As part of developing the Pittsburgh Customer Experience Management practice at SDLC I’ve had the pleasure of reading article after article and white paper after white paper on the key metrics attached to CXM. Concerning the latter, the one that has consistently stuck out most to me is a metric called NPS, or Net Promoter Score.
It’s a concept that was originally advanced by Frederick Reichheld in his 2003 Harvard Business Review article, The One Number You Need to Grow. It has since been adopted by Bain (co-owner of its trademark) and CXM strategy consulting firms everywhere.
Here’s how it works: Survey your customers (typically a well-targeted constituency) and ask them to answer the question, “How likely are you to recommend this service to family, friends, or colleagues?” based on a 10-point scale. Those responding 9 or 10 belong to your “promoter” group. Those responding 7 and 8 are assumed “passively satisfied”. Those reporting scores of 6 or lower are presumed “detractors” and likely to share negative experiences or defect altogether.
I find this number so compelling for its correlation with economic performance. Consider Charles Schwab, which saw disappointng annual growth of -3.6% between 2003 and 2005. The firm rebounded significantly in the years that followed, growing an average +17.5% until 2008 when it resumed its place atop the industry. Over that same period the firm’s NPS shifted from an uninspiring -34% to an impressive +42% (Bain). Perhaps more importantly they have sustained their position, and in 2012 were ranked Highest Customer Satisfaction in the industry by JD Power and Associates.
But the highest NPS in absolute terms shouldn’t necessarily be a firm’s end game. According to Bain, “…a business with a low absolute NPS that nonetheless scores higher than all of its direct competitors is indisputably best in class and empirically likely to gain market share.”
The takeaway: When it comes to Customer Experience Management, you don’t have to be perfect. You just have to be better. Those who are better over the long term will achieve the most market share, and by extension, the most excess profits vis a vis their competition.
You may also be interested in: