Here is an open-source system whose “engine” can drive profitable growth
This is a revised and expanded second edition of a book published in 2006. In it, Fred Reichheld skillfully develops several concepts in much greater depth. In most of his previous books and articles, he focuses his primary attention on how to build and then sustain trust between and among those who share a workforce. Trust is again an important theme in this latest book because, if customers do not have trust in a company, its people, and its products and services as well as in its values, they will have little (if anything) to do with it and will certainly not recommend it to others.
The eponymous book titles refer to a question of ultimate importance: “On a zero-to-ten scale, how likely is it that you would recommend us (or this product/service/brand) to a family member, friend or colleague?” As Reichheld explains, the phrasing of that question is “a shorthand wording of a more basic question, which is, Have we treated you right, in a manner that is worthy of your loyalty?…But the question really wasn’t [and isn’t] the heart of things. After all, no company can expect to increase its growth or profitability merely by conducting surveys, however the question or questions might be phrased.”
With assistance from Markey, what Reichheld does is provide a cohesive, comprehensive, and cost-effective management system by which that has three central components: categorizing customers into one of three categories (i.e. Promoters, Passives, an Detractors) through a simply survey, creating an easy-to-understand score based on that categorization, and finally, “framing progress and success in these terms, thereby motivating everyone in the organization to take the actions required to produce more promoters and fewer detractors.” In other words, on an on-going basis, use current scores and related feedback to drive improvements.
With regard to the scores themselves, Promoters are those who provide a rating of 9 or 10, Passives 7 or 8, and detractors 6 or less. For purposes of illustration, let’s say 100 customers respond as follows: 35 Promoters, 45 Passives, and 20 Detractors. The net score is determined by subtracting the total number of Detractors (i.e. 20) from the total number of Promoters (i.e. 35) and that is 15. That is a baseline against which subsequent efforts to increase Promoters and decrease Detractors are measured. Reichheld calls it the Net Promoter Score (NPS) and so shall I.
In my opinion, with all due respect to the importance of the NPS metrics, the implications of the measurements are of far greater importance. Think of the measurements as a mirror, one that reflects multiple realities. Only by understanding those realities — and how to respond to each effectively — can appropriate change initiatives be initiated to achieve and then sustain a never-ending process of improvement. “Flexible it may be, but without the following elements, NPS just won’t work.” They are:
1. Companies must systematically categorize promoters and detractors in a continuous, timely, and accurate manner. I think it is also important to note when Promoters become Passives and when Detractors become Passives. Also, to understand why.
2. Companies must create closed-loop learning and improvement processes and build them into their daily operations. In other words, NPS is not – and must never be viewed as – a customer relations improvement initiative or even a program. It must become and then remain an organic system.
3. CEOs and other leaders must treat creating more Promoters and fewer Detractors as mission critical. I’d say “mission imperative.” As Peter Drucker once observed, “Without customers, there is no business.”
Hundreds of the world’s largest and most complex organizations have adopted NPS but I hasten to point out that it can also be of substantial value to almost any company, whatever its size and nature may be. In recent years, it has been my great pleasure as well as privilege to work closely with owner/CEOs of hundreds of companies whose annual sales are less than $20-million. I would recommend NPS to each without hesitation or qualification. As Reichheld explains, it is “a business philosophy, a system of operational practices, and a leadership commitment, not just another way to measure customer satisfaction.”