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this is Pete fader from the marketing
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department at the Wharton School of the
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University of Pennsylvania and I'm here
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today with Rob Mary from Bane Consulting
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to talk about his new book The Ultimate
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question 2.0 Rob it's great to have you
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with us thanks Pete it's great to be
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here before we jump in and talk about
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the book first can you tell us what all
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this NPS stuff is all about those three
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letters are on everyone's mind these
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days a lot of businesses are being run
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by them so before we talk about the
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implications of it tell us what NPS
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stands for well NPS uh originally when
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we started it stood for the net promoter
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score and it was designed as a way to
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help you know marketers operations folks
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call center
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operators um Business Leaders figure out
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the extent to which they were really
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meeting their objective of earning the
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Loyalty of their
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customers and the way that you get your
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net promoter score is that you ask this
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one simple question How likely would you
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be to recommend my company my product my
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service to your friends your colleagues
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your family
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members and based on the answer to that
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question we can then sort customers into
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promoters the people who are
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enthusiastically loyal to your brand
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your company your product and are out
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there telling all their friends and
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personally buying more staying longer
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you know helping build your business the
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passives people who are you know
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passively positive they think your stuff
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is okay and then the the worst group the
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detractors people who just really
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dislike doing business with you they
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would leave if they had a choice um they
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tell their friends how terrible it is to
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work with you and you get your net
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promoter score by taking those promoters
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and you and subtracting out the
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detractors to get that Net score and so
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the research that you've been involved
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with and Fred reld has done uh both in
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the current book and the previous book
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has has shown that this NPS score has
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just some amazing associations with
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other more bottom line oriented business
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metrics tell us about those well the
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essence of it boils down to the fact
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that individual customers behave
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consistently with the designation
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promoter passive detractor so if you
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were a promoter you'd be buying more
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staying longer telling your friends
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building the business and the detractor
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doing just the
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opposite that's that's the foundation on
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top of that what we discovered is that
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if you aggregate all the promoters and
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detractors and create that Net score and
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then compare one company's score to
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another company score in the same
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industry in the same Market you'll find
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that the the one that has a higher score
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score tends to outgrow the one with the
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lower score and in fact the net promoter
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score leader in an industry in a market
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tends to outgrow its competitors by a
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factor of more than two and a half to
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one so that that right there actually
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was the thing that started to really um
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make this catch on because people
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understood suddenly if I can grow my net
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promoter score then I can get more
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customers to stay longer buy more tell
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their friends I can outgrow my
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competitors and I can even in some cases
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achieve a cost Advantage MH now before
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we move on from net promoter score to
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net promoter system I have to admit my
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initial bias my skepticism uh as a
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marketing professor as someone who
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focuses on measurement when it first
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came out my reaction was it's it's too
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simple and knowing that there are so
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many uh uh colleagues in the field and
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other companies who have been working on
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very similar kinds of measurement issues
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but capturing for instance the
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multi-dimensional aspect to satisfaction
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or loyalty my reaction was you can't
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boil it all down to one thing and have
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it work for you so your reaction to that
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well you can't actually the the truth is
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that the net promoter score is designed
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to be radically simple not because it's
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statistically better but instead because
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it's statistically fine and that
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Simplicity appeals to Frontline
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employees and even CEOs can understand
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it m so this designation promoter
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passive of detractor based on one
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question it's a simplifying construct
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that helps motivate inspire people to
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want to create more promoters and fewer
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detractors if you really wanted a
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statistically robust thing that was far
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you know that all it was was about the
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statistically um accurate correlations
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you'd always go for more questions MH
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but what we found is that there's about
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a 10 or 15% Improvement by adding more
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questions
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in terms of statistical accuracy but it
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tremendously degrades your ability to
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motivate the organization to take action
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because then you get into these debates
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well what are the questions that are
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part of the index and how are they
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weighted and I don't know maybe that
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question isn't relevant for my business
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and then you you end up debating the
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score and not actually focusing on what
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matters which is getting your customers
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to stay longer buy more and tell their
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friends and indeed what you just
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described as very consistent with the
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academic research which shows that a a
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richer multi-dimensional scale can be
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say 10 to 15% better um but that this
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this this one question this ultimate
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question really is good enough so in the
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academic Community it's kind of a half
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full half empty I'm I'm a half full kind
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of guy saying give me a measure that's
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good enough one that that managers can
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actually appreciate understand Implement
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uh spread throughout the organization uh
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and it it raises the whole idea of of
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measurement and understanding customer
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differences to a level that we've never
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seen before in any organization well
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we're proud of what we've been able to
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accomplish from a practical perspective
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with net promoter score um I think what
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motivated us to start thinking about NPS
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those three letters as standing for the
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net promoter system was that um the
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appeal of this radically simple approach
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actually got you know just like just
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like happened with um Six Sigma or
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happen with other management tools some
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companies were using it really well and
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other companies honestly all they were
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doing is calculating a score and then it
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wasn't impacting their business and they
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were saying well we're not getting any
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impact here why you know we're measuring
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what's going on and the um that
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frustration that they felt and that we
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felt watching them led us down this path
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of trying to discover what are the
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differences between the companies that
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are getting real impact and the
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companies that are failing m
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and that led to this Insight that there
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are these three things that the
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successes are doing that the failures
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aren't and that was the the foundation
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of the net promoter system so let's hear
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about them okay well the the first one
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is that the the companies that were
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doing really well had a really robust
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and thorough way of collecting the data
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to create a a reliable score a reliable
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outcome metric you know the foundation
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of the application of this was built out
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in some ways at GE where they were
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trying to apply Six Sigma to service
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operations and sales and they you can't
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apply Six Sigma unless you have a
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reliable way of identifying a defect and
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a success and net promoter became that
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that outcome metric for them well if the
