It’s Good to Talk. If you’re as old as I am, you’ll remember the British Telecom (as BT was then known) TV adverts with this tagline. It was an incredibly effective advertising campaign which helped change consumers’ perceptions of the organisation.
As it so happens, the same tagline is relevant to the sales and account management communities too. Let me explain by using an example from the corporate banking world.
Relationship Managers
Corporate banks don’t employ account managers to manage their major accounts. They employ Relationship Managers or RMs. Words are important. Banks tend to take business relationships more seriously than other industries. This is partly because an intimate knowledge of the customer is critical when making lending decisions.
One of our clients is a large European bank. The MD of the Corporate and Business Banking division prides himself on the level of service provided to his customers. For him, service begins with regular contact. The vast majority of corporate and business clients see their RM every three months or more frequently.
The MD asked us to test this, so we did. We asked his clients how frequently they saw their RM. A small percentage (4%) of the bank’s clients claim they never saw their RM and a similar number said they met the RM annually. 9% saw their RM every six months; 22% every 3 months and the majority (56%) said that their RM was in contact with them on a more frequent basis.
What we hadn’t predicted was that frequency of contact has a huge impact on the quality of the banking relationship. We call this Customer Relationship Quality. It also has a huge impact on the bank’s Net Promoter Score (NPS).
It really is good to talk
A quick analysis of Net Promoter Scores by frequency of contact is telling.
The bank’s overall Net Promoter Score is 28% which, for European B2B companies is good (see another blog here).
When RM visits are conducted only on an annual basis, or not at all, the Net Promoter Score is deeply negative – minus 70% for the 4% of clients who claim they never see their RM.
However, for the majority of clients who are in contact with their Relationship Manager every 1-2 months, the Net Promoter Score is a whopping +51%.
There is a very simple message here. If you want to have better relationships with your clients, go and talk to them more frequently than you currently do.
Get in touch with us today if you want to find out a little more about customer centricity.
If I got a penny for every time a client has asked “How do we compare against our competitors?” or “How are we doing against the benchmark for our industry?” I’d be a rich man. But the thing is that B2B benchmarking is not a good idea.
Seriously. You should strive to be a ‘Unique’ company and not an average company.
Most of our clients want to know how they are doing against the benchmark score for their industry. My response: “If you really aspire to being a mediocre company, then I’ll tell you what the average score is for your industry and how you compare against the average. But you can do better than that. You can be UNIQUE.”
In fairness, some of our clients have latched on to the message that they should ignore the competition. They should focus purely on being indispensable to their existing customers. Still, it’s tempting to see where you stand in a league tables against your industry peers.
So let me ask a few questions about why you want to do benchmarking. Because B2B benchmarking is not a good idea!
What exactly is your industry?
Are you in the insurance industry, or the insurance broking industry? Or are you in both? Or re you an outsourcing company that specialises in insurance third-party processing?
They’re all in the insurance world but these are very different industries. They have different dynamics and there are differences in average scores from one industry to the next. For example, we know from experience that many IT and most BPO (Business Process Outsourcing) companies tend to get lower than average scores, while corporate banking and professional services companies tend to get higher than average scores. Firms operating in niche markets also find it easier to be seen as different and unique.
If I say you’re at the industry benchmark, will you really be happy?
If you aspire to hit the average score for your industry, or your country, you’re setting the bar pretty low. What you’re telling me is that you want to be an average company.
To take my point to its extreme, benchmarking is little more than a recipe for mediocrity.
Do you realise that international benchmarks are inherently flawed?
This is not just because the insurance broking or widget-manufacturing markets in the Netherlands have a completely different structure than they do in Australia. It’s also because Dutch and Australian clients have completely different approaches to the way they answer customer surveys.
There are some good academic papers on how different nationalities are pre-disposed to answering questionnaires differently. Let me give just one example. Some people will claim that the average Net Promoter Score (NPS) for B2B companies is between 25% and 30%, regardless of industry. However, these figures are heavily skewed towards US companies.
