Last month on the CUES Net listserve, a CU marketer asked, “What are some ways to measure ROI on brand awareness efforts? Can brand awareness translate into loyalty or market penetration?” When the question went unanswered, we put it to several branding experts. Here is the first response (see “Comments,” below, for more):
By Denise Wymore
Marketing’s role today is less about product, price, promotion and more about preserving and protecting the brand. And brand is the experience your member has with you.
Truth be told, word of mouth was and is the best marketing. According to the book, The Ultimate Question by Fred Reichheld, customer satisfaction surveys don’t cut it. There is little connection between satisfaction rates and actual member behavior, or between satisfaction rates and a company’s growth. In the spring of 2005 for example, General Motors was taking out full-page newspaper ads trumpeting its numerous awards from J.D. Power and Associates, the biggest name in satisfaction studies. Meanwhile, the headlines in the business section were announcing that GM’s market share was sinking and its bonds were being downgraded to junk status.
Some financial institutions have similar experiences. Their member satisfaction scores are high—but growth is low. How can that be? If you’re that good—aren’t people recommending you?
The truth is—you don’t know because you’re not asking the right question. Or, you’re asking too many questions to too few of your members.
Imagine asking only one question of all your members, “How likely is it that you would recommend us to a friend or colleague?” It makes sense. Loyalty is directly related to their feelings about recommending you. If they love you (are loyal) they will recommend you.
While loyalty isn’t the only factor determining growth, profitable growth cannot long be maintained without it.
There are two conditions that must be satisfied for a member to make a referral. They must believe that you offer superior value in terms that an economist would understand: price, features, quality, functionality, ease of use, and all the other practical factors. But they also must feel good about their relationship with the company. They must believe the company knows and understands them, values them, listens to them, and shares their principles. This is the heart of your brand or culture. Targeting an audience with a common bond (again) and making the competition irrelevant.
The Net Promoter Score
Reichheld’s Net Promoter® Score measures loyalty. It is based on the fundamental perspective that every company’s customers can be divided into three categories:
1. Promoters—loyal enthusiasts who keep buying from you and urge their friends to do the same.
2. Passives—satisfied but can be easily wooed by the competition.
3. Detractors—Unhappy members trapped in a bad relationship.
Members can be categorized according to their answer to the question, “How likely is it that you would recommend Company X to a friend or colleague?” Those who answer nine or 10 on a zero-to-ten scale, for instance, are promoters, and so on down the line.
The best way to gauge the efficiency of the growth engine is to take the percentage of members who are promoters (P) and subtract the percentage who are detractors (D).
It’s that simple. P - D = NPS
NPS Stars are USAA at 82%, Harley Davidson at 81% and HomeBanc at 81%. Find other examples here.
Commerce Bank topped the inaugural report on financial service providers, with a Net Promoter Score of 54%.
Loyalty is the key to profitable growth. After all, it doesn’t take a rocket scientist to see that a company can’t grow if it is churning members out the back door faster than the sales force can drag them in the front.
The goal of most corporate strategies is to build competitive advantage and to gain the highest market share possible. The irony is this: The more successful a company’s strategy, the more likely the company will stumble into the trap of bad profits. While bad profits don’t show up on the books, they are easy to recognize. They’re profits earned at the expense of member relationships.
Banks are notorious for stumbling into the trap of bad profits. Fees to talk to a teller is probably the best example. How could that possibly result in positive word of mouth?
The more metrics you track, the less relevant each one becomes. Each manager will choose to focus on the number that makes his or her decision look good.
What would happen if the only metric you looked at for one board meeting was the Net Promoter Score? How different would your conversations be?
The goal of the NPS is to have the majority of your “active” members score as “profitable promoters.” First you have to determine what makes a profitable member and then survey them immediately after they have interacted with you.
It is possible to have “profitable detractors.” Especially in banking. Accounts that generate a ton of fees may be great for the bottom line, but NPS will probably reveal that they are not promoting you. Why should they? The goal then is to balance these type of members with profitable promoters.
When used regularly, the NPS will be the watchdog for adding too many BAD profits—those that erode your member service reputation.
Denise Wymore is a firebrand, marketing consultant and credit union lifer. The author of Tattoos: The Ultimate Proof of a Successful Brand, she can be contacted via her Web site or e-mail.
Read more from Denise in our Skybox archive.
