NPS Blog

Medallia webinar replay: Harnessing the economics of customer loyalty

Loyalty leaders know how valuable their most valuable customers are. It’s a simple but powerful concept.

In a webinar last week, I explained how companies can use loyalty economics to make investments that ultimately build loyalty and sustain growth. By estimating the relative profitability of promoters, passives and detractors, companies can gauge the impact of their future initiatives and allocate resources better.

If you missed the webinar, you can click here to view a replay.

The huddle: The short meeting that leads to big results

Net Promoter System podcastNo matter what size your company, keeping employees connected to the core mission can be a challenge. For frontline workers, the incessant flow of customer transactions can eventually strip them of context and meaning. Often, in an attempt to improve productivity, customer satisfaction or other business outcomes, a narrow focus on goals and metrics can distract them from what really matters: turning each customer into a profitable promoter. Back-office and managerial staff can face even stronger forces drawing them into the crisis of the day.

That’s why smart companies like Apple, Zappos and Telstra gather their employees regularly for short meetings, or huddles. They’re forums for employees to discuss how well they’re serving customers, what they could do to improve and what sort of help they need. They offer an opportunity for employees to solve problems, build camaraderie and recognize wins and losses. And they are an opportunity to recenter on the core mission of the company in a regular way.

Huddles are critical to a healthy team and company. We consider huddles the third mechanism of the Net Promoter System because they bring together the constant feedback of the “inner loop” and the larger systemic improvements forged in the “outer loop.” While these meetings may be short (usually 15–30 minutes), they’re the glue that connects individuals to each other and to the larger organization and its mission.

Fred ReichheldBain Fellow Fred Reichheld recently returned to the Net Promoter System Podcast to talk about all things huddle—what they are, how major companies use them and what makes them effective. He has spent the past two years developing HuddleUp, a digital tool that helps companies run better huddles.

Fred and I are no strangers to huddles. We have been taking part in them for years at Bain & Company. We just didn’t refer to them by that name. During what we at Bain call “case team meetings,” teams working on projects together discuss their progress, challenges they’re facing and feedback from clients. These meetings often address other important employee team topics, such as work-life balance.

Companies use huddles in a wide variety of settings. Developers at software start-ups, for example, might gather briefly each morning to share what they’re working on as they build a new product. These “agile scrums”—often conducted while standing—can help team members refocus their efforts and reenergize. The Net Promoter System formalizes two specific types of huddles. One type focuses on customers and serving them better, while the other addresses how team members work together and ways to improve the team environment. Often, teams combine these with each other or other huddle types in a sort of hybrid, or mash-up.

Like most things, running a good huddle takes practice. In the best huddles, team members prepare in advance so they can contribute to the conversation, and leaders start with open-ended questions to stimulate the discussion. Employees often take turns setting the agenda and managing the meeting. At the end, participants generally agree on actions they will take and commit to making improvements.

You can learn more about huddles in the next issue of Loyalty Insights. You can also listen to my conversation with Fred on the Net Promoter System Podcast. Subscribe to the podcast on iTunes, or listen to this episode through the player below. Click here to browse more Net Promoter System podcasts.

Subscribe to the Net Promoter System podcast on iTunes

Medallia webinar: What are the economics of customer loyalty?

Doing right by your customers so that they stay loyal and share their experiences sounds intuitive. But what is it really worth? Many companies grapple with this question.

After all, your best loyal customers stay longer, spend more, cost less to serve and recommend your company to their friends and family. Companies that don’t know the value of delighting their best customers to build loyalty often underinvest in the initiatives required to achieve it.

If you’ve ever wondered how understanding loyalty economics might benefit your business, I welcome you to join me on Wednesday, July 22 at 12 PM ET/9 AM PT for a webinar hosted by Medallia, the customer feedback software company. Among the items I plan to discuss: the key tenets of loyalty economics, how loyalty leaders build robust business cases to advocate for change and support necessary investments, and the challenges of getting it right.

Register for the webinar here

In this short video, I give an overview of loyalty economics:

The wisdom of Jeanne Bliss: Stop chasing the CEO’s pet peeves and put customers first

Jeanne Bliss of CustomerBlissWhen a company lacks a thoughtful method for listening to customers and making systemic improvements, some executives tend to jump on every middling complaint and business fad rather than tackle deeper issues.