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fundamental outcome metric is unreliable
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because you fail to sample appropriately
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or because you're asking the question in
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a way that frames it with prior question
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or because you're inconsistent about the
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uh set of set of uh product
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Services you know you have no basis for
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making decisions about where the defects
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lie and where the opportunities are to
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create
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promoters so foundationally number one
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robust robust score number two and this
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is maybe most important the successes
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were using the the feedback that came
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out of net promoter as the basis for
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fast cycle closed loop learning
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action and and um uh service recovery so
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instead of just treating this as a score
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to calculate and something to measure
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they were actually turning it into an
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operational functional uh part of their
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business they take the feedback directly
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from a customer give it within 24 hours
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to the employee who had been most
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responsible for creating the outcome
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and then Coach them on how to improve so
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that timing is important because I if I
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if I'm your the person serving you I can
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remember the interaction we had that
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created your feedback as opposed to what
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we traditionally do where we we
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aggregate months of data give a an
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employee like an average score and say
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okay
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improve so this this closed loop became
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the the second thing we discovered and
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then the
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third in a way it's um it it's it sounds
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so trite and obvious but the companies
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that were
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successful they believe deeply from the
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senior leadership on down that earning
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the Loyalty of their customers was
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really critically important to their
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business
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strategy that that was how they were
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going to grow profitably and the score
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was a way of the and the system were a
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way of of helping achieve that objective
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the failures almost invariably they set
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a goal on a on a number hey we want to
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we want our net promoter score to be
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higher than it is today or we want to
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earn the JD power
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award and then they delegated it to like
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the head of service or somebody deep in
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the organization and said okay go do
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that and tell me how it goes so for
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those firms that really embrace it as
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you just said there's going to be more
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broader more fundamental organizational
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changes tell us how companies have
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realigned themselves around that
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promoter system oh it's a big deal it
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actually what sounds so simple this
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sorting your customers into promoters
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passive detractors turns out in practice
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to have profound impacts for your
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culture the way you organize the
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processes that by which you run the
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business so as an example um you've got
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in most of the companies that are doing
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this really well this infrastructure
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data infrastructure um Financial
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infrastructure to help figure out which
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customers are promoters and passives and
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detractors take action against that and
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figure out what the value would be of
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improving you know of of turning a a
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detractor into a promoter or to Turning
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hundreds or thousands of customers from
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detractors into promoters um you end up
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having the the guys in product
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development suddenly changing the way
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that they think about success instead of
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just getting the product launch out and
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having lots of initial sales to the
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channel they now not only have to have
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lots of initial sales but they have to
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have night High net promoter score in
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fact at at Logitech at Logitech um each
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SU excessive uh product release has to
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be has to have a higher net promoter
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score than the one before it or it into
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it they do the same thing and it it
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actually changes their perspective in in
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the development of new products so going
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one step further so not only is it going
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to realign a company to do what it does
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better I'm interested in in the Step
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Beyond that so as you know I have a
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recent book on customer centricity
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saying that companies need to be
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following a a a fundamentally different
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strategy uh let's sort out different
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kinds of customers the good from the bad
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and realign everything we do for from
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product development uh on on down around
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the better kinds of customers are we
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seeing fundamental shifts in strategy as
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people have something like NPS to guide
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them we are although I would say that
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the companies that are successful
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actually start with with the principles
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that you're talking about Pete um net
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promoter system works best when it's
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embedded in a culture in a company that
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fundamentally believes that earning more
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loyalty from the profitable customers is
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the Strategic outcome that they're
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trying to create and the net promoter
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system helps provide guidance about
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where to focus what actions to take to
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get there and how to help individual
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employees tens hundreds thousands of
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individual employees align their actions
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around that
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objective but that doesn't substitute
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for business strategy and what you're
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talking about and I I love your your new
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book what what you're talking about
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there is the the more fundamental
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question well which customers loyalty
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should I be striving to to earn because
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they are the ones that offer the
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greatest potential in the marketplace
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and because my company has skills
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capabilities um Market position that
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allow us to be more successful with that
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that group of customers great so
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thinking about the future we've gone
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from net promoter score a particular
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measurement device to net promoter
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system a broader system to help
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companies better appreciate and leverage
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uh what they got out of that score uh I
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know that the book is new you're you're
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out there uh trying to get more
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companies to fully understand what this
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new NPS is all about but thinking ahead
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two three years what's next what's the
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next level to add to it I think you're
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going to see two two big areas of focus
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from us and from our clients the members
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of The NPS loyalty Forum one um over the
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last few years we haven't written a lot
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about it but we we we mentioned it in
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the
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book significantly more focus on this
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linkage between employee advocacy and
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customer advocacy the recognizing that
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it is very hard to sustain high levels
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of customer focus of customer centricity
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of customer advocacy unless you have
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also earned the same thing from your own
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employees and that there are specific
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things that you can do on the employee
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advocacy side that lend themselves more
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to custom Custer advocacy so that's one
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and then the second one is around
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Innovation and design for Delight as
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some people call it or um the process of
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Designing products Services value
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propositions that will differentially
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create promoters I think in the early
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days because partly because its
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foundation was like a GE with Six Sigma
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defect elimination a lot of the emphasis
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was on rooting out those defects the
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things that create detractors and now we
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are spending a lot more of our energy
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around the things that you can do to
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create promoters and even to what we
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call activate promoters give your
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promoters a voice give them a story to
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tell a reason to get excited about
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talking to their friends about your
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company well I'm excited to talk to you
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rob uh want to encourage everyone to
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take a look at ultimate question 2.0
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it's been a pleasure having Rob Mary
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here with us today thank you very much
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thanks Pete
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