Our experience of gathering NPS scores across 86 different countries since 2006 is that the average NPS score for any B2B industry is closer to 10%. But then again, our clients are more heavily weighted towards European and Australian respondents, who generally tend to score less positively than their American counterparts.
But I still want to benchmark my performance!
I thought you might say that.
If you really do want to benchmark yourself, then let me suggest that you approach the subject of benchmarking in a slightly different fashion:
START BY SETTING THE BAR HIGHER. Aspire to be the best, or at the very least to be ‘Unique’ in the eyes of your customers. Our database at Deep-Insight shows that only 10% of B2B companies are considered Unique by their clients, but these Unique companies have significantly stronger relationships – and retention rates – than the ‘average’ company. Unique companies typically have twice the number of Ambassadors and have NPS scores of 30% or more.
BENCHMARK YOURSELF AGAINST YOUR OWN PERFORMANCE LAST YEAR. That’s a much more reliable way of seeing if you are becoming more customer-centric or not. The journey to becoming a customer-centric organisation is a long one – don’t think you’re going to achieve it in anything less than three years – so be sure to check your progress formally on at least an annual basis.
BENCHMARK YOURSELF INTERNALLY. See what your clients think of you, compared to the scores that are achieved by other divisions or business lines within the same company. If you’re an international company, benchmark yourself against other geographies (but watch out for the cultural differences between, say, American and European divisions.)
Remember that B2B benchmarking is not a good idea. It’s not a BAD idea. It’s just that you should ignore the competition and become unique for your customers.
Last year, I wrote a blog post entitled What is a ‘Good’ B2B Net Promoter Score?. For some reason it turned out to be surprisingly popular. The blog still gets dozens of hits every week. I’m guessing that was because there’s a lot of nonsense posted on the Internet about companies achieving Net Promoter Score (NPS) results of +62 or even +78, or about people being hugely disappointed because they only achieved a score of +25.
Meanwhile, some of our own clients at Deep-Insight would get upset when I tell them their customer NPS was only marginally positive or – even worse – negative. The two simple messages in that blog post were:
“Be careful about how you interpret NPS figures”
and
“A customer Net Promoter Score of approximately +10 is the average for European B2B firms.”
eNPS versus NPS
In that blog, I was discussing NPS as a measure of customer advocacy. More and more, it is also becoming the de facto standard for measuring employee advocacy and employee engagement. So this blog will address the question: “What is a ‘Good’ Employee Net Promoter Score?”
Before I let you know what that magic number is, it’s worth digressing slightly to explain the basics of how NPS is calculated. If you’re already a net promoter aficionado, skip the box below.
HOW IS THE NET PROMOTER SCORE CALCULATED?
For the uninitiated, a company’s Employee Net Promoter Score (eNPS) is based on the answers its employees give to a single question:
“On a scale of 0 to 10, how likely are you to recommend Company X to a friend or colleague?”
Employees who score 9 or 10 are called ‘Promoters’. Those who score 7 or 8 are ‘Passives’ while any employee who gives a score of 6 or below is a ‘Detractor’. The actual eNPS calculation is:
Net Promoter Score = the percentage of Promoters minus the percentage of Detractors
Theoretically, companies can have a Net Promoter Score ranging from -100 to +100.
So think about it. The only Promoters you have in your company are those employees who are prepared to give you a score of 9 or 10 out of 10. In the average American company (remember that the whole Net Promoter concept originated in the USA) that makes sense. Americans tend to score very positively when they are satisfied, so having a high cut-off point is appropriate. However, if you’ve grown up and live and work in a European country, you approach the Net Promoter question from a very different cultural perspective.
It’s a Cultural Thing
Many – nay, most – Europeans regard 8/10 as a very good score. Some will argue that 9s or 10s are only handed out in exceptional circumstances. This is culturally ingrained into us Europeans through our schooling system and particularly through our university grading system.
In European universities, a First Class Honours degree requires a score of 70% (7 out of 10). Scores of 75% are remarkable, while scores of 80% (8 out of 10) and higher are almost unheard of. These cultural differences have to be taken into account when interpreting whether a particular Employee Net Promoter Score is ‘good’ or ‘bad’.
