers. Every other maker of diesel truck engines is owned by a truck company. The truck companies coordinate with their engine manufacturing divisions, with integrated engineering and a business model that consumes all of its engine production. To overcome this structural disadvantage, Cummins must work a lot harder to earn its customers’ business and their loyalty.
Complicating things further, each of its customers consists of multiple decision makers, influencers and other constituents spread across many different functional and business units. The day-to-day management of customer relationships requires all-in devotion from the Cummins team.
These are the complex situations that business-to-business companies routinely face. When you’re selling to consumers, you generally have just one person to satisfy. But when you’re working with a complicated B2B organization, the path to loyalty might cross five international sub-units, four layers of management and sometimes the CEO. Salespeople and service teams must be experts on their own products, their customers’ products and even broader industry trends.
Sure, B2B companies know they have a lot to gain from earning their customers’ loyalty. But it’s a lot more difficult to earn business loyalty these days. In a recent Bain & Company survey, 68% of executives at B2B companies said their customers were less loyal than in the past. Earning loyalty in B2B markets requires truly unique products and service offerings that advance your customer’s business goals and strategy.
Lori Cobb and Dave Crompton, my recent guests on the Net Promoter System podcast, understand these dynamics extremely well. As veteran executives at Cummins, they’ve experienced the complexities of serving business customers in a competitive global market. In their industry, producing efficient, low-cost engines just gets them to the table. Winning and keeping their customers’ business requires Cummins to adapt its business to fit into the supply chain and operations of the truck manufacturers themselves.
Cummins started using the Net Promoter System a few years ago to learn how it can serve customers better. In our discussion, Lori and Dave share some of the big lessons they’ve learned and things they would do differently.
We’ve also devoted the latest Loyalty Insights to exploring how B2B companies can adapt the Net Promoter System for their operations. While the overall philosophy and principles of high-velocity feedback and learning is the same for all Net Promoter System practitioners, applying them to B2B firms requires unique skills and capabilities.
You’ll find the latest Loyalty Insights here: Get real feedback from your B2B customers. You can listen to my discussion with Lori and Dave on iTunes or through the player below. Click here to browse more Net Promoter System podcasts.
Ever wonder how Starbucks dreamed up the Frappuccino—that frothy, creamy coffee beverage that’s now its own billion-dollar business? It has its own website, Twitter feed and a roster of more than two dozen flavors.
The line is so popular that it has moved beyond Starbucks’ coffee shops to supermarkets and convenience stores. Just the word “Frappuccino” has become so deeply embedded in pop culture—a symbol of the high-end coffee craze of the 1990s—that it earned a zinger in the Ben Stiller comedy Zoolander.
This beverage phenomenon started with a daring experiment by a persistent Starbucks store manager in San Diego. She was simply trying to please her customers and meet local demand. At first, Starbucks executives were skeptical of the idea. But her experiment succeeded because the Starbucks culture fosters creative thinking and personal service. It discourages the robotic behaviors, scripts and sales tricks that can make the fast-food industry such a soulless place to work (e.g., “Want fries with that?”).
Howard Behar, who recently joined me on the Net Promoter System podcast, helped shape that culture during almost two decades at Starbucks. When he joined the chain in 1989, it had just a few dozen stores. By the time he left in 2008, there were thousands of locations. Behar spearheaded Starbucks’ international expansion, blending the quality control of a large chain with the personal touch of a local coffee shop.
Starbucks employees consistently develop the sort of individual, human connection with customers that keeps them coming back day after day. Very few multinational chains have maintained that sort of culture through years and years of rapid growth and all that comes with it. Achieving that level of social chemistry requires a deep commitment to careful hiring, followed by rigorous coaching. At Starbucks, they encourage employees to use their emotional “antennas,” as Howard calls them, to build genuine relationships with customers during these very brief daily interactions.
It sounds complicated, but it’s a way of recreating what used to be the norm. When I was in high school, I used to fetch coffee for all the butchers at my grandfather’s meat company as part of my summer job. After just a few days, the local coffee shop owner had learned my name, my usual order and my thoughts on the losing streak of our hometown baseball team. He was a regular local entrepreneur, forming connections with his regular customers. Now, my daughter has a similar experience at her local coffeehouse, except now she visits a Starbucks.
Howard believes that loyalty is earned when companies encourage employees to be themselves and treat customers like members of their community. It doesn’t come from robotic transactions punctuated by rote recitations of canned niceties. Howard even wrote a book about it a few years ago. Now, he travels the world and helps other executives to create more customer-centric cultures.
You can listen to my discussion with Howard on iTunes or through the player below. Click here to browse more Net Promoter System podcasts.
