“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.
Last year, almost 40% of American customers bought at least one new product from a bank. Despite bankers’ intense focus on cross-selling, only half made that purchase from their primary bank. This pattern, more or less, was repeated in more than 27 countries, according to Bain & Company research on 190,000 consumers.
Bankers all over the world have become increasingly concerned about earning the loyalty of their customers. While they have long had cross-selling, share of wallet and customer satisfaction on the list of topics they discussed, very few banks historically invested in earning the ardent advocacy of customers required to succeed. In the US, the primary source of growth for most banks came from mergers once the regulations changed to allow interstate banking. Many banks relied on an ever-growing list of fees to grow revenue.
Those sources of revenue, however, have largely run their course. Many banks are precluded from acquiring their competitors by regulators worried about antitrust issues. Others are precluded for reasons of regulatory limits on their capital spending. Fee revenue has come under pressure as regulatory agencies have more and more come to the defense of consumers.
Now, bankers who previously didn’t take loyalty seriously care a lot more. They’re competing for a shrinking pool of new customers, with a shrinking variety of available sources of new revenue growth forcing them either to deepen their relationships with their existing customers or poach customers from their rivals.
What can banks do to restore growth? Is it now time to focus on regaining customers’ loyalty? These are questions my next guest on the Net Promoter System podcast has set out to answer. Gerard du Toit, a partner at Bain & Company, has lead the firm’s research on customer loyalty in retail banking for several years, and has been digging deeply into the topic of how and why customers choose to do more or less business with their bank.
Gerard’s research shows that earning bank customers’ loyalty requires bankers to improve the banking experience so that the customer benefits as much as the company. That means using digital tools to make simple transactions—such as depositing a check—easy to do at home. This then frees up the branch to be a resource for more complicated interactions, such as applying for loans and getting investment advice.
Many banks have dramatically improved their customer experience, even turning once-punitive overdraft fees into teachable moments that leave customers feeling that their bank is on their side. The lessons retail banks are learning apply to other industries, especially those that rely on people who subscribe to their services. I think you’ll find our discussion enlightening, even if you’re not a banker.
Ever wonder why Ritz-Carlton hotels serve afternoon tea? You know, that light “meal” with the fussy cucumber sandwiches and miniature eclairs on tiered platters that seem more fitting on Downton Abbey than in a 21st-century hotel restaurant.
After all, a proper tea service is undoubtedly expensive to do well when you factor in the cost of pastry chefs, formal waiters and maybe a classical pianist to set the right ambience. For a fixed price, patrons can linger, talk and sip a pot of tea—not order the finest bottle of pinot noir or some artisanal charcuterie.
Tea service is a relic from a bygone era, but hotel legend Horst Schulze would never think of getting rid of it. As he explains on the latest Net Promoter System podcast, afternoon tea lends an air of opulence that lets people know that his hotels are the best in town. In Net Promoter-speak, it gives people a remarkable experience – the kind of story they’ll want to tell their friends.
Horst would know. He’s one of the masterminds behind the Ritz-Carlton “mystique.” During his 20 years at the hotel chain, he helped cultivate an impeccable level of service that set the gold standard for high-end accommodations. He even coined the often-quoted motto, “We are ladies and gentlemen serving ladies and gentlemen.” Now he’s bringing his philosophies to a new breed of luxury hotels under the Capella brand.
Horst is a straight-talking and compelling advocate of involving front-line employees in running the business. And he believes deeply in trusting employees to do the right thing, as long as you’ve hired the right people in the first place. He even empowers staff members to spend as much as $2,000 to keep a customer happy. If he gains a lifelong customer in the process, he considers it money well spent. He knows how much that customer is likely to spend over a lifetime.
Too many leaders seem to wish that culture change would just happen organically, effortlessly. In their minds, all they need to do is develop a well-worded mission statement and a vision for the future that fits on a nice PowerPoint slide. Get the organization to understand the statement and buy in—maybe even involve some employees in crafting it—and then put it on wallet cards, posters and the company’s intranet. Maybe they’ll buy some Lucite paperweights to place on employee desks to remind everyone of this new perspective each day.
And then these leaders move on to the next issue, the next crisis, the next budget meeting, hoping that the organization will change now that everything is so well articulated and prominently displayed. But, as we all know, that’s not how it works.