The Magic Number
So what is a ‘Good’ Employee Net Promoter Score? We have been measuring NPS and eNPS since 2006. We do this mainly for European and Australian companies. The average Employee Net Promoter Score (eNPS) across all of our clients during that time has been a paltry -10. Yes, that really is a negative sign before the 10.
MINUS TEN!
Put it another way: achieving a positive Employee Net Promoter Score is a solid achievement for most European firms. Rarely do we see eNPS results in excess of +20.
So there you have it. If your company has just received a negative eNPS in the latest employee survey, don’t feel too bad. You’re in good company!
To find out more about Deep-Insight’s employee assessments, click here.
* Net Promoter® and NPS® are registered trademarks and Net Promoter SystemSM and Net Promoter ScoreSM are trademarks of Bain & Company, Satmetrix Systems and Fred Reichheld
We run B2B customer assessments for large corporate clients in the Netherlands and elsewhere. Very often I get asked questions like this after we deliver the customer feedback to senior management:
“OK, you’ve told us what our customers think of us, but what do we do about it now?”
“Tell us what we do in the next few weeks so that we don’t lose momentum.”
So here’s what I tell them:
1. BRIEF YOUR PEOPLE.
Typically, you need to brief at two levels and both are equally important:
– Executive Team. The senior executives in your organisation need to ‘own’ the overall results. If the customer feedback is negative or requires fundamental change, only the executive team can decide on the appropriate actions.
– Account Managers. These are the people who need to ‘own’ the results at account level. They are also the people you need to set up and run the account feedback sessions (see below).
Make sure to get the senior executives to read all the verbatim comments and see if their summary of the top issues agrees with the Deep-Insight analysis (they will understand the context better than we can). The most effective way of increasing Customer Relationship Quality (CRQ) and NPS scores is to have the programme driven by the executive team. Without the drive and passion at this level, the programme will fail.
2. DISCUSS THE RESULTS WITH YOUR CLIENTS.
Typically this happens in two stages:
– Stage 1. Within 2 weeks of the assessment results being delivered, you should get a general communication to all customers that you invited to give feedback. This should include a general ‘Thank You’ message for participating in the assessment (OK, not everybody completed it – our completion rates are typically 35-40% – but let’s not be mean!) as well as a message that their account manager will be in touch to arrange a feedback session to discuss the results (the overall results plus the specific results for their account)
– Stage 2. Within 8 weeks (or whatever target you set – but you must set a target), the account managers should have completed face-to-face meetings with all key customers. Ideally, they will have used that discussion to create a ‘Joint Action Plan’ setting out what both parties need to do, in order to address any issues unearthed in the assessment. Remember that the actions are on both sides – the account manager may need the client to change certain things as well.
3. FEED THE RESULTS INTO THE ANNUAL BONUS SCHEME.
If you haven’t done so already, think about incorporating the CRQ or NPS scores into account managers’ annual targets and bonus plans. If you have done so already, pay out the bonuses! This is probably the second most important driver of success in any customer experience programme. What gets measured and rewarded, gets done.
4. PLAN THE ACTIONS.
Again, do this at two levels:
– At corporate level. These are typically the key themes mentioned in the verbatim comments. Choose one or two big initiatives to work on during 2015. Keep it focused – any more than one or two initiatives will result in a dilution of effort.
– At client level. Each client will have its own specific set of issues including some ‘quick wins’ that can be addressed immediately.
5. MOST IMPORTANT, MONITOR PROGRESS.
If the results are poor, consider an interim assessment in 6 months (we call this a ‘Healthcheck’) but definitely repeat the feedback assessment after 12 months. If you don’t do this, you won’t know if you have achieved success.
None of the above five items are rocket science, but it strikes me as odd that some clients fail to take these actions. I know from 10 years of delivering Deep-Insight customer feedback to clients in the UK and the Netherlands, I know that these actions will result in better customer experience and improved feedback scores.
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.
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.
