Are you going to NPS me? Yes, I am!

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This is the topic of a talk I’m giving this week at a customer loyalty conference in Melbourne. It is in response to another talk entitled “Are you going to NPS me? No I’m not” in which Dr Dave Stewart of Marketing Decision Analysis will be presenting the case that Net Promoter is a deeply flawed concept. Dave will say that NPS should be discarded by organisations that espouse customer advocacy. To be honest, Dave’s position is close to what I thought of the Net Promoter Score concept when it was first introduced by a pretty smart academic and business consultant called Fred Reichheld back in 2003.

Tom Fishburn

Net Promoter Score

Reichheld’s basic premise was that you only need to ask one question in order to understand if a customer is going to stay loyal to you or not. The question is: “How likely are you to recommend us to a friend or colleague?” Fred, being the excellent marketeer that he is, proclaimed the benefits of this Net Promoter Score (NPS) concept in respected publications like the Harvard Business Review. He then promoted it in his own book The Ultimate Question which came out in 2006, shortly after I took on the CEO role here at Deep-Insight. Since then, NPS has became very popular as a customer loyalty metric.

However, NPS has also attracted some heavy criticism. Tim Keiningham gave NPS a particularly scathing review saying that he and his research team could find no evidence for the claims made by Reichheld. (It should be said that Keiningham worked for the market research company Ipsos so his views may not be completely unbiased.)

At that time, my own view was that NPS was probably too simplistic a metric for business-to-business (B2B) companies. I also felt that Deep-Insight’s own customer methodology – which also included a ‘would you recommend’ question – was a much better fit for complex business relationships. And if I’m honest, there was an element of ‘Not Invented Here’ going on in our own organisation as well.

So we decided to ignore NPS.

The Rise of NPS

But here’s the thing: our customers didn’t ignore it. When we ran customer feedback programmes for customers like Reed Elsevier and Atos in the UK, ABN AMRO in the Netherlands, Santander in Poland, and the Toll Group in Australia, they would all ask: “Can you add in the NPS question for us – we have to report the numbers back to headquarters?” Of course, being the good marketeers that we were, we duly obliged. However, we always gave the results back in a separate spreadsheet, so that it wouldn’t contaminate our own reports and our own wonderful methodology!

Roll the clock forward to 2013. NPS still hadn’t gone away. In fact it had become even more popular. It was particularly popular with large international companies where a simple understandable metric was needed to compare results across different divisions and geographical areas. And when I finally looked into it, I discovered that Deep-Insight had actually been gathering NPS data from customers across 86 different countries since 2006.

Is NPS a good predictor of loyalty?

Around the same time we also did some research into our own database to find out what really drove loyalty and profitability in our clients. Now this is not an easy thing to do, as many of you who have tried will know. But where we had several years of customer feedback data, it was relatively straightforward to analyse how many of our clients’ B2B customers were still with them. If they have deliberately defected, we investigated if that defection could have been predicted by a poor Net Promoter Score, or by any of the metrics in our own CRQ methodology.

I have to say that the results were quite interesting. A low ‘Likelihood To Recommend’ was not the BEST predictor of customer defection. However it was actually a pretty good predictor. Deep-Insight’s overall Customer Relationship Quality (CRQ) metric was a slightly better predictor.

A poor Commitment score – one of the key components of CRQ – was the best predictor of whether a B2B client was going to defect to the competition or not.

So there we had it: NPS did actually work.

It worked not because it’s the BEST predictor of whether a client was going to defect, but because it’s a GOOD predictor, coupled with the fact that NPS has been embraced by some of the world’s leading organisations as an easy-to-use and internationally-accepted customer benchmark. 

At Deep-Insight, we came a little late to the party. We only incorporated Net Promoter Score into our customer methodology in early-2014. Today we find that the combination of NPS and our own CRQ metrics works really well for our clients.

The future for NPS

Now let’s go back to the cartoon at the top of the blog (and thank you to the wonderful Tom Fishburne for allowing us to use it). If there is a statistically purer methodology than NPS, why not use that instead?

The answer is simple: most senior executives aren’t interested in re-inventing the wheel. They are much more interested in taking the feedback from their clients and acting on it, so that they can protect and enhance the revenues they get from those clients.

So for those B2B executives who are wondering if NPS is the right customer metric for them or not, I would suggest that you’re asking the wrong question. What good CEOs and Sales Directors are asking these days is:

“If my Net Promoter Score is low or if I have a lot of Opponents and Stalkers as clients, what do I do?”