Probably every sales clerk or customer-service rep has run into customers they never want to see again. They’re rude, obnoxious and make life uncomfortable for employees and for fellow customers. Their shouts are often laced with profanity. They abuse the rules and cut into line.
It’s time to empower employees, and recognize that not all customers are worth engaging. The Net Promoter System is built on customer feedback — but if the feedback comes from the wrong customers, then what is the point? Taking feedback seriously from the wrong customers simply diminishes the credibility of the system and alienates frontline employees.
I explore this notion of “bad customers” in my latest post on LinkedIn.
Read the post here: Big Ideas 2015: Why Companies Should Fire Bad Customers
‘Tis the season to be jolly—unless you’re one of the millions of last-minute shoppers fighting the crowds at the mall. Or you’re one of the employees who has to put up with cranky, demanding shoppers and with the incredible crush of business the holidays bring.
Amid all the stress and strain, we occasionally find individuals who stand out like angels atop a holiday tree—beacons reminding us that, in this season more than ever, it’s good to treat someone you do business with the way you would want to be treated. In my latest blog post on LinkedIn, I look at “holiday heroes,” store employees whose small gestures can brighten a customers’ day.
Read the post: Making Spirits Bright—Not Insanely Stressed Out—for Holiday Shoppers
When the Net Promoter Score debuted in 2003, perhaps its most distinctive feature was its radical simplicity. The score is based on a single, intuitive question. Its clarity appealed to CEOs, general managers and other business leaders. It wiped away the unnecessary complexity and cut through the confusing opacity of proprietary, multi-question customer satisfaction or loyalty indices.
Of course, the Net Promoter approach has always required asking the follow-up question: “Why?” Giving customers an opportunity to describe, in their own words, what they love and hate about a product, an experience or a company strips away the preconceptions of managers and researchers. With no friction or complexity, it engages a customer in sharing his or her own thoughts and feelings about the company.
A decade later, we still see many companies add a lot more questions to their Net Promoter feedback tools. When managers see a chance to communicate with their customers, they just can’t seem to help themselves. We call it “question bloat”—the tendency to add just one more question to any feedback opportunity until the questionnaire puts so much burden on customers that they rebel by either abandoning the process midstream or by not responding to a future request. In the long run, the executives’ lack of restraint is punished with low response rates.
Simplicity is surprisingly difficult to achieve and maintain. Complexity can kill any company. There are thousands of ways to introduce complexity into your customer feedback processes, and dozens of forces pushing the organization toward burdening customers to provide more and more feedback.
That’s why my next guest on the Net Promoter System podcast is trying to help companies keep it simple. With his app Promoter.io, Chad Keck offers firms a quick, easy and elegant way to collect customer feedback with minimal burden on the customer and maximum information for the company. With his radically simple approach to Net Promoter feedback, he helps companies turn it into operational improvements with no friction. Chad became a fan of the Net Promoter System while he was working at Rackspace, a longtime Net Promoter company.
Promoter.io’s self-serve platform helps users query different customer segments, create campaigns and quickly spot score trends. However, the app does not allow users to change the central question from which the Net Promoter score is derived—“How likely are you to recommend my company to a friend or colleague?”—or add other questions. In essence, this forced simplicity keeps data-hungry entrepreneurs from becoming their own worst enemy. The company made the news recently for completing a successful round of financing. It’s one to watch. (Full disclosure: Fred Reichheld, Bain Fellow and my collaborator on all things loyalty, recently became an investor in Chad’s company.)
You can listen to my discussion with Chad on iTunes, through the player below or on our podcast page. Click here to browse more Net Promoter System podcasts.
A couple of weeks ago, I found myself on a marathon shopping trip with my family. We were visiting my son at college. As autumn progressed and temperatures began to drop, he realized that his wardrobe of shorts and t-shirts was not going to keep him warm enough. Off to the mall we went.
I’m an impatient shopper at best, so after four hours I volunteered to get my son’s iPhone fixed at the Apple Store. The small store was full of shoppers playing with the new iPhone 6, getting help with iMacs and waiting for appointments with Apple’s “Geniuses.” More distressing to me was the line of a half-dozen customers just waiting to see the “concierge” for the Genius Bar. There was no way I was going to see a Genius that day. Even so, I decided that I’d rather wait in queue and see when the next appointment might be available than rejoin the quest for the perfect sweater.
After a few minutes, I reached the front of the line, finding myself face-to-face with an iPad-wielding, bearded store employee. I said, “I’m sure you can’t help me today. I can see you’re really busy.” “Right,” he said. “We’re fully booked today. Can I make an appointment for you tomorrow?” “No,” I replied, “we’re leaving town tomorrow.” “What do you need to see a Genius about?” he asked. “My son’s iPhone won’t charge completely.” “Do me a favor,” said the employee, “and stand over there for a minute until I can work down this line. I might be able to help you.”
