Forbes.com

How Rackspace turns customers into brand fanatics

The cloud-computing company uses a Net Promoter system to measure the loyalty engendered by its "Fanatical Support" philosophy.

By Rob Markey and Fred Reichheld

Published on September 20, 2012
min read


Rackspace is a young entrepreneurial company in the fiercely competitive cloud computing and managed hosting business. Founded in 1998, it now has a revenue run rate of more than $1 billion and annual growth topping 30%. What distinguishes the company from competitors, says CEO Lanham Napier, is the so-called “Fanatical Support” it offers customers. The company measures and manages Fanatical Support through its Net Promoter® system. “The goal of Fanatical Support is to create customers who are promoters,” Napier explains. “Promoters recommend us to their friends, becoming an extension of our salesforce. Customers who are promoters are also more profitable, staying with us longer and buying more of our services…. The creation of loyal promoters not only reduces customer acquisition costs, it improves retention rates and inspires our Rackers [employees].” A Net Promoter system is way of running a business that focuses on creating promoters—passionate, loyal advocates—among your customers and employees. It’s a complete management philosophy, and it requires transforming many elements of a company’s operations. We’ll summarize the key tasks in this post and examine them in greater depth in future posts. 1. Accurate scorekeeping. Net Promoter companies survey their customers regularly. Most ask this question: “On a zero-to-10 scale, how likely would you be to recommend this company (or product) to friends and colleagues?” The responses indicate promoters (9-10), passives (7-8), and detractors (0-6). Most practitioners find that they must develop, test and finetune their sampling and survey techniques so that everyone in the organization trusts the resulting classifications and the Net Promoter scores (promoters minus detractors). 2. Understanding of loyalty economics. Promoters, passives and detractors have vastly different economic value to most companies. Determining the magnitude of the difference can help you gauge the value of investments in improving the customer experience. 3. Root-cause searches. To track down the root cause of an individual customer’s experience, Net Promoter companies ask themselves, What about this customer, this situation, our marketing, our products or our operations produced the given result? This is not a question that can be farmed out to a market research firm. 4. Closed-loop procedures. Companies develop practical, consistent methods for sharing feedback with employees and contacting customers to learn more about their experiences. 5. Learning. Employees at Net Promoter companies have the power to experiment with what works best for customers. The organization as a whole needs systems for discovering improvement opportunities in products, policies and procedures. 6. Action. To create more promoters, companies have to resolve individual issues, help employees solve problems or “wow” customers on their own, address systemic issues, and improve products and services. 7. Robust support systems. Large, complex organizations that run on enterprise software often require significant IT investments to integrate Net Promoter processes into their broader operating systems. 8. Commitment and communication. Leaders typically find they must not only commit to the Net Promoter system, they must constantly communicate to the entire organization the importance of the system and the values that underlie it. Implementing a Net Promoter system isn’t easy, and it isn’t for everybody. The Net Promoter approach defines cultural values and core economics that affect virtually every aspect of a company’s business system and competitive strategy. The most successful companies work hard on all eight elements. But when they do it right, as Rackspace and many others have discovered, they leave the competition in the dust. For a complete practical guide to implementing a Net Promoter system, go to www.netpromotersystem.com. Written by Rob Markey and Fred Reichheld, authors of The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World. Markey leads the Global Customer Strategy and Marketing practice at Bain & Company and Reichheld is a Fellow at the firm.

Rackspace is a young entrepreneurial company in the fiercely competitive cloud computing and managed hosting business. Founded in 1998, it now has a revenue run rate of more than $1 billion and annual growth topping 30%. What distinguishes the company from competitors, says CEO Lanham Napier, is the so-called “Fanatical Support” it offers customers. The company measures and manages Fanatical Support through its Net Promoter® system.

“The goal of Fanatical Support is to create customers who are promoters,” Napier explains. “Promoters recommend us to their friends, becoming an extension of our salesforce. Customers who are promoters are also more profitable, staying with us longer and buying more of our services…. The creation of loyal promoters not only reduces customer acquisition costs, it improves retention rates and inspires our Rackers [employees].”

A Net Promoter system is way of running a business that focuses on creating promoters—passionate, loyal advocates—among your customers and employees. It’s a complete management philosophy, and it requires transforming many elements of a company’s operations. We’ll summarize the key tasks in this post and examine them in greater depth in future posts.

1. Accurate scorekeeping. Net Promoter companies survey their customers regularly. Most ask this question: “On a zero-to-10 scale, how likely would you be to recommend this company (or product) to friends and colleagues?” The responses indicate promoters (9-10), passives (7-8), and detractors (0-6). Most practitioners find that they must develop, test and finetune their sampling and survey techniques so that everyone in the organization trusts the resulting classifications and the Net Promoter scores (promoters minus detractors).

2. Understanding of loyalty economics. Promoters, passives and detractors have vastly different economic value to most companies. Determining the magnitude of the difference can help you gauge the value of investments in improving the customer experience.

3. Root-cause searches. To track down the root cause of an individual customer’s experience, Net Promoter companies ask themselves, What about this customer, this situation, our marketing, our products or our operations produced the given result? This is not a question that can be farmed out to a market research firm.

4. Closed-loop procedures. Companies develop practical, consistent methods for sharing feedback with employees and contacting customers to learn more about their experiences.

5. Learning. Employees at Net Promoter companies have the power to experiment with what works best for customers. The organization as a whole needs systems for discovering improvement opportunities in products, policies and procedures.

6. Action. To create more promoters, companies have to resolve individual issues, help employees solve problems or “wow” customers on their own, address systemic issues, and improve products and services.

7. Robust support systems. Large, complex organizations that run on enterprise software often require significant IT investments to integrate Net Promoter processes into their broader operating systems.

8. Commitment and communication. Leaders typically find they must not only commit to the Net Promoter system, they must constantly communicate to the entire organization the importance of the system and the values that underlie it.

Implementing a Net Promoter system isn’t easy, and it isn’t for everybody. The Net Promoter approach defines cultural values and core economics that affect virtually every aspect of a company’s business system and competitive strategy. The most successful companies work hard on all eight elements.

But when they do it right, as Rackspace and many others have discovered, they leave the competition in the dust.

For a complete practical guide to implementing a Net Promoter system, go to www.netpromotersystem.com.

Written by Rob Markey and Fred Reichheld, authors of The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World. Markey leads the Global Customer Strategy and Marketing practice at Bain & Company and Reichheld is a Fellow at the firm.