I saw this phenomenon in action at a financial services firm. I was meeting with executives at the company to discuss its bold plan to use customer service as a competitive weapon. I expected to be blown away by an ambitious plan, but what they showed me was a list of 10 problems that had irritated the CEO so much that he demanded they be addressed. One of the listed issues involved a tech setting in the company’s mailing system that caused a board member’s friend to see his name mangled on bills and letters. Chasing the CEO’s pet peeves is not how long-term, enduring change happens.

Jeanne Bliss, who has helped companies such as Bombardier and Pella Windows become more customer-centric, says this reactionary attitude gets in the way of meaningful improvements. She recently joined me on the Net Promoter System Podcast to discuss her approach to developing the processes that support strong customer experiences at major companies.

Jeanne is probably best known for pioneering the role of chief customer officer (or as we call it at Bain, the chief advocacy officer); she has held the position at Land’s End, Microsoft and Allstate. More recently, she has coached many of these leaders at other companies, helping them to consider how their products affect customers’ lives.

Net Promoter System podcast“People chase the shiny object, and it’s interesting, but it doesn’t change the culture,” Jeanne says. “Just start with renaming the stages from the customer’s life point of view.”

Jeanne has a lot to say about how you turn around an organization that constantly chases the latest customer complaint, research report or executive field visit. In her new book, Chief Customer Officer 2.0, she shares five competencies that serve as a framework for uniting a company’s leadership around serving customers. It’s powerful advice that speaks to the struggle many companies face as they try to understand their customers.

In our discussion, Jeanne broke down some of the common pitfalls executives encounter as they try to make broad operational changes. She shared some of the companies she admires and the qualities that make chief customer officers effective.

You can hear more from Jeanne on the Net Promoter System Podcast. Subscribe to the podcast on iTunes, or listen to this episode through the player below. Click here to browse more Net Promoter System podcasts.

Subscribe to the Net Promoter System podcast on iTunes

JetBlue: Taking the turbulence out of travel

JetBlue's Bonny SimiImagine a business where customers regularly pay hundreds or thousands of dollars so they can wait in long lines, experience deep anxiety, be confined for long periods of time and be treated with little compassion or respect. For the most part, that’s air travel these days. From crowded airports and complicated security checks to baggage fees, delays and chronic overbooking, few things we pay for inspire as much intense anxiety as commercial flying.

Now add small kids to the mix. Traveling with small children is a stressful dance. Frantic parents try to juggle squirming babies and toddlers, along with all the gear they need to keep them safe and happy—car seats, diaper bags, food, comfort toys, strollers—along with carry-on bags and coats, while a line of impatient passengers forms behind them, scrambling to get to their own seats.

This is such a familiar sight. And every parent has experienced the messy, frustrating and embarrassing struggle of traveling with infants and toddlers. Yet, in all my travels I’ve seen only one airline do something about it—JetBlue. I once watched a JetBlue flight attendant entertain an infant—carrying her up and down the aisle and interacting with other passengers—so that the child’s harried mother could set up her baby’s car seat and load her gear into the overhead bins. It was such a simple gesture, but it meant so much to the grateful mom.

Net Promoter System podcastLike many executives, I’ve wondered how JetBlue instills the kind of genuine caring and proactive attentiveness in its staff that makes this sort of gesture commonplace there. On the latest Net Promoter System Podcast, Bonny Simi, JetBlue’s vice president of talent, shares the carrier’s approach to developing customer experiences that leave people talking long after they’ve landed. Her philosophy is very simple, even if executing it is hard: “It’s very much around having happy crew members who love to go above and beyond.”

Since its founding in 1998, JetBlue has been on a mission to “bring humanity back to travel.” Bonny says the company tries to hire people who enjoy engaging with customers and relish in the adventure of travel. These employees “wake up on the right side of the bed every day.” And they look for fulfillment that goes beyond their paycheck. They live to make others smile.

When new employees join JetBlue, according to Simi, they become part of a “customer service organization that happens to fly airplanes.” At JetBlue, it’s not unusual to see pilots help flight attendants tidy up the plane while on the ground, or a manager step into a subordinate’s role to reward her with a day off for good service. It’s part of creating a sense of teamwork and affiliation focused around the customer and demanding that employees do right by customers, even when it’s inconvenient.