In fact, the really successful CEOs and Sales Directors are spending the time thinking about the challenges of putting a really effective customer experience (CX) programme in place, rather than worrying about the purity of the metrics. That’s what you should be doing too.

Help! What Do I do with my Stalkers and Opponents?

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If you’re a typical B2B company, the chances are that you have good or excellent relationships with the majority of your clients. But you will also have clients where your relationship is not as strong. At Deep-Insight we help you understand these client relationships by segmenting them based on the strength of their relationship with you.

Here are the five categories we use:

Customer Relationship Quality – the Strongest Relationships

Ambassadors

The most loyal client category is the Ambassador segment. Ambassadors are your most valuable customers. They have a unique relationship with you and will recommend you to others. They are also prepared to pay a premium for your products or services – price is not an important consideration for them because of the quality of the relationship. Typically, a third of your clients are Ambassadors.

High Rationals

The next segment of clients are known as Rationals. They rate you positively but do not see anything unique in the relationship. Rationals will take their time to assess alternative sources of supply and the relationship can become unstable if good alternative offers exist. Typically, half of your key B2B accounts fit into this category. Generally they are good clients albeit not as loyal as Ambassadors.

The Weakest Relationships

But wait! That doesn’t add up to 100%. What’s the story with the others?

Well, the answer is that in all B2B account portfolios, there are clients that don’t love you that much. We typically find that 10-20% of accounts have poorer relationships with you and fit into one of the following three categories:

Ambivalents

Ambivalents often have a “love/hate” relationship with you. In some instances, they love the way you solve their problems but hate the way you treat them. More often, you are killing them with kindness but failing to solve their business issues. You may think the relationship is strong but you don’t really understand their issues and can’t propose business solutions to move their business forward.

Stalkers

Stalkers are often only interested in price. Sometimes they can be large corporate accounts looking for special offers and discounts. Other times, they are smaller accounts that view your services as poor value for money. Stalkers see nothing unique in the relationship and often have very high service requirements. They play different competitors against each other and do not generate a positive value for your portfolio.

Opponents have the poorest relationships with you. They are deeply dissatisfied and often highly frustrated by what they see as consistently poor service. Opponents have a negative relationship with the company and generate negative value. They can sometimes be won back if the reason for their dissatisfaction is identified and addressed but, in many cases, the relationship has broken down irretrievably and they can not be won back.

Managing Ambassadors

Before we look at how to manage Stalkers and Opponents – the main point of this blog – one quick point about how to manage Ambassadors. Ambassadors are willing to recommend you. So ask them for testimonials. Trustmary is a Finnish company that helps clients do exactly that using Net Promoter Score as the key metric for identifying Ambassadors.

Don’t be afraid to ask Ambassadors for testimonials or for introductions into other businesses. They want to help you. So just do it.

Managing Stalkers and Opponents

So what to do with these poorer-value relationships, particularly Stalkers and Opponents?

Three things:

1. Decide if you want to keep them or fire them

It may sound strange to talk about ‘firing’ clients but sometimes there are clients that can not be serviced effectively or profitably. Sometimes their expectations are too high, or the fit between their needs and your products or services is limited. In such cases, it’s valid to ask the question “Would we both be better off if we ended the relationship?” The big advantage about firing customers is that it frees up sales and account management time. This time can be used for more profitable activities such as cross-selling and upselling to Ambassadors, or for converting Rationals into Ambassadors.

2. If the answer is FIRE THEM, find a ‘beautiful exit’

Stalkers and Opponents have a corrosive influence on your company. They sap energy and consume resources that can be better used elsewhere. They also have a corrosive influence on other clients as they spread a negative message about your capabilities and services. Have that tough conversation with the client before the situation deteriorates, and help them move to a competitor. Do it cleanly and professionally. Find what Finnish Business Professor Kimmo Alajoutsijarvi refers to as a Beautiful Exit to the relationship – a disengagement that “minimises damage to the disengager, the other party, and the connected business network.”

3. If the answer is KEEP THEM, put a proper recovery plan in place

Many of Deep-Insight’s clients will put a Service Improvement Plan (SIP) in place for poor-scoring accounts, typically Opponents or Stalkers. These SIPs involve a significant increase in service support to that client. They also require an open and honest conversation between the Account Director and the most senior people in the client organisation. In large complex B2B client relationships, changes in behaviour are typically required on both sides to bring the relationship back on an even keel again. Don’t be afraid of saying to your client: “We’re committed to making improvements on our side, but we need you to do X and Y for this relationship to work.” (more…)