Culture change requires hard work and patience. You not only need a clear vision of the future, but you also have to define the new set of behaviors people will have to exhibit. Maybe more important, you need to create mechanisms, processes and policies that reinforce those behaviors. You must find ways to ensure that decisions are aligned with the company’s objectives and values, and craft procedures to make the new behaviors easy to adopt, which often requires technology or process support. There are dozens, even hundreds of details to address.
So who does all that work? Most successful Net Promoter companies create a central team that leads the effort. This team goes by different names in different companies. One NPS Loyalty Forum member calls their company’s team the Advocacy Program Office, while another calls it the Customer Champion Organization. Whatever the name, this group provides the expertise that supports a robust Net Promoter System.
In our latest episode of the Net Promoter System podcast, Herman Miller’s Pam Carpenter returns to talk about the office furniture maker’s NPS implementation. We’ll discuss the roles of a customer advocacy office and the progress that Herman Miller is making in selecting a technology vendor that supports their Net Promoter System. Listen in and hear about their progress.
Banks are working hard to cultivate loyalty just to keep pace in an ultra-competitive market. In the process, they’re doing many things right, as I explain in my latest post on LinkedIn Pulse.
They’re using technology to make easy transactions fast, and beefing up their branch expertise to make difficult transactions less painful. More importantly, they’re gathering regular feedback, listening closely to their customers and making the changes that create a memorable customer experience. For these reasons, I think we can look forward to better and better banking experiences in the future.
Read the post: How banks are bringing back the love
Suppose I’m a customer of yours. You and I have recently interacted. I was a little disappointed in how you served me and my company. I have some feedback about my experience―how it made me feel and what I think you might be able to do better in the future. For example, I might have a particular point of view about how prepared you were for our phone call or how you handled a specific question I asked.
It will be up to your boss to decide whether to pass along my feedback. Maybe she will. Maybe she won’t. Perhaps she’s worried that you are having a bad enough day, already. Or maybe she’s not having such a great day herself and wants to avoid the hassle of delivering even constructive feedback to one of her employees.
Moreover, it’s up to her to decide whether to pass along my feedback exactly as I provided it, or to sugar coat it, softening the blow to you and obscuring some of the details.
How would you feel knowing that your customer had shared feedback with your boss, but being unsure what, exactly, that customer had said?
If you’re like most of us, you’d be frustrated―unless you have the opportunity to hear the customer’s feedback quickly, directly and in the customer’s own words. Even if it hurts a little bit initially, you want to know you can do a better job in the future. The truth is the best employees just want to do a great job for their customers, and honest, direct and immediate feedback helps you do that.
So why do so few companies provide simple ways for frontline employees to hear feedback directly, immediately and in the words of the people they serve? It’s a challenge that our next guest on the Net Promoter System podcast has set out to address.
Amy Pressman, cofounder of the customer experience software maker Medallia, says that companies should always share customer feedback with frontline employees, even if it’s awkward. She has a wonderful perspective on how great companies incorporate customer feedback into their day-to-day operations, and she offers some of the best practices of customer-centric companies.
Medallia and other providers of technology, as well as other support for the Net Promoter System, can be found on the vendor section of the Net Promoter System website.
So many companies today suffer from survey diarrhea, constantly bombarding their customers with long, pointless surveys. These surveys usually ask for 10 or 15 minutes of a customer’s time and rarely lead to any meaningful changes.
My latest post on LinkedIn delves into this pervasive problem. The next time you get a survey, ask yourself whether it’s worth your time to fill out, and whether you expect anything to happen if you do. If either answer is no, do what I do—throw it on the electronic trash heap.
Read the post: Why I deleted your survey
So you’ve run some closed-loop feedback pilots using the Net Promoter System. You’ve learned a few things. Now what do you do?
That’s the question Pam Carpenter and Michael Ramirez face as they bring Net Promoter to Herman Miller. We’ve been following their progress on the Net Promoter System podcast all year, and Pam and Michael are back in the latest episode to discuss some of the challenges they’ve faced and lessons they’ve learned.
Questions we explore in our discussion include: How fast should the office furniture maker move forward after its initial NPS pilot? What should be the process for expanding its efforts? Should the company scale up from the initial prototype within a particular business unit or should it widen its scope by bringing the system to other parts of the business? What kind of IT support will the system need?