I have often told the story about a JetBlue flight that was circling due to stormy weather on its way from Texas to New York. After spending several hours in a holding pattern, the plane was diverted to Rochester, New York, for refueling. We had been on this plane for almost six hours and weren’t going to get to the Manhattan area for at least another two. Everyone was cranky, tired and hungry, so our pilots asked JetBlue’s ground crew to arrange for pizza to be delivered to the plane. As the pies entered the cabin, the atmosphere turned from sullen resignation to friendly celebration. The gesture lifted everyone’s spirits. I imagine getting that much pizza to a landed plane late at night is no small feat. Think about all the logistical and security considerations, let alone the issue of how to pay for this spontaneous decision. Somehow, JetBlue made it happen.

Stories like these come up regularly about JetBlue. Not to say they are always perfect. But they stand in contrast to the culture philosophy of “no” at most airlines, whose policies, working conditions make everyone miserable, from the gate agent to the customer.

You can hear Bonny’s point of view on service on the Net Promoter System Podcast. Subscribe to the podcast on iTunes, or listen to this episode through the player below. Click here to browse more Net Promoter System podcasts.

Subscribe to the Net Promoter System podcast on iTunes

Customers have been talking, and companies are finally listening

customers-are-listening-220x207Companies across all industries are seeing the benefits of loyalty and trying harder than ever to foster a dialogue with customers. And best of all, companies are listening.

Sure, not a week goes by without some bizarre story of a poorly handled service call that leaves a customer irate or in tears, but overall, companies are getting better at listening to their customers. Perhaps the rise of crowdsourcing or social media or the wider use of simple customer service metrics is behind this delightful trend. 

In my latest post on LinkedIn, I look at companies that have made feedback to central to their operations.

Read the post: Customers Have Been Talking, and Companies Are Finally Listening

Habitat for Humanity: Nailing Net Promoter at a nonprofit

Net Promoter System podcastLeaders of major companies often assume they have nothing to learn from nonprofits. That’s just not true.

Corporate executives tend to underestimate the sophistication and complexity of successful nonprofits, and nonprofit leaders often overestimate the resources available in big companies. Each one discounts the experience of the other and its relevance to them.

My latest guests on the Net Promoter System Podcast prove my point. They are two leaders from one of the biggest nonprofits in the country, Habitat for Humanity. Ann Goggins Gregory, chief operating officer of the organization’s Greater San Francisco affiliate, and Mark Andrews, vice president of volunteer and institutional engagement at the international headquarters, have been active members of Bain’s Net Promoter Social Impact Forum. And they have spearheaded Habitat’s adoption of the Net Promoter System.

Ann Goggins Gregory of Habitat of Humanity San FranciscoHabitat for Humanity is best known for building houses for families in need (picture former President Jimmy Carter wielding a hammer on a job site), but it’s far larger than many realize. The company helped 1.6 million people around the world in its 2014 fiscal year through home construction, rehabilitation and repairs. Beyond building homes, the organization provided cleanup kits after devastating floods and landslides in Bosnia-Herzegovina, smokeless stoves that make cooking safer in Guatemala and shelter repair kits for typhoon victims in the Philippines.

What does it take to change lives in dozens of countries around the world? More than 2 million volunteers and annual revenue of $1.7 billion.

Mark Andrews of Habitat for Humanity InternationalUnlike big companies, Habitat manages a vastly complex ecosystem of constituents: volunteers, paid staff, aid beneficiaries, government organizations, donors and community members. Each group interacts with the organization in a different way and needs to be managed differently. The organization has been using the Net Promoter System to gauge the volunteer experience and is considering how it might deploy it elsewhere in the organization.

Like many organizations that are early on the Net Promoter journey, Ann and Mark have wrestled with technique and technology, with closing the loop and maintaining a focus on learning instead of evaluation. After years of using long surveys to gather feedback but getting very low response rates, Ann was thrilled to reap more responses and richer answers from her Net Promoter experience. Still, the effort has not been without its pain points.

You can listen to this candid discussion on the Net Promoter System Podcast. Subscribe to the podcast on iTunes, or listen to this episode through the player below. Click here to browse more Net Promoter System podcasts.

Subscribe to the Net Promoter System podcast on iTunes

Birchbox: Unboxing a fantastic customer experience

hayley-barna-120x113I’ve been getting a box in the mail every month this year. Inside I usually find four or five samples of products I’ve never heard of, like Billy Jealousy Liquid Sand Exfoliating Facial Cleanser or PARLOR Re-Workable Hold Paste or Das Boom Everywhere Lotion Detroit, whose distinctive scent is “a trio of tobacco, musk and motor oil that invokes the Motor City,” according to its label.

