‘Recommendation’ as a business objective
In current times, more than ever, achieving customer recommendation through positive word of mouth is hugely valuable to companies. Forrester Research says that 80% of customers trust word of mouth more than any other form of promotion. And, word of mouth is 9 times as effective as advertising – as well as being a lot cheaper!
That the experience delivered to customers contributes to their likelihood to recommend is demonstrated clearly by Forrester. Their findings show that the propensity to recommend, together with other significant outcomes – propensity not to switch and propensity to buy more – correlate highly with the quality of customer experience, across a range of business sectors.
Research by Fred Reichheld of Bain & Co, together with Satmetrix, developed the Net Promoter® Score (NPS) as a measure of customer experience that correlated with business success. This has led to many major organisations embracing NPS as a key performance indicator: arguably, the first time that the customer’s opinion has been truly on the management agenda. No longer is customer data purely the domain of the marketing department – senior management across businesses are measured, targeted, and, in some cases, remunerated by their NPS. And, as a consequence, the customer opinion matters!
Because Net Promoter® Score has achieved such a high profile, claiming management attention in a way that customer satisfaction and other customer measures never have, this paper is primarily focused on NPS. However, the points made and lessons learned are totally relevant to customer experience programmes more generally.
What impacts propensity to recommend and Net Promoter® Score?
Based upon ‘voice of the customer’ research that we have conducted across a range of service businesses to identify what experience customers truly value, plus literature searches, we conclude that there are 4 factors that determine customers’ propensity to recommend an organisation:
- Brand relationship
- Experience of / satisfaction with product offerings (features; relevance; pricing)
- Ease of doing business (simplicity; efficiency; reliability)
- Touch point experience (the degree of warmth and understanding conveyed by front-line employees)
The relative importance of these factors on a company’s NPS varies across businesses and across markets, however, ‘contact with the company’ – that is, the ease of doing business plus the touch point experience – typically accounts, we believe, for about 60% of the total.
For most operational managers, responsible for business functions that handle sales or service interactions with customers, their sphere of influence is this 60% – the ease of doing business and the degree of warmth and understanding conveyed by their people. The drivers of ‘brand relationship’ and of ‘product satisfaction’ – factors such as corporate reputation, product pricing and innovation to name a few – are typically longer term and slower moving.
Focus on improvement not on scores
Recognising the importance of the ease of doing business and the touch point experience, as many organisations do, would logically lead them to focus significant effort on improving the experience their business delivers. However, what is evident, in too many organisations that claim to be driven by NPS is an overt focus on ‘their Net Promoter® Score’ rather than the underlying drivers of NPS. There is an obsession with ‘the number’ but an insufficient focus on strategies to drive improvements in ‘the number’ and consequently the customer experience.
This is limiting the business benefits that should have been gained from focusing on customers’ propensity to recommend. Even Reichheld has acknowledged this shortcoming and said recently at a conference “The score, NPS, maybe was a mistake. It’s not the score that matters, it’s what you do with the score to make Promoters”.
Having advised companies for several years on strategies to improve their customer experience – and on how to use NPS effectively – some important pointers have been identified that characterise the most successful customer experience and NPS improvement programmes.
Firstly, companies wishing to improve their customers’ experience (and their NPS) at key touch points should review the themes that come through in research from customers’ verbatim comments:
- What are Detractors saying? And, how can we reduce/remove them?
- What are Promoters saying? And, how can we create more of them?
Although not exclusively the case, it is generally true that:
Detractors are created by perceived shortcomings in the offer, especially price in highly competitive markets, or by the process if it creates complexity, inaccuracy and inefficiency for the customer – essentially not being easy to do business with Promoters are created through customers feeling the company was reliable and ‘easy to deal with’ plus interacting with staff who consistently deliver ‘special’ experiences. Understanding what constitutes ‘special’ for their particular customers provides businesses with significant insight and opportunities to differentiate.
These ‘differentiating opportunities’ vary from business to business and sector to sector but typically include feelings of ‘trust’; feelings that convey ‘a sense of relationship’ (as opposed to simply a transactional process); and dealing with staff who ‘go the extra mile’. Promoters frequently remember and mention staff by name, Passives – customers who score 7 or 8 on Reichheld’s scale – never do!
Focusing on factors that are consistently mentioned by Detractors should be the priority for management. Not only are they creating negative word of mouth but they will be leading to re-work; failure demand and unnecessary, frequently significant, operational costs. In addition, the issues cited by Detractors may suggest that an organisation is attracting the wrong types of customers: people whose needs they cannot satisfy.
Whilst removing or reducing Detractors should be the priority, this may not always be possible as it may require significant infrastructure investment. Experience suggests that focusing on factors that create Promoters can be the fastest way to increase NPS. This requires a detailed understanding of what makes customers of a particular business feel ‘special’ – what are the differentiating opportunities – and then focusing on delivering these special experiences relentlessly.
Ten factors for successful customer experience improvement programmes
There are 10 key factors that characterise successful implementation of NPS and customer experience improvement programmes:
1. There is a clear imperative for improving the customer experience i.e. an irrefutable argument that a better customer experience will drive the business forward.
2. There is a passion and a commitment to being focused on customers.
3. The desired customer experience is clearly articulated and based upon ‘Voice of the Customer’ research.
4. The customer experience is of equal importance as other business imperatives such as revenue targets and operational efficiency.
5. The customer experience is analysed and managed holistically – end to end.
6. There are processes in place to examine and act on root causes of poor customer experiences and service failures.
7. Priorities for action are determined by the ‘Delivery Gap’ – the gap between the desired experience and the actual experience: in NPS language, reducing Detractors and increasing Promoters.
8. Everyone understands what customers’ value (and what creates Promoters) – and focuses on delivering this relentlessly.
9. Management get personally involved at the customer interface – interacting with customers and consulting with frontline staff.
10. Customer feedback links directly in to training, rewards, recognition and internal communications.
A note on NPS programmes – best practitioners’ advice
Many companies that are benefitting from introducing NPS have spoken about their experiences and the lessons along the way. Importantly, all success stories tend to position their NPS programme in ‘customer terms’ (e.g. ‘putting the customer at the heart of the business’ or ‘getting close to the customer’) – not as a measurement programme.
They warn against focusing overtly on the NPS score; and, certainly against focusing on rewarding the NPS score too soon. Other common characteristics that these companies emphasise is the importance of getting people engaged; of widely sharing the themes that are creating Promoters and Detractors; and of a high level of management engagement at the customer interface – such as listening to calls; calling customers; and responding to customer verbatim comments.
The advice is clear from NPS advocates – ‘embed the process of reviewing and acting upon the Detractor and Promoter themes in to ‘business as usual’ – then introduce and focus on the score.’