Pam and Michael are also grappling with some common issues that companies that sell to other businesses typically face. It all makes for a thoughtful and interesting discussion.
Net Promoter practitioners love to talk about NPS benchmarks. They want to know how their companies measure up against “typical” or “comparable” companies. A well-constructed benchmark samples all target customers for a certain product or service, including those of competitors and even alternatives. Competitive benchmark Net Promoter Scores provide an objective and fair basis for comparing your company’s feedback with the feedback your competitors earn. Done right, they can provide the basis for goal setting and prioritization at the highest levels of a company.
But too many companies misuse benchmarks. Almost every day, it seems, we see another press release or blog post in which a company (wrongly) proclaims its NPS superiority over Apple. As a result, there’s been a pretty strong backlash against NPS benchmarks. And I’ve personally locked horns with some of the people who have been most critical of using them.
My next guest on the Net Promoter System podcast is one of those people with whom I’ve locked horns in the past. He says that many companies should ignore benchmarks altogether, especially small companies for whom an appropriate NPS benchmark might not even exist. Adam Ramshaw, founder of Genroe in Sydney, Australia, says it’s better to focus on increasing a company’s score over time and building a system of constant improvement. Adam discussed his position in a recent post on Genroe’s blog. At the end of the day, it turns out, he and I agree that benchmarks are useless if you’re comparing apples to oranges.
Adam’s firm helps other companies implement the Net Promoter System and advises them on customer service.
In our discussion, Adam also shared his perspective about how NPS can help service companies bring total quality management-like approaches to their operations. Total quality management—a philosophy that relies on statistical process control and simplifying operational mechanisms to eliminate production variables at factories—helped Japanese automakers gain an edge over American companies in the 1980s. These tactics helped Japanese car companies sell high-quality cars at shockingly low prices.
If you’ve ever had a job where you interacted directly with customers, you know how hard it can be to deal with someone who has had a bad experience. Frustrated customers engage in a range of behaviors, from mild protest to begging, bargaining, asserting their rights or importance, or simply enraged venting. Whether the cause was a defective product, a mistake or poor service, your gut probably told you to try to calm down the customer, smooth over the situation and move on.
In fact, once you finished with that interaction, you probably just wanted to put it out of your mind. Certainly, the idea of re-engaging that customer—calling back to discuss the situation, ask for details and learn more—was probably not high on your list of things you might enjoy doing. But sometimes that’s the only way to get to the root cause of a complaint so you can learn more effectively, repair the relationship with that customer and even address issues that might be more pervasive than you realize. Fixing the problem and letting the customer know—a process we call “closing the loop”—is a critical part of the Net Promoter System and a powerful way to build loyalty.
In the latest episode of the Net Promoter System podcast, Herman Miller’s Pam Carpenter returns to tell us about the progress the office furniture company has made so far. During our conversation, Pam reviews some of her team’s early experiences with follow-up calls to customers. She also discusses an interesting experiment the company is conducting with a customer who agreed to let Pam’s team observe his efforts to get a broken chair fixed, allowing them to see the complaint process through the customer’s eyes.
Pam has also been wrestling with some typical questions Net Promoter practitioners face at this stage of the NPS journey: How do you improve response rates? How should you address customer experiences that span multiple interactions? How do you improve the quality of the feedback?
This article originally appeared on LinkedIn.
We’ve all heard of “paying it forward”—the idea that one thoughtful act on someone’s part can touch off a chain reaction of good deeds. I’ve posted before about how companies can get into the act through intelligent acts of kindness. These are simple, inexpensive gestures that brighten a customer’s day and generate loyalty.
But some commenters on my post questioned whether companies can ever be expected to act in a generous spirit. Others wondered whether a company can really hope to engender this kind of behavior in their employees. Continue reading
This article originally appeared on LinkedIn.
Recently a colleague’s son decided to cut the cord to his cable provider. He bought a Roku stick so he could stream movies and TV shows from Netflix, Hulu and others. He installed a high-quality antenna so he could pick up over-the-air channels from neighboring cities. “I was surprised,” my colleague said, “because he’s a big Red Sox fan, and those games are the one thing he can’t get. But he was completely fed up with the cable company’s terrible service and the expensive bundled pricing.”