I would never have purchased these products off a store shelf. These samples were selected and sent to me by Birchbox, a five-year-old e-commerce company that has devised a brilliant business around the idea of getting customers to pay for beauty and grooming samples. Yes, samples. The ones that companies usually give for free to entice customers to buy a full-size product.

For a monthly fee, Birchbox subscribers receive a box each month, and inside they discover several high-end beauty product samples. Early on, each customer shares some personal information to help Birchbox select the right combination of samples. Many go on to buy full-sized products from Birchbox’s website. The most ardent Birchbox fans consider their deliveries a special treat. Some of them even post YouTube videos of themselves opening their boxes with delight.

Net Promoter System podcastCo-founder Hayley Barna, who worked at Bain early in her career, recently joined me on the Net Promoter System Podcast to explain how she came up with the idea for Birchbox, and how it creates this unique customer experience. She shared some of the secrets to maintaining the quality of the experience despite the company’s rapid growth. Birchbox now has more than 1 million subscribers and it’s on its way to becoming a household name.

“The first interaction that we have with a customer is, ‘Tell us a lot of information about yourself, so that we can give you a fantastic experience,’” Hayley says. “So we really live and die by that close relationship to our consumer.”

Those close relationships with customers are the key to the company’s rapid growth. Hayley and her business partner, Katia Beauchamp, track each customer’s purchasing behavior over the span of their Birchbox relationship. They look for patterns that might inform future offers and guide business decisions. They use the Net Promoter System to keep their fingers on the pulse of the customer experience, identify areas of weakness and find new opportunities to improve.

This careful monitoring, along with Birchbox’s vast customer data, makes it a great partner to consumer products companies, which often struggle to learn about and form relationships with the customers who buy their goods. Some of these manufacturers are so eager to work with Birchbox that they produce samples exclusively for its customers.

What’s the secret behind Birchbox’s runaway success? You can unbox it by listening to Hayley on the Net Promoter System Podcast. Subscribe to the podcast on iTunes, or listen to this episode through the player below. Click here to browse more Net Promoter System podcasts.

Subscribe to the Net Promoter System podcast on iTunes

The three qualities of the Net Promoter System’s “outer loop”: Answering the call for culture change at AT&T

Net Promoter System podcast“We have over 5,000 customer experience initiatives currently in flight across the organization. I know two or three of them are probably going to be really high impact. I also suspect that while most of them are really good things to do, I am almost certain a large percentage are just a waste of time. Here’s the problem: I don’t know which two or three will really move the needle. And I can’t stop the thousand or so that are just a waste of time.”

The above statement was made by the president of a business unit at a large insurance company, explaining his frustration with his organization’s ability to make progress on improving the customer experience.

True loyalty leaders solve this problem by creating a portfolio of high-impact investments that will make a big difference for their customers. They assign talented resources to tackle each one, develop a clear implementation plan and cultivate support from across the company. In a large organization, creating and managing this portfolio requires a process for identifying and prioritizing the opportunities that need improvement and allocating the right resources toward that end. True loyalty leaders don’t just tackle the right priorities, they also communicate their progress and results with employees, building trust and pride.

In the Net Promoter System, we call this mechanism the “outer loop.” It identifies, prioritizes, allocates resources to and manages the customer-friendly changes that employees and teams can’t make on their own. The outer loop works in tandem with the Net Promoter System’s “inner loop,” which is the process for fostering rapid individual learning and customer intimacy through immediate, tangible feedback, coaching and follow-up.

A strong outer loop has three qualities:

 It’s robust, using input from customers, employees, benchmarking data and other sources to guide decisions.
 It’s rigorous, so it can gauge how a given initiative might affect retention, revenue and other measures.
It’s transparent, so it inspires confidence among employees who can see the company’s efforts to improve.

John Dwyer of AT&TJohn Dwyer, the senior vice president for customer experience at AT&T, joins me on the latest episode of the Net Promoter System podcast. He and his team have developed a robust, rigorous and transparent outer loop at AT&T that has enabled the company to become a J.D. Power leader in wireless customer service and purchase experience.

AT&T has used the approach to evaluate network upgrades, service improvements and the ways it supports its frontline employees. Its process is so finely tuned that the company knows the 13 tasks that customers need to be able to complete to be happy with their mobile phone service. That allows the company to size up projects based on its potential to deliver what really matters to customers.

