By Denise Wymore
When I wrote Measuring Your Brand, about the Net Promoter Score tool several months ago, I had just finished reading the book The Ultimate Question by Fred Reichheld. Because of the title, I’ll admit I started reading, well skimming at first, to find out just what IS the ultimate question. He finally reveals it on page 18. Customers are asked to rate on a scale of 1 - 10 (10 being the highest):
“How likely is it that you would recommend this company to a friend or colleague?”
The metric that it produces is the Net Promoter Score.
Based on the ranking, there are three categories of customers:
Promoters (9-10)-- those loyal folks who love your company and urge their friends and families to use you too.
Passives (7-8) - they are satisfied with your service, but are not loyal and can be wooed by your competition
Detractors (0-6)- unhappy customers trapped in a bad relationship
To calculate your company’s NPS, take the percentage of customers who are promoters, and subtract the percentage who are detractors.
P - D = NPS
This process, according to Reichheld has been 20 years in the making. His frustration with most customer service surveys are the results they produce. One of the biggest mistakes we make is asking too many questions. The more questions you ask, the fewer the responses.
The other problem he had with customer surveys -- they ask the wrong question. “Are you satisfied” is entirely different than “would you RECOMMEND.”
For 50 plus years the majority of credit unions didn’t need marketing - they grew because of word-of-mouth. Their members RECOMMENDED the credit union to their co-workers. That’s called a “growth engine.” But many credit unions' engines have stalled. Common bonds have eroded, service is not measured as intensely as profit, regulators seemingly run our organizations. So we expanded our fields of membership to include more territory, we beg for business with “membership drives” and go so far as to bribe people (give them cash or, worse yet, a chance to win a car) to join. This is like putting watered down gas in your tank. You’re just not going to get far.
So let’s fill it up with indirect lending. Our loan-to-share ratios are reaching record highs, the pressure is eased a bit, margins aren’t great, but the books look good. As time has shown us, very few indirect people end up being loyal. You buy a loan, not a member. How many indirect lending folks will RECOMMEND you to a friend or colleague? How many even know who you are? Have ever met you?
NPS is to Customer Experience Management what Six Sigma is to Total Quality Management. It is a discipline. A discipline we have to learn (again) to avoid the trap of bad profits. NPS is the only true measure of your culture and its ability to sustain profits in the long run.
It’s not just enough to ask the question--you have to ask the question in a manner that provides reliable, timely and actionable data. And the most critical part of the discipline is learning how to improve your score.
According to Professor Das Narayandas of the Harvard Business School, one of the general session speakers at the second annual Net Promoter Conference I just returned from, we need to get away from managing products for profit. We need to manage customers for profit. And not just in a service or balances per household kind of way. We need to be able to find the “key drivers” to loyalty.
My favorite example of discovering these key drivers was the story we heard about PetSmart. Their business model began as the Wal-Mart of pet stores. They successfully killed small pet shops in any area they located. It was all about big selection, low prices. But as with any good model, folks will R & D it. Rip off and duplicate (think office supply stores). They saw their profits drop. But they looked intimately at their most loyal shoppers. Through a series of intense NPS surveys they identified the “Pet Parent.” The Pet Parent is the type of person who will tell their dog (or cat) that they love them. Daily. They buy the good food. They also spend money on grooming, training, clothing and, most importantly, the occasional boarding of their “kid.”
To create a strong sustainable growth engine, PetSmart completely reorganized their stores from type of product (food, collars, toys) to type of pet (dog, cat, bird, iguana). Then, they added grooming, veterinary services and a kenneling service that included private suites with televisions and a Bone Phone so the parents can call in once a day to, you guessed it, tell their pet they love them.
George Hofheimer, chief research officer for the Filene Research Institute was also featured at this amazing conference. George shared with these innovative international companies the first of what will be many “benchmarking” surveys of the credit union movement. Filene asked 17 credit unions to participate. 50,000 surveys were sent out; 13% of members surveyed responded. Drum roll please......the NPS for “credit unions” is 54.3%. Compared to banks, we rock. Always have. Compared to USAA at 82%, not so much.
But before we go patting ourselves on the back (again) we have to look at what drove those numbers. According to Hofheimer, they were, in order:
1. Reputation
2. Customer Service
3. Overall product and service quality
The bottom (or least mentioned):
1. Ownership structure
2. Marketing
George admitted to this diverse audience, that although credit unions have outscored banks in service for years, our growth is stagnant. That’s the paradox of the credit union NPS. Look for Filene Research to continue their cultural anthropology. The NPS has the potential to become a “metric system” for quality in the service industry. We all need to measure with the same tool. I predict it could, if not should, become a component of CAMEL.
I’ll leave you with three final thoughts--my favorites from the conference:
- Differentiation creates promoters.
- Moments of truth must be prioritized.
- Don’t ask the Ultimate Question unless you’re prepared to listen and act.
Oh, and Fred says the reason he wrote the book: because you should read it. I’ve read it twice. Remember, it’s not a survey, it’s a discipline.
Denise Wymore is a firebrand, marketing consultant and credit union lifer. Check out her new blog, Modern Marketing.
Read Denise's previous post on Net Promoter and its associated comments.
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