The Birth of the NPS
In 2003, Fred Reichheld, an Executive at Bain & Co. incepted the Guest Satisfaction Survey as a means to test brand loyalty. Almost instantly, the idea exploded. Its clear application among service oriented businesses and scrappy executives made the Net Promoter System (NPS) an instant success as it has now come to be utilized by over two-thirds of today’s Fortune 500 companies. Ultimately, the notion of the NPS and its intent to stimulate growth by delivering an unparalleled customer experience has been a critical vector in driving revenue through the most informed promoters companies can identify, their own customers.
However, times change, of course. Today, Fred Reichheld, the former pioneer of the Net Promoter system is now its most vocal critic, renouncing its very utility as well as highlighting its personal shortcomings and external obstacles of which I have listed below:
- Survey Fatigue: Due to the onslaught of survey inundation and public review sites, customer feedback has fallen to an all-time survey completion rate low of 9%. [Pew Research Center]
- Misguided Ratings Incentives: Companies skew valuable feedback data by tying employee incentives to feedback scores as they pressure customers to give high marks. [Bloomberg]
- Reactive Approach: Companies treat customers who provide feedback like data points as opposed igniting empathy and engaging customers meaningfully as the NPS only focuses on one-question, believe it or not
Evidently, while the NPS fills a gaping void in the customer experience arena by helping companies re-focus their growth efforts internally, a system with insufficient, skewed, and one-dimensional leaves executives pulling out whatever hair they have left.
What the Hell is the Net Promoter Score, Anyway?
While the NPS was originally propelled to far reaching use through its formatted simplicity of asking customers one single question in its surveys, i.e., “How likely are you to recommend a friend?”, we are now observing the residual effects of an unraveling system. Earlier this year, Fred Reichheld, when interviewed about his growing dissatisfaction with his NPS, expressed his need for a solution, “The instant we have a technology to minimize surveys, I’m the first one on that bandwagon.” I hear that. Tattle has it.
First thing’s first though, because I’m sure you’re wondering: what the hell is the NPS? It’s really quite simple: companies ask customers “How likely are you to recommend a friend?” through a quick one-question survey and customers respond with a 0-10 response, 10 being the highest. I’ve provided an image below for a quick visual to understand its scoring process:
Once customers respond, they are bucketed into their most apt segment for relationship management by the company. I’ve provided the segments and nomenclature below for better understanding:
- Promoters (score 9-10): Loyal enthusiasts who will keep buying and refer others, fueling growth
- Passives (score 7-8): Satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
- Detractors (score 0-6): Unhappy customers who can damage your brand and impede growth through negative word-of-mouth.
Lastly, once customers are properly segmented based upon their own feedback responses, companies ‘close the loop’ by responding to Passives and Detractors while monitoring their NPS rating as a predictive indicator of future revenue growth. That’s correct, companies kind of just wait around, using mismanaged data, as an index for what growth may come. No joke.
The obvious problem, of course: with a system based on insufficient, skewed, and one-dimensional data, how can the NPS be used to drive growth if its merely a predictor (of bad data, nonetheless)?
Believe it or not, a majority of feedback collected today, even by Bain & Co., either comes from mystery shoppers, paper comment cards, emails, phone calls, or online ad-hoc surveys. Outside of the apparent deficiencies surrounding the integrity of NPS data, the harrowing oversights involved in the feedback collection process neglect two major areas where Tattle has yielded significantly higher results in feedback volume and large scale growth efforts:
- Experiential Feedback: Tattle drives a 99.53% survey completion rate of up to 15 questions answered, 20-50X more feedback than all other aforementioned mediums, and 93.93% of our customer feedback data comes through the smart phones of guests having a real, onsite experience
- Customer Prospecting: Tattle now offers a Referral Program built in to its customer responses by identifying customers who are ‘Very Likely’ to recommend a friend and providing them incentives to do so, while companies create the parameters of the referral campaign in order to monitor and attribute new customers as they comes in
It’s quite simple. Where the NPS fails in terms of volume, bias, and brevity as well as revenue generating initiatives, Tattle excels at identifying more customers, gathering more insights for relationship management, and setting true promoters in motion to, well, promote.