AT&T has also forged one of the most well-developed employee “suggestion boxes” that I’ve ever heard of. When a frontline employee faces a question he can’t answer or a problem he can’t immediately fix, he can use AT&T’s homegrown “Hero” system to request a suitable solution from an internal expert. If the employee isn’t happy with the expert’s response, he can challenge the expert to find a better answer.

“There are two kinds of employees inside our company: Those who support our customers and those who support those who support our customers,” John says. “We’ve got to make sure that those frontline employees feel that sense of support within the business.”

When executives use the outer loop effectively, like they do at AT&T, they let employees know that the company supports their efforts to serve the customer. To learn more about the outer loop, check out our latest issue of Loyalty Insights, which explores some of the common challenges and pitfalls that companies face as they develop an outer loop.

To hear John discuss AT&T’s approach to customer experience and the process of improving service at a large company, check out the podcast on iTunes or through the player below. Click here to browse more Net Promoter System podcasts.

Subscribe to the Net Promoter System podcast on iTunes

At Disney, the show must go on

Net Promoter System podcastImagine that 20 million people depend on you to create a magical vacation experience for their family every year. Imagine leading 40,000 employees operating four theme parks and 20 resort hotels spread over an area larger than the city of San Francisco. On top of that, imagine running multiple shopping and entertainment districts, water parks, golf courses and the ESPN sports complex. That was Lee Cockerell’s job for over a decade. He was EVP of operations for Walt Disney World in Orlando. Just the logistical challenges of that role would overwhelm most leaders.

But the logistics aren’t really what interests me. And Lee, who retired a few years ago, mastered the logistics and complexity winningly. Much more fascinating is the question of how Lee and his team so consistently—day in and day out for years on end—created the kind of experiences that left customers so delighted they just couldn’t wait to visit again and tell their friends.

lee-cockerell-disney-120x113And that’s the key to Disney’s success: repeat business and word of mouth. About 70% of Disney’s visitors on any given day have been there before. The average customer comes back every three years for life. Walt Disney World’s economics depend on that repeat business. “That’s why we focus on trying to make the experience so good that they want to come back to us over and over,” says Lee.

Lee is my guest on the latest Net Promoter System podcast. He told me that Disney gathers data on customers’ experience at a level most companies can only dream about. It surveys 2 million guests a year on the Internet. It has teams armed with iPads roaming the park, interviewing guests while they’re still in the middle of the experience. It tracks how guests flow through its transportation system, hotels, restaurants, shops, shows and rides. And it uses this data to fuel its guest experience innovation pipeline for the resort.

Customers told Disney, for example, they wanted more certainty about what they would spend on food in the parks. So Disney introduced a meal plan for the resort, now used by more than 50% of guests. Customers didn’t know they wanted free transportation to and from the airport, but Disney’s research suggested that getting to and from the airport with kids and luggage in tow was a common source of anxiety. Once the company put an airport transportation system in place, complete with end-to-end baggage handling that takes guests’ bags from airport baggage claim to hotel room and back, the company’s hotel occupancy rate rose 10%.

Some of these innovations have direct payoffs. Even though the meal plan offers a great deal for guests, for instance, it increased food revenue because meal plan guests eat almost all their meals at Disney restaurants. Other innovations might seem like pure expense, such as the decision to install Wi-Fi capacity throughout the Disney properties. But it’s all driven by a desire to make the customer experience so seamless and unforgettable that it creates enthusiastic promoters of Walt Disney World.

Ultimately, of course, the key to such an experience lies with tens of thousands of employees—cast members, in Disney parlance. On that front, Disney shows a remarkable combination of what In Search of Excellence authors Tom Peters and Bob Waterman once called loose-tight principles, and what we at Bain call “leading by letting go.”

On the one hand, Disney expects every cast member to look the part, play the part and “act happy” every minute of every working day. “Cinderella can’t have a tattoo on her neck, and Mickey can’t smoke,” Lee points out. “We’re putting on a show, and that show’s got to be the same every single day.” On the other hand, Disney gives individual cast members a great deal of authority to solve any problem they encounter. A little girl gets wet in a rain shower? “The cast member has the authority to give her a [new] dress at no charge, or to replace her Mickey Mouse doll or to get her a new ice cream cone.”

Lee discusses all this and more on the podcast—including what it takes for other companies to emulate Disney’s world-class practices. You can listen to the discussion on iTunes or through the player below. Click here to browse more Net Promoter System podcasts.

