Focus on the customers, not the metric
How to get clarity around the end goal...
Richard Owen, CEO of Satmetrix, the leading customer measurement company, gave a thought-provoking speech to open their Customer Experience summit in London recently. Richard said that some companies were fixating on the NPS (Net Promoter Score) metric rather than the ‘concept’. The notion of focusing on your most valuable customers; those that drive revenue growth through retention and referral, makes perfect sense. Coupled with this, NPS is a simple and effective way of calculating how many of these valuable customers we have in the business. However, if we focus on the NPS metric as the end goal, we risk losing sight of the real business objective – the actions necessary to win and keep our best customers.
Instead, he argued, we should think about NPS as a simple way to put our customers into three buckets:
Promoters - those that drive growth.
Passives - those vulnerable to competitive offers.
Detractors - those that generate negative word of mouth through their dissatisfaction.
We can then focus our actions on those that are most likely to improve our business results whereas, if we simply focus on the NPS score itself, the goal becomes ‘shifting the needle’ to please the leadership team.
For example, we recently conducted a large Customer Experience survey for a client of ours. The NPS was found to be 33% and the easiest way to improve that figure would be to reduce the percentage of Detractors (those awarding scores between 0-6) that were dragging the score down. This may have pleased the executives but would have little impact on the revenues because we also correlated likelihood to repurchase with each level of satisfaction on the ten-point scale. The mean level of satisfaction was 7.7 and at that level the likelihood to repurchase was just 35%. But at a satisfaction level one point higher at 8.7 the likelihood of repurchase shoots up to 85% and then flattens off rapidly.
In other words, being perfect may be pleasing but may not be justified economically but the impact of moving Passives just over the line to Promoters was huge.
Reducing the percentage of Detractors would improve the NPS but was unlikely to have a big impact on future revenues. Now, I am not saying we should ignore Detractors. If our system is broken and we are failing to deliver on our promise to our customers then of course we must deal with that with a level of urgency. However, in any business there are a small proportion of customers who may have unrealistic expectations or who are not our target customers and if were to run our business to please them all, it would be very expensive and we would end up with no strategy by trying to be all things to all people.
There are times when focusing on Detractors is exactly the right thing to do. For example, when we conducted research for Premier Inn, the mid-market hotel brand, we discovered that the quality of the sleep experience is a key driver of NPS for the brand. As a result Premier Inn offers a ‘Good Night Guarantee’, that is a money-back promise if the customer does not have a brilliant night’s sleep. Not only is this a powerful way to communicate what the brand stands for but it is also a very direct way of measuring the delivery of the promise and the economic impact every single day. But this level of clarity is rare.
Any guest that invokes the money-back guarantee is a Detractor - you don’t need to rely on the few percent of customers who respond to the survey to tell you that. This is another major point Richard made in his speech - that we need to be more predictive in measuring the actual experience that customers have and less reliant on what they report after the event because we are in danger of creating dissatisfaction though constantly asking our customers to complete long, boring questionnaires when it is too late to do anything about it anyway.
We need to know what truly drives recommendation in the business, and measure and manage it proactively. If we do that, NPS will take care of itself. We still need to measure it, but it becomes one of a series of metrics that come together in a scorecard that provides a holistic view of the business and, most importantly, the actions that drive results for our three categories of customers.
I also gave a speech at the Satmetrix summit and I spoke about the need for brands to be ‘On Purpose’, in other words to be intentional about the customer experience and make this truly meaningful for customers. By researching our customers we can be much more insightful about the experience that they expect and how we can differentiate as a brand. But this requires us to focus on the customer, not the metric. As a Satmetrix business partner, Smith+Co is working with a number of clients to provide on-line visual dashboards that provide each level of the business with the information needed to drive results. And yes, NPS is one of them but it is a guide, not a goal.