A couple of minutes later, he called me over and asked to see the phone. He peered deep into the connector on the bottom of the phone, using his own phone as a flashlight. Then he reached into his pocket and pulled out a paper clip, which he unfolded and inserted into the hole. Like a magician pulling scarves out of his sleeve, he drew what seemed like inches and inches of lint from the impossibly small space.
“That should do it, sir,” he said with a grin. “If that doesn’t work, tell your son to bring it back. Have him ask for me.” He handed me a business card with his name and the store’s location.
This guy loves his job. He’s passionate about Apple’s products, and he wants everyone to enjoy them as much as he does. If he didn’t care much about his job, he probably would have sent me on my way, dismissing my complaint as not his problem.
Day by day, little by little, detached employees wear down customers and fellow employees. Sometimes, the proliferation of unenthusiastic employees indicates hiring mistakes. More often, employee detractors indicate a company culture that saps employee energy, enthusiasm and creativity. While management teams generally don’t intend to create such a culture, they too rarely succeed in creating the opposite—a culture that fosters energy, enthusiasm and creativity in serving customers.
It’s a well-established fact that companies that put employees in a position where they can consistently earn the enthusiastic advocacy of customers win in the long run. What’s less apparent to the leaders of many companies is how to earn the enthusiastic, energetic creativity of employees.
In our latest Loyalty Insights, we describe the employee Net Promoter System as well as how companies are using it to inspire their employees and to provide them with a way to shape their own work environment. We look at the best practices of companies with truly engaged employees, along with the tactics they use to involve their teams in problem-solving and ownership for both their own work environment and their customers’ experiences.
We also explore some of these same issues on the latest Net Promoter System podcast. In this episode, Fred Reichheld and I discuss a new employee engagement tool he’s developing called HuddleUp. It’s an app that helps employees provide feedback about their work to teammates and managers, identifying opportunities to work better together and serve customers more effectively. As you know, Fred invented the Net Promoter Score and considers engaged employees crucial to a company’s success.
Here’s the latest Loyalty Insights brief: Energetic, enthusiastic and creative. You can listen to my discussion with Fred on iTunes, through the player below or on our podcast page. Click here to browse more Net Promoter System podcasts.
In my latest blog post on LinkedIn, I look at two stories of customer service—one that made me shake my head in dismay and one that brought a smile to my face.
In the first story, a company creates a customer-unfriendly policy in the hopes of saving a few bucks. In the second story, hotel leaders reveal how, in some cases, they get more when they give to their customers.
In this world of online ratings, word travels fast. No amount of advertising can overcome customers’ stories of poor service. In contrast, who knows how far a happy customer’s account of a truly wonderful experience can travel?
Read the post here: How Nickel-and-Diming Your Customers Can Cost You
“Our average customer is a 38-year-old married woman with 1.4 children who lives in a suburban neighborhood and drives a Japanese-make minivan.” How many times have you heard an executive talk about his or her company’s average customer? How much time and money has been spent researching the habits and demographics of the average customer? How much does this customer spend, and on which products or services? How often? How do they respond to promotions? What is their average number of visits to our website?
But when we ask an executive to define more closely what we call a company’s “design target,” we often get a negative reaction: “We serve everyone. We need to appeal to the whole market so we can sustain our growth.” And then businesses spend a lot of money trying to attract and retain more of these “average” people. By meeting the needs of the broadest possible audience, these companies figure their investments will net them more customers than if they targeted a more sharply defined segment of customers.
But what if your best customers aren’t really “average” at all? What if the average customer is less loyal—and therefore more costly to serve? In our experience, this is almost always the case. Moreover, it often turns out that—somewhat paradoxically—focusing on a set of customers more narrowly can result in growing the business more quickly.
Peter Fader, my next guest on the Net Promoter System podcast, spends a lot of time pondering questions of customer segmentation as co-director of the Wharton Customer Analytics Initiative at the University of Pennsylvania. He makes the case that there is no average customer, and companies that chase the mean set themselves up to miss their potentially most profitable business opportunities.
Peter’s an actuary at heart. As he says, rather than “predicting how long it will be until someone dies, I predict how long it will be until someone buys.” His book Customer Centricity: Focus on the Right Customers for Strategic Advantage (Wharton Digital Press 2012) argues that some customers are worth more than others and that companies should make business decisions with the most valuable customers in mind, even if that means ignoring customers with less payoff potential. Peter is also a fan of using the Net Promoter System as a tool for segmenting customers.
You don’t have to be a quant to enjoy this episode. Even though Peter is a hardcore number cruncher, he has a knack for explaining how data analysis can help companies serve their best customers better.
You can listen to our discussion on iTunes, through the player below or on our podcast page. Click here to browse more Net Promoter System podcasts.