Knowing when an interaction needs a human touch

linkedin-dont-send-technology-to-solve-human-problem-220x207Banks, retailers, and companies in just about every industry are expanding their online and mobile tools and finding new ways to serve customers through screens rather than at a counter. Without a doubt, a strong digital presence is critical to success in today’s business world, but it’s not enough. Some customers will always want to talk through complicated problems with another person, especially when the questions are sensitive and personal.

The smartest minds in business know which customer interactions benefit from a human touch, and the best companies know how to blend the best aspects of the digital and physical customer experiences.

In my latest post on LinkedIn, I look at the ways that some companies use technology in a way that undermines their service efforts.

Read the post here: Don’t Send Technology to Solve a Human Problem

Taking the temperature of temps: Building relationships that last (even if they’re not meant to) at Elwood Staffing

Net Promoter System podcastWhen you decide to use temporary employees to fill a role in your company, you generally do it because you don’t want the burden or expense of bringing someone onto the payroll permanently, right? Temp jobs are typically transitory, often unpleasant and rarely central to the mission of the company. That’s why managers are willing to delegate the hiring of temporary workers to an agency.

So why would a staffing firm work hard to gather feedback from the temporary employees it places with temporary employers?

Alan Balmer and Fernando Cadena (pictured right) of Elwood Staffing provided some insight on this puzzle when I spoke to them recently on the Net Promoter System podcast. When you hear them talk about it, the whole thing starts to make perfect sense.

Elwood is a large temporary employment agency based in Indiana. It places temporary employees in many different jobs in a variety of industries—automobile manufacturing, oil and gas, warehousing and so on. Its temporary employees might stay on the job for a month or for many months. Similar to a lot of business-to-business companies, Elwood focuses on building long-term partnerships with its clients so that when a company needs extra help, the first vendor it calls will be Elwood.

Fernando CadenaBut customer loyalty in this business is complex, because human beings are involved. If employees don’t like their placements—or if it’s just a bad fit between an individual and the job to which he or she is assigned—the work will suffer, and turnover will be high. That’s costly both to Elwood and its clients. So it’s in everyone’s interest that the temporary employees feel fairly treated, appropriately paid and listened to when they have concerns.

Fernando, who is director of associate engagement, says that addressing this issue was challenging. The company had to “find a way to collect feedback from our [temporary] employees and then … provide that feedback to the clients where our employees were working and also to our internal teams so that we could make some changes to make it better for our folks and improve their experience.”

Enter Net Promoter. Fernando read The Ultimate Question 2.0 and liked the simplicity of the feedback methodology. Before long he was pulling Elwood associates off the line at clients’ workplaces and asking them how likely they would be to recommend this company to friends or colleagues. He also asked an important follow-up: If the company could make improvements, what would they be?

You can hear on the podcast some of the interesting issues and opportunities he uncovered. But more important than the specifics they raised might be the process: Temporary employees were grateful simply to have a voice. And the systematic feedback data enabled Elwood to have productive conversations with its clients about the workplace issues that temporary employees raised. Clients who acted on the concerns found that turnover decreased and the quality of work improved. Those that failed to act, not surprisingly, found the opposite. As a result, Elwood not only improved the quality of experience for its temps but forged closer relationships with its corporate clients.

This use of the Net Promoter System differentiates Elwood from its competitors, says Alan, who is vice president of workforce solutions at the firm. “From our perspective, it’s very important to retain [clients] and demonstrate to our existing client base that we are committed to you,” he says, and investing in Net Promoter “is a small cost in order to retain the clients that we have and keep them feeling happy.”

So there it is: A metric originally developed to help earn enduring loyalty is being used in a situation that everybody knows is temporary. Yet it’s completely logical. And it’s good for everyone—Elwood, its clients and its associates alike.

You can listen to my discussion with Alan and Fernando on iTunes or through the player below. Click here to browse more Net Promoter System podcasts.

Warby Parker: Seeing the eyeglass business through a new set of lenses

Dave Gilboa - Warby ParkerRoughly half the adult population of the US wears eyeglasses. Until recently, I never did. But now that I’m getting a little older, I need corrective lenses to read anything closer than about a football field away from my face.

I’ve noticed several things about eyeglasses. First, the shape and design of a pair of glasses really impacts how you look. For me, there’s a big difference in how I look wearing round, oval or rectangular lenses. And the frames matter. They can be nearly invisible or quite prominent, metal or tortoiseshell, light or dark. Second, they cost a lot! Sure, you can pick up some cheap reading glasses at the drugstore for well under $20. But if you need prescription lenses and want them to look nice, get ready to spend a few hundred dollars. Finally, the custom ones can take a really long time to arrive from the eye doctor. Mine seem to take around a month every time I need a new pair.