In cutting the cord, the young man became part of what service providers call churn, meaning turnover among customers. When my Bain & Company colleagues recently studied churn, they found that most telecommunications and media companies lose between 2% and 2.5% of their customers every month. For a company with 5 million customers, that churn rate means that about 1.3 million customers and $2 billion in revenue vanish each year and must be replaced. Continue reading
Every company needs rules and traditions, but if left unchecked, restrictive policies can stymie creativity. They can give rise to what my next guest on the Net Promoter System podcast calls “invisible fence syndrome.”
Like a dog that’s been zapped too many times while trying to go beyond those invisible electrical fences so popular in suburban yards, employees with this affliction stop offering new ideas because they assume the response will be negative. Employees stuck in a culture of “no” start to feel that their contributions don’t matter. If employees don’t feel heard by their managers, it’s likely that customers also feel this way. It’s a dangerous situation for companies trying to build loyalty.
In the latest episode of the Net Promoter System podcast, we speak with Tony Ezell, who has worked to thwart invisible fence syndrome at Eli Lilly. During his more than two decades at the pharmaceutical giant, Tony has been responsible for adapting Net Promoter for the company’s scientists, sales teams and managers. He’s exceptionally candid about some of the challenges he encountered and how he would have tackled them differently now that he’s been through the experience.
Success in big pharma has always been associated with the discovery, development and marketing of new drugs. So why is a global powerhouse like Eli Lilly thinking about customer loyalty and the Net Promoter System? Find out in our latest podcast.
Every now and then you hear about a company that gets it right. They listen to customer feedback. They act on it. Sort of gives you a warm, fuzzy feeling—except that you wish it wasn’t so unusual.
The other day, a colleague of mine came back from a trip to the Washington, D.C., area. I asked him how it went. “The trip was fine,” he replied, “but the hotel stay was terrible. I was up half the night listening to the A/C unit cycling on and off. Every time it came on, it sounded like a jet plane.” Continue reading
I eat out in restaurants a lot. Objectively, it’s fair to say that I eat out too often, sometimes as many as 15 times a week. While I wouldn’t say that I’m a restaurant snob, I do pay attention to lots of little things like how genuine the initial greeting feels, or whether the server is attentive or how confidently they talk about menu items.
Does the server make recommendations that I find compelling? Do they sense what I’m looking for and try to figure out how to pace the meal? And maybe most important, do they keep my water glass filled?
You might think it odd for a guy who is so focused on customer feedback for a living, but I’m also a little bit shy about providing direct feedback to my servers. I don’t know why, but unless there’s a real problem I tend to suffer in silence. And at the end of the meal, I tend not to vary the tip all that much based on the quality of service because I don’t think tips offer a very efficient way to provide feedback.
In the newest Net Promoter System podcast episode, we hear from two people who have recognized this dynamic and are trying to do something about it. Bernard Briggs is the CEO and founder of Humm, a company that provides systems for collecting customer feedback at restaurants, stores and other retail environments. Robert Irvine is a restaurant owner and the host of the popular Food Network show, Restaurant: Impossible. He has actually put the system to use at his restaurants.
I love watching Robert’s shows, and I find it both fascinating and gratifying that he’s using the Net Promoter System in his own restaurants. Moreover, I love the simplicity of the solution that Bernard and his team at Humm have developed. I’ve never actually used it myself, so I can’t attest to how it works in practice yet. But I love the concept and hope that companies like Humm continue to innovate and make the process of delivering real-time feedback easier and more frictionless for both customers and companies.
We have catalogued many companies providing Net Promoter System support here.
Receive new posts by email
Search the Loyalty Blog
- October 2014
- September 2014
- August 2014
- July 2014
- June 2014
- May 2014
- April 2014
- March 2014
- February 2014
- January 2014
- December 2013
- November 2013
- October 2013
- September 2013
- August 2013
- July 2013
- June 2013
- May 2013
- April 2013
- March 2013
- February 2013
- January 2013
- December 2012
- November 2012
- October 2012
- September 2012
- July 2012
- June 2012
- March 2012
- February 2012
- January 2012
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- April 2011
- February 2011
- January 2011
- December 2010