There is a gap between the vision executives articulate for loyalty initiatives and the reality of how successful companies are at driving operational changes and action at the front lines, reveals new research from Satmetrix.
The research, presented at a recent conference, suggests that Net Promoter offers a solution to this gap, allowing organisations to rally around a straightforward score that links to customer loyalty and growth. But, according to Dr Laura Brooks, co-developer of Net Promoter and vice president of methodology and consulting at Satmetrix, "Achieving results requires a disciplined approach that drives customer focus throughout the organisation."
Growing interest - and debate
Interest in Net Promoter as an overall measure of customer loyalty has grown rapidly since the publication of The Ultimate Question, the most recent book by business loyalty expert and Bain Fellow, Fred Reichheld. Conference sponsor, Satmetrix Systems, co-developed the Net Promoter metric with Reichheld, and has been actively involved in educating business markets on the use of Net Promoter and helping companies implement it within their operations.
How NPS works
Net Promoter Score is a discipline in which customers are asked a single question: "Would you recommend us to a friend or colleague?" Broadly, to calculate a company's Net Promoter Score (NPS), take the percentage of customers who are promoters (those who are highly likely to recommend the company or products), and subtract the percentage of customers who are detractors (those who are less likely to recommend the company or products).
The NPS is found by subtracting the percentage of detractors from the percentage of promoters.
According to Net Promoter, companies with the most efficient growth engines - companies such as Amazon.com, eBay, Costco, Vanguard, and Dell - operate at NPS efficiency ratings of 50 - 80%. So even they have room for improvement. But the average firm sputters along at an NPS efficiency of only 5 to 10%. In other words, promoters barely outnumber detractors. Many firms - and some entire industries - have negative Net Promoter Scores, which means that they are creating more detractors than promoters day in and day out.
Four key elements
Satmetrix laid out a framework for the Net Promoter Discipline, encompassing four key elements:
- A strong executive foundation linked to the company's business strategy;
- Organisational alignment with the executive vision;
- A system infrastructure for collecting, analysing, and distributing customer feedback within the organisation;
- Process integration to drive closed-loop action at the front line and align operational metrics and incentive.
According to Laura DeSoto, senior vice president at Experian: "A few years ago, we began to implement a company-wide initiative called 'The Client Promise'. As part of this, we began to track our Net Promoter scores. In the past six quarters, Experian's Net Promoter score has doubled and at the same time we have seen double-digit growth. We feel there is a correlation between our Client Promise initiative, our increase in customer loyalty and our revenue growth."