Dave Gilboa and his cofounders at Warby Parker are trying to change all that. Five years ago, they started selling glasses over the Internet at $95 a pair, undercutting most opticians. Their goal is simple: They want to make glasses so affordable and easy to buy that you’ll want to own several pairs, even coordinating them with your mood, your clothing or the occasion. After all, you wear them on your face, and they’re one of the first things people notice about you.

Net Promoter System podcastIt wasn’t an easy proposition. “People tend to be very deliberate and picky when they’re selecting glasses,” says Dave, who recently shared his experience on the Net Promoter System podcast. And, of course, every pair of prescription glasses must be custom-made after someone places an order.

Dave also realized that the fledgling company had little that was proprietary—no intellectual property, no new cutting-edge technology. “It’s not rocket science to figure out how to source affordable products globally these days,” he says. “So we realized other people could copy that.”

Therefore, he and his partners concluded, fanatical attention to customer experience would be essential to Warby Parker’s success. They would have to build a brand and a reputation that created positive word of mouth. Before launch, the founders “camped out for hours in optical shops just to observe how people are shopping for glasses,” Dave says. They saw how important it was for consumers to try on different frames, get advice and make sure everything was just right before they ordered.

In response, the company initiated a unique “home try-on” service that allows customers to choose up to five frames on Warby Parker’s website to try on at home. The company pays all the shipping costs, so it’s not the cheapest service, but the conversion rate is high enough that the economics work out. And it’s a great marketing tool—the buyer’s friends and family members often learn about Warby Parker.

Warby Parker’s approach is working. Its online sales have boomed. It has opened 12 physical stores in cities around the US, and they’re doing well. Recent speculation among investors gives the company a potential valuation of more than $1 billion. Fashion has also played a role in the company’s success, of course—Warby Parker’s elegant designs are wildly popular among young, hip shoppers.

The company has relied on Net Promoter feedback to maintain and continue to improve its outstanding customer experience amid this growth. Dave says the Net Promoter Score is “the leading indicator for the health of our brand and the best indicator of how good a job we’re doing serving our customers’ needs.” When the score recently dropped several points, the company looked closely at detractors’ comments. Increased shipping times—a result of rapid growth—were a particular sore point. So the team quickly developed an action plan to get orders out faster.

Dave talks about much more on the podcast, like the thinking behind Warby Parker’s decision to open physical stores and the critical importance of repeat and multiple purchases. You can listen to the discussion on iTunes or through the player below. Click here to browse more Net Promoter System podcasts.

Net Promoter, pay and predictable (but unintended) consequences: How to avoid the most common traps

Net Promoter System podcastHere’s how it usually goes. A CEO or division president decides that it’s time to get serious about customer loyalty and decides to use the Net Promoter System as a lever for change. Executives tell themselves that “anything that is really a priority must be part of our goals and incentives,” and they take the obvious first step of setting NPS goals and linking them to incentive compensation—bonuses. Often the link extends throughout the organization, including everyone from CEO down to the frontline employees who interact with customers every day.

What happens next? Well, because it is actually hard to earn customer loyalty, and because NPS is new to them and not yet well understood, employees and their managers begin by criticizing the new metric. When that doesn’t work, they very predictably move on to analyzing in great detail subtle changes in scores, explaining away every low score as either an outlier or a result of some factor beyond the control of their own functional group. Pricing, for example, is a perennial favorite of sales teams, while policies and product features seem to surface regularly in call centers. Inadequate IT also seems to be an easy target.

Eventually, however, almost every company that leaps to set goals and incentives based on NPS in the early days finds that some significant number of employees begin coaching customers about how to respond to the company’s requests for feedback. They start begging for top scores, as so many auto dealers do. In the worst cases, the idea comes from their bosses, who themselves feel frustration with the team’s inability to quickly move the scores. Often, they sanction crafty ways to game the system, such as figuring out how to exclude dissatisfied customers from the survey database.

