10 Key Observations for Customer and Employee Loyalty Practitioners
1. Despite its ability to generate customer insights, a Net Promoter Program is a customer and employee engagement tool, not a research exercise. Its top goals are triggering customer relationship resets and holding employees accountable to embracing customer-centric behaviors. Using Net Promoter only as a customer feedback collection tool fails to engage with its primary value, ultimately undermining ROI.
2. Net Promoter has become the dominant loyalty metric and principle because of its simplicity and relative ease of adoption, whether researchers like it or not. NP is a good example of what psychologists call “Availability Cascade,” a self-reinforcing cycle that starts when a simple idea gains popularity because of its simplicity, and then is viewed as even simpler because of its popularity. A smart company should embrace Net Promoter, since trying to fight dominant trends almost always leads to isolation, but it should not rely entirely on it.
3. Both metric and end-to-end Net Promoter programs rely entirely on the “Likelihood to Recommend” question, which, at its core, assesses the Word-Of-Mouth (WOM) state/impact of your customers, not customer retention. The assumption is that strong “recommenders” are your most loyal customers, which links Net Promoter Scores to customer loyalty. If this particular linkage is proven untrue or inaccurate over time, the Net Promoter principle will end up being hot air. However, this is quite unlikely to happen.
4. The Net Promoter Score ranges from 0-10 and segments the market into three primary groups: Promoters (rating of 9-10), Passives (rating of 7-8), and Detractors (rating of 0-6). As a result, it measures positive WOM (based on customers’ “recommendation likelihood”), but it does not account for negative WOM, namely those who not only are not at all likely to recommend (Detractors), but who actively provide negative recommendations to people they know. The metric assumes that an individual will only provide either positive recommendations or no recommendations at all. Customers providing negative recommendations are forced into the bottom of the Detractor segment, preventing the metric from capturing a comprehensive picture of Word-Of-Mouth impact.
5. The Net Promoter Score is derived by subtracting the percentage of Detractors (rating of 0-6) from that of Promoters (rating of 9-10). Approximately 20% of the market (rating of 7-8) is theoretically left out of the equation, which implies “no impact,” while at the same time this very group of customers significantly contributes to the end result. In almost all projects I have personally managed, the Passives have provided numerous recommendations per year, but the metric treats them as if they are completely inactive or do not exist, an oversight that could easily lead to inaccurate business decisions. Executives almost always approach Passives as if they have zero contribution, a potentially costly mistake.
6. The “Likelihood to Recommend” question could be misleading in cases of customers not providing recommendations as a result of innate personality traits instead of low satisfaction with or loyalty to an organization. In simple words, a customer may state a low likelihood to recommend because he/she simply does not believe in recommending anything, not because he/she is dissatisfied with the company, product, or service. Although these cases may be the minority, they do impact results.
7. A fully operational Net Promoter program (meaning a program that includes comprehensive customer follow-up planning/execution and deep NPS integration to employee performance assessment and compensation) is expensive. Simply obtaining your customers’ likelihood-to-recommend-your-company scores (by running a customer satisfaction survey) requires a few hours preparation and may cost $250/year or less. Integrating that score to your company’s core culture and basic operational functions is where the cost can skyrocket – and the area to focus and keep a close eye on.
8. Realizing bottom-line results from implementing Net Promoter programs demands at least two to three years of persistent and uninterrupted program execution with very careful wave-to-wave refinement. Organizations that claim significant NPS increases in a matter of months are just scratching the surface, and in many cases, cannot really tell what drove their score improvements. Again, successfully developing and executing customer follow up and employee compensation models takes a fair amount of time, not just a “matter of months.”
9. Implementing NP programs is essentially a race against your own benchmark, similar to how athletes approach triathlons; each time you try to improve your previous performance. Straight company-to-company comparisons should mostly serve directional purposes and help put things in perspective. Each vertical is different with regards to customer loyalty and each organization is set up differently as well. Also, customer loyalty benchmark studies are based on different and sometimes conflicting methodologies. Instead of spending hours comparing your performance to these of your competitors, try comparing your performance now versus your performance a year ago.
10. It is no secret that Fortune 1,000 companies are already implementing NP programs in some form or another. However, the future of these programs (and, in my view, the true opportunity to prove the superiority of the concept) is their full adoption by small- and medium-sized companies. This particular market segment will need to develop innovative ways to execute end-to-end NP programs, since capital and human requirements are currently too high for these businesses to afford complete, integrated solutions. This will be the test that will determine whether Net Promoter is the de-facto loyalty principle or just a luxury for the few.
Disclaimer: I am a Net Promoter Certified Associate, trained by the co-developers of the concept, Satmetrix Systems. All content expressed on this post represents my personal opinions. The views stated here are not those of Bain, Satmetrix Systems, or any other organization and/or individual mentioned on this post. Net Promoter and NPS are registered trademarks of Bain and Satmetrix Systems.