Both elements are critical. Do only the first and the business
will struggle to translate strategic insights into day-to-day
actions. Do only the second and the organization can waste efforts
on the wrong priorities. It takes a common framework, language and
set of metrics that is embraced at all levels of the organization
to accomplish both objectives.
Several leading firms have discovered that the Net Promoter®
disciplines provide such a comprehensive system. At the
organization's frontlines, "bottom-up" surveys triggered by recent
customer transactions help identify types of interactions or
experiences that cause customers to become promoters, passives or
detractors. Through follow-up calls with willing respondents,
employees develop insights that spur continuous learning and
improvement. The steady feedback enables frontline employees and
their supervisors to use the Net Promoter Score (NPS®) to
measure their progress. But for an NPS program to deliver its full
potential, senior leaders need a robust top-down approach for
benchmarking their business units against the competition, setting
strategic goals and allocating resources.
Top-down NPS, the subject of this brief, provides a clear
understanding of the company's competitive position in key markets
with an emphasis on its target customers. It gives the leadership
team a roadmap to improve that position and focus the organization
on the customer.
There are four key elements of a complete top-down NPS program.
Here is how leading companies serving business-to-consumer and
business-to-business markets put them to work:
1. Target the customer segments that matter
most
The most attractive customer segments may make up less than 20
percent of a company's total customer base, but they account for a
disproportionately large share of revenues and earnings. NPS should
be rooted in understanding this target group. These are the core
customers a company should strive to serve better than anyone else
and, as such, should be the focus of its efforts to identify and
recruit more like them.
When a major retail bank set out to use top-down NPS to shore up
its customer relationships, the analysis revealed that the top
quartile of customers accounted for more than 75 percent of its
total profits. Digging deeper the team developed a demographic
profile of these account holders by age, income, and the products
and services they bought. Based on this template, the team
constructed its NPS initiative to focus on potential new customers
who shared these prized characteristics. The factors that created
promoters or detractors among this segment differed markedly from
the factors driving loyalty among other, less attractive segments.
An "on average" look at NPS among all customers would have been
misleading.
2. Benchmark against the right competitors
Senior executives are keen to know how their organizations stack
up against the competition, but what is the right basis of
comparison? The overall brand? A specific product or service? And
what are the right geographic markets to evaluate? Ultimately, the
appropriate framework will depend on the decisions the organization
needs to make and the actions that the findings will unlock.
What matters most is not the business unit's absolute score.
When measuring top-down NPS, it is important to be mindful of the
two "Rs": Compare the organization's NPS relative to that of its
direct competitors across relevant product markets and geographies.
Drawing the right boundaries around the comparison set minimizes
the risk that cultural bias could skew the results. Japanese
customers, for example, rarely award top scores. In Australia, by
contrast, customers tend to rate companies more generously. But
cultural predilections do not obscure the meaningful differences
between customerloyalty leaders and laggards within every market.
Thus, 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. By contrast, a
business with a high absolute NPS that trails its direct
competitors is likely to lose share (see Figure 1).
3. Let your customers help you make better
decisions
Top-down NPS is a powerful tool for driving change deep within
the organization. The top-down scores provide a reference to how
the business stacks up against the competition and help managers
identify actions that can truly differentiate the customer
experience. Verbatim replies from top-down survey respondents help
pinpoint the key issues customers face in their interactions with
your organization (and your competitors) that have the greatest
potential to increase its number of promoters or create
detractors.
Used in combination with bottom-up surveys of customers'
experiences in daily transactions, the top-down feedback
accelerates tactical improvements. Informed by competitive insights
from the top-down surveys, functional managers at the company's
mid-level ranks can respond to unresolved issues elevated from the
frontline. They use the Net Promoter inputs to refine operating
systems, alter product features, fine-tune pricing and adjust
policies (see Figure 2).
4. Measure simply, measure well
The effectiveness of a top-down NPS program is a direct
consequence of the integrity of the survey process. Companies that
do this right keep their surveys brief and simple, but they are
thoughtful about how they implement it. They choose their survey
sample carefully to target prime customer segments and to ensure
that the sample size for each is large enough to yield
statistically significant results. To guard against any temptation
to game the system and produce predetermined results, they hire a
third-party research firm to field the survey, using a double-blind
process.
Most companies find that the short survey keeps response rates
high and generates sufficient data to develop timely, actionable
insights. The survey should begin by determining which product or
service provider the respondents use, followed immediately by
asking the centerpiece question, "How likely are you to recommend?"
Dig deeper by inviting respondents to explain briefly why they gave
the score they did, and supplement the answers, as necessary, by
eliciting key demographic or psychographic data that will enable
you to analyze responses by customer segment. To probe the depth of
the customer's attachment, additional questions may ask how likely
the respondent is to repurchase, and to rate one or more of the
product or company attributes.
Philips, the global lighting, healthcare and consumer-products
company, carefully field-tested its top-down questionnaire, the
customer sample that would be invited to participate and the
outside research firm that would conduct the telephone survey and
tabulate the raw results. To launch the program, it selected one
product from its medical instruments unit in one market. Only after
the survey team analyzed the initial results and fine-tuned the
approach did the company broaden the survey to multiple markets. It
was only by the end of the first year that the program had been
fully vetted and was rolled out across the entire healthcare
division.
Simple, yet powerful, Net Promoter disciplines provide the
rigor, speed and thoroughness to transform a company into a loyalty
leader. Because loyal customers spend more with companies that
treat them well, cost less to serve and refer more customers who
are like them, the Net Promoter approach can pay huge
dividends.
To learn more about Net Promoter, we recommend the following
resources:
- Fred Reichheld, The Ultimate Question: Driving Good Profits and
True Growth (Harvard Business School Publishing, 2006).
- Rob Markey, Fred Reichheld and Andreas Dullweber, "Closing the
feedback loop with customers" (Harvard Business Review, December
2009).
- "Closing the customer feedback loop at Charles Schwab" (Bain
& Company, December 2009). See video on www.bain.com
- "Net Promoter Score: A Primer" (Bain & Company, December
2009). See video on www.bain.com
Key contacts in Bain's Customer Strategy and Marketing
practice are:
Boston: Fred Reichheld
Munich: Andreas Dullweber
New York: Rob Markey
San Francisco: Aaron Cheris
Sydney: Jayne Hrdlicka and Scott Tanner
For additional information, please visit www.bain.com
Net Promoter® and NPS® are registered trademarks of Bain
& Company, Inc., Fred Reichheld and Satmetrix Systems,
Inc.