Sure enough, scores begin to rise—only senior executives don’t really understand why. And the improvement, of course, is wholly illusory. Even more dangerous are the side effects. Customers feel used. Employees feel the company lacks integrity.
Fred ReichheldSo that’s the trap. To learn how to avoid it—or how to escape it if it has already ensnared your company—you’ll want to tune into my latest podcast. Net Promoter creator Fred Reichheld and I discuss the specific conditions that must be met before you link scores to compensation. We also talk about how to fix things if you have done so prematurely. (Hint: The first step is to break the link—but you have to do so carefully, so that people don’t misinterpret the move.)

I’ll leave the details to the podcast. But there’s a fundamental principle here that Fred emphasizes, and that underlies our practical recommendations. People don’t work for money alone. Sure, they have to be paid fairly. But the real satisfactions of a job come from accomplishing something, from serving someone, from feeling like a valued member of a winning team.

“Part of the solution here has to be refocusing the energy on intrinsic motivation,” Fred said to me. “The truth of the matter is that our bonus is not what’s going to make our lives worth living.”

I think that’s why so many successful Net Promoter companies go out of their way to recognize people’s contributions in nonmonetary ways. They don’t just give out the usual pats on the back—they create stories about people and teams who did remarkable things for customers, and they spread those stories throughout the organization. (For a great example, watch this video about TD Bank.) The most powerful form of recognition, moreover, comes from a person’s peers. If an employee regularly wins recognition from peers for living a company’s values, says Fred, that should be part of the permanent record and should figure in performance reviews.

Everyone knows that incentive compensation can be a powerful motivator. But unless companies are careful, they can wind up incentivizing the wrong things and sending the wrong messages about what’s important. That’s why both Fred and I always urge companies to use great care in linking pay to NPS performance.

You can listen to my discussion with Fred on iTunes or through the player below. Click here to browse more Net Promoter System podcasts.

Would you recommend your town to a friend? How a ski town uses Net Promoter to grow the tourist trade

Net Promoter System podcastSteamboat Springs, Colorado—the entire town, not just the ski resort—is using the Net Promoter Score to help make itself more customer-friendly.

Yeah. You read that right. A town. We at Bain have a lot of experience helping big companies adopt the Net Promoter System. But a town? That was a new one. So I asked Jim Clark (pictured below right), CEO of the Steamboat Springs Chamber Resort Association, to tell me all about it on a Net Promoter System podcast. Jim was joined by Rob Perlman (pictured below left), head of sales and marketing for Steamboat Ski & Resort Corporation—a good thing, as it turned out, since the ski company has been using Net Promoter for years and was one of the inspirations for the town’s pathbreaking move.

Jim Clark of Steamboat Springs Resort Chamber Association

The ski company decided to employ Net Promoter for the same reason a lot of companies do: to set the resort apart from competitors. “I’m constantly saying … we all have green trees, blue skies, white snow,” says Rob. “What differentiates our resort from the others? It’s the service we provide, the experiences [our guests] have, the lasting impressions we provide. … That’s what’s going to make people select Steamboat over our competitors, who all have the same stuff.” Feedback from Net Promoter has helped the company create a customer-centric culture, maintaining high levels of service and friendliness among its extensive staff.

But there was a problem. Visitors “don’t differentiate between where the resort stops and the town begins,” as Rob puts it. A customer’s overall experience at Steamboat depends as much on airport personnel, bus drivers, restaurant waitstaff and other service providers as on ski-company employees. Moreover, Steamboat as a community attracts summer visitors as well as winter ones, and the ski company is far less active in the summertime.

So that’s when Jim Clark and his colleagues got the idea. What if the whole town—or at least the Chamber Resort Association’s 832 members—adopted Net Promoter?

Rob Perlman of Steamboat Ski & Resort Corporation

That’s the effort that is under way now. The association began training local businesses. It also began gathering systematic feedback from visitors, primarily in the summer. Jim would be the first to acknowledge that the system is still in development—for example, many of the responses are anonymous, which makes it impossible for anyone to close the loop when a visitor offers a complaint or a suggestion. But the feedback has already underscored the importance of certain key events in the overall customer experience, such as how a customer is treated at the airport and what happens if there’s a mistake with a reservation.

Most important so far is a sense among local businesses that the culture is changing. According to Jim and Rob, the community has begun to feel that Steamboat Springs is improving on the Western friendliness and great service it has been known for. “There’s a real sense of pride” about Net Promoter, says Jim. “It’s been very much embraced.”

To hear more about how a town can use Net Promoter, listen to my discussion with Jim and Rob on iTunes or through the player below. Click here to browse more Net Promoter System podcasts.

You can also find an article in the New York Times about Steamboat’s great experiment.