Power is shifting in the marketplace from the seller to the buyer. The rules of business are changing. Increasingly, customers know everything about the companies they buy from. Customers are taking charge and the new business bottom line is customer delight. It’s no longer about pushing features at customers, it’s about achieving the experiences customers desire. It’s no longer about concept to cash, it’s about how long it takes to go from concept to customer delight. It’s no longer about output, it’s about outcomes. Delighting customers is everyone’s responsibility and whether you realize it or not, no matter what you do, you’re working in customer services.
The purpose is to delight
In 1973 Drucker said, "the only valid purpose of a firm is to create a customer.” Combining this with Steven Denning’s premise for Radical Management, the purpose of a company is to create delighted customers and keep them delighted. When we can turn delighted customers into active promoters of the company they become the best assets for growth, and the profits we make afford us the freedom to do good for customers and to get better at doing it. Given a purpose, John Seddon reminds us to measure progress in terms of that purpose. So how might customer delight be measured?
Net Promoter Score
All companies want to grow. Sustainable, profitable growth occurs when customers love doing business with a company, when employees love working in that company, and when both customers and employees sing its praises to friends and colleagues.
Fred Reichheld came up with the Net Promoter Score (NPS) as a measure of the quality of a company’s relationships with its customers. In understanding how trust and loyalty played a part in those relationships, he realized it wasn’t enough to just look at the amount of delight created. He knew unhappy customers were just as likely to share their bad experiences, be they related to poor service or dodgy business practices. So he also looked at the amount of frustration and disappointment among customers likely to become vocal detractors. Apparently, once detractors were brought into the mix with promoters, Reichheld claimrd a correlation between customer responses and the relative growth rate of companies. Further research supports this but also shares some caveats. As one would expect, there is controversy in the customer research community surrounding the NPS question and the formula used to calculate the score. Reichheld himself is careful not to overstate the reliability or validity of the method. Indeed he reminds us that survey results should be continuously audited against actual experience to ensure gaming or other noise is not entering the system.
NPS takes the percentage of customers who are promoters and subtracts the percentage who are detractors:
% Net promoters = % Promoters - % Detractors
Customer loyalty suggested by a high NPS isn’t the only factor determining growth, but profitable growth cannot be sustained without it. On that basis, a growth engine running at perfect efficiency converts 100% of customers into promoters. Intuitively it’s easier to understand the benefits of increasing the number of promoters and reducing the number of detractors than it is to increase the mean customer satisfaction index by one standard deviation.
NPS is a simple mechanism to get feedback from customers, gauge the efficiency of a growth engine, and obtain actionable data that represents real customer experiences.
Just ask one question:
How likely is it that you would recommend Energized Work’s products or services to a potential customer? Or,
How likely is it that you would recommend Energized Work to a friend as a place to work?
Interestingly, Reichheld found that asking an indirect question rather than a direct question produced a more reliable correlation with business growth. It’s better to ask about a customer’s willingness to recommend a product or service to someone else than it is to ask about whether a customer was delighted.
Typically customers respond to the question on a scale of 0 to 10.
Detractors are unhappy customers (0 to 6). Passives are neutral customers (7 or 8). They’re passively satisfied, generally unenthusiastic, and can be easily wooed by the competition. Promoters are loyal enthusiasts who keep buying from the company. They’re likely (9 or 10) to make a recommendation to friends and colleagues. By focusing on the most enthusiastic and the most negative customers, NPS avoids the inflation that undermines traditional customer satisfaction surveys where a person just a smidgeon above average is considered to be a satisfied customer.
What does the score mean? Any positive score is good news; higher than +50% is considered to be exceptional. According to the Net Promoter website the 2011 leaders in the UK are Apple with 67%, First Direct at 61%, LG at 39%, Samsung at 35%, and Sony at 30%.
If you don’t like the 0 to 10 scale, use something else. Reichheld suggests some flexibility around the scoring system. Schneider and Krosnick et al tested four scales and found Reichheld’s preferred 0 to 10 scale had the lowest predictive validity; their preference is the following seven-point bipolar scale:
- Extremely likely to recommend against
- Moderately likely to recommend against
- Slightly likely to recommend against
- Neither likely to recommend nor recommend against
- Slightly likely to recommend
- Moderately likely to recommend
- Extremely likely to recommend
Reichheld recommends asking customers an open-ended follow-up question about why they chose the score they did, something like:
What is the primary reason for the score you gave? Or,
What is the most important improvement that would make you rate Energized Work closer to 10?
If more than two questions are asked there’s a risk of receiving fewer responses and biasing the results towards the more-engaged customers. The goal is to get both promoters and detractors to respond so it needs to be quick and easy.
Delighting customers is a priority for everyone
Eric Ries recalls an episode at IMVU when service changes were made that “wound up alienating a large number of customers” and “clumsy” support afterwards “gave customers the idea we didn’t take them seriously, and weren’t interested in listening to their complaints.” Apparently the first thing to indicate all was not well was NPS dropping to “an all-time low for the entire duration of the crisis”.
It feels like it’s time for an experiment. I’m no fan of satisfaction surveys, so with some more thought I want to try tracking customer delight using NPS on a regular basis. How to do this? How can we generate a steady stream of feedback from customers so we can hear what went right or wrong in the customer’s own words and we can see how customers score their experience? How can we build a closed-loop learning cycle into our daily operations so we’re able to continuously improve our understanding of what customers value and focus on improving our capability to delight customers? I’ll let you know if these efforts help us earn deeper and longer-lasting customer loyalty.
- People don’t buy what you do, they buy why you do it
- Positive emotions and purpose
- (I can’t get no) satisfaction, let alone customer delight