Why B2B Benchmarking is NOT a good idea!

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.

Most of our clients want to know how they are doing against the benchmark score for their industry. It doesn’t matter how many times I tell them: “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 and focus purely on being indispensable to their customers, but it’s still 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.

-What exactly is your industry? Are you in the insurance industry, or the insurance broking industry? Or both? Or are you an outsourcing company that specialises in insurance third-party processing? These are all different industries, with different dynamics. And there are differences in average scores from one industry to the next. For example, we know from experience that IT and BPO outsourcing companies tend to get lower than average scores from their clients, while corporate or business banking companies tend to get slightly higher than average scores. Firms operating in niche markets sometimes 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, or the globe, 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.

If you really do want to benchmark yourself, then let me suggest that you approach the subject of benchmarking in a slightly different fashion:

  1. 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.
  1. 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.
  1. 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.)

Good luck!

What is a ‘Good’ Employee Net Promoter Score?

What is a ‘Good’ Employee Net Promoter Score?

Last year, I wrote a blog post entitled What is a ‘Good’ B2B Net Promoter Score? which turned out to be surprisingly popular. I’m guessing that was because there’s a lot of nonsense posted on the Internet about companies achieving NPS (net promoter score) 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 clients would get upset when I told them their 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 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 = % of Promoters minus % 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 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.

Making the Grade
 

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 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.
 

Does NPS Work for B2B Companies
 
 

* 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