Closing the Loop on Referrals
For perspective on the inherent value of a feedback generated referral program, let’s review a customer response in the context of the NPS:
A customer visits your website looking for a new pair of Jordan’s; the customer finds them, buys them, is served a survey upon the delivery of his Air Jordan 6 Retro’s, and leaves a poor, 1-point Detractor score on his Guest Satisfaction Survey. Ouch.
Being the savvy web marketer that you are and feedback enthusiast, you respond with protocol by closing the loop and asking ‘Why?’ the customer left this poor feedback. You do this because it’s an economical imperative that you suppress the opinion of an unhappy customers who can damage your brand and impede growth through negative word-of-mouth. Smart.
However, what happens in the event you receive a 9? What about a 10? These are your best and most likely Promoters. In the same manner that you managed poor feedback from an unhappy customer to prevent negative word-of-mouth, wouldn’t the most prudent action among Promoters be to set these customers in motion to refer their friends? I think so.
So, in order to actually grow your business, the automation of a Tattle Referral Campaign kicks in to send this Promoter a 50% off coupon through Tattle if they refer 2 friends who buy a pair of Jordan’s from you, and you get to watch the reach of this Promoter’s network expand as new customers are introduced to your brand and convert to help grow your business.
Referral Marketing Over Everything
Let’s put it this way: your current customers are your best sales people. Hands down. It’s not even close.
In supporting this thesis, I have gathered some of the most compelling stats that compound both the efficiency and necessity of a referral program for both customers and marketers alike, specifically among Customer Experience Management platforms (CXM) rooted in customer feedback, which just snuck past ‘Mobile Payments’ as the 3rd most adopted technology by hospitality executives.[eMarketer]
- Growing Referral Budgets: 70% of respondents are planning to increase their online WOM spend, and 29% will increase their offline word-of-mouth marketing spend.
- Highly Receptive Millennial Demographic: Millennials ranked word-of-mouth as the #1 influencer in their purchasing decisions about clothes, packaged goods, big-ticket items (like travel and electronics), and financial products. Baby Boomers also ranked word-of-mouth as being most influential in their purchasing decisions about big-ticket items and financial products. [Radius Global]
- Impact of Meaningful Customer Connections: Brands that inspire a higher emotional intensity receive 3x as much word-of-mouth as less emotionally-connected brands. [Keller Fay Group]
- Underserved Referral Program Usage: Only 30 percent of the surveyed B2B companies said they have a formalized referral program in place. [Small Biz Trends]
- Impact on Buying Behavior: 91% of B2B buyers are influenced by word-of-mouth when making their buying decision. [USM]
- Increased Engagement Through Incentives: More than 50% of respondents are likely to give a referral if offered a direct incentive, social recognition or access to an exclusive loyalty program. [Software Advice]
- Most Effective Conversion Channel: Referral Marketing generates 3-5x higher conversion rates than any other channel and referred customers are 4x more likely to refer more customers to your brand
- Higher Lifetime Values: Lifetime Value of a referred customer is 25% higher than that of other customers. [Wharton School of Business]
CXM Over NPS
Today, a customer experience cannot be encapsulated with the answer of one basic question. Likewise, companies are not well served to simply wait to define correlation between NPS and bottom-line revenue, especially with faulty data.
Through Tattle, data is now dynamic and plentiful; our engaged consumers prefer meaningful connection from businesses, and our partners are positioned to take all the behaviorally based data they collect to respond in humanizing fashion and monetize it at scale through referral campaigns. Much like websites, brick-and-mortar business, due to the surge of onsite smart phone usage, are finally in a position to replicate the best of their customers with an act-a-like model approach without the crystal ball.