Net Promoter Score?All companies seek to grow. And growthprofitable, sustainable organic growthoccurs most often when customers and employees love doing business with a company and sing its praises to neighbors, friends and colleagues.Most leaderswantcustomers to be happy; the challenge is how toknowwhat customers are feeling and how to establishaccountabilityfor the customer experience.Conventional customer-satisfaction surveys often dont work for this purpose, because the results dont make it back to the front line in a timely and individualized manner to actually drive behavior change.Some years ago, Fred Reichheld and a Bain team launched a research project to determine whether a different approach would prove more fruitful. Working with data supplied by Satmetrix, they tested a variety of questions to see how well the answers correlated with customer behavior.As it turned out, one question worked best for most mature, competitive industries:What is the likelihood that you would recommend Company X to a friend or colleague?High scores on this question correlated strongly with repurchases, referrals and other actions that contribute to a companys growth. In 11 of the 14 industry case studies that the team compiled, no other question was as powerful in predicting behavior. In two of the remaining three cases, other questions won out, but the likelihood-to-recommend question was so close to the top that it could serve as a proxy for the leaders.NPSAfter testing many questions, we found that one worked best for most companies in most industries:How likely is it that you would recommend Company X [or Product X] to a friend or colleague?RelatedClosed loopLearningWe conducted research (supported by the research team at Satmetrix Systems) with thousands of customers in six industries. We found that the way customers answered this question consistently predicted their behavior: customer retention, repeat purchases, referrals and other indicators of customer loyalty, profit and passionWhats more, the question was quick, respectful of customers time and easy for both customers and employees to understand.Thats why we called it the Ultimate Question.

More than a scoreThe score is at the heart of the Net Promoter System, but you cant take action if you dont know why a customer is or is not likely to recommend. You should always follow up the Ultimate Question with an open-ended question: Why?The answers can help transform your organization. To learn how, check out theClosed loop,LearningandActionprocesses of the Net Promoter System.

How the scoring worksWe scored the answers to the ultimate question on a simple zero-to-ten scale. This scale is easy for customers to understand. And the responses tend to cluster in three groups, each one characterized by different attitudes, behaviors and, therefore, economic value.Promoters (9 or 10)Promoters are loyal, enthusiastic fans. They sing the companys praises to friends and colleagues. They are far more likely than others to remain customers and to increase their purchases over time. Moreover, they account for more than 80 percent of referrals in most businesses. They are, in general, pleasant for employees to deal with.Passives (7 or 8)We call this group passively satisfied because this group is satisfiedfor now. Their repurchase and referral rates are as much as 50 percent lower than those of promoters. Their referrals are likely to be qualified and less enthusiastic. Most telling: if a competitors ad catches their eye, they may defect.Detractors (0 to 6)Detractors are unhappy customers. They account for more than 80 percent of negative word-of-mouth. They have high rates of churn and defection. Some may appear profitable from an accounting standpoint, but their criticisms and bad attitudes diminish a companys reputation, discourage new customers and demotivate employees.Net Promoter scoreYour Net Promoter score is simply the percentage of promoters minus the percentage of detractors. Its a number you can compile and track regularly, not only for a whole company but also for each business, product, store, or customer-service team. You can also track it for customer segments, geographic units or functional groups. It helps everyone focus on the twin goals of creating more promoters and fewer detractors. It is, quite simply, your customer balance sheet.Theres moreThe Net Promoter System is much more than just the score. Net Promoter System practitioners ask customers the reasons for their ratings using an unstructured, open-ended question. This provides employees throughout the organization the opportunity to hear comments from customers every dayin their own words. These leaders build that feedback into their operating systems, using it both to address customer concerns and to fuel the innovations that generate more promoters. They use thisclosed loopto learn more about how they can improve their processes, people, products and pricing for the long term.

What are the benefits of Net Promoter in comparison to other customer measurements?Over the years, companies have developed many different methods for gauging the attitudes and behaviors of their customers. None of these methods is perfect; all are simply attempts to gather data that a company can use to improve its products and processes.We believe that Net Promoter, as both a specific metric and a full Net Promoter System is the most useful and practical method. Among its primary advantages: Simplicity.Net Promoter surveys typically require just two or three questions, keeping the burden on the customer low. Moreover, the key "likelihood to recommend" question is scored on a simple zero-to-ten scale. There are no complex indices or correlation coefficients. The Net Promoter score is a single number that can be tracked from week to week and month to month, just like net profit. As with net profit, of course, a companys Net Promoter scores can be broken down however you wishby business line, by store, by product, even by individual customer-service rep. Ease of use.A company can conduct its NPS surveys by phone, e-mail or Webwhichever generates the best response rates and the most useful data. It can compile and post scores quickly, so that people can see the results of their performance in a timely fashion. It can share up-to-the-minute verbatim comments with employees and managers. Quick follow-up.NPS practitioners typically share customer feedback very quickly after it is received. They quickly ask managers or frontline employees to contact every customer who gives an unfavorable score (a detractor), to identify the customers concerns, and to fix the problem whenever possible. Frontline managers and senior leaders use NPS data and customer comments to inform decisions about process changes, new products and other innovations. A growing body of experience.Thousands of companies in many different industries have begun to measure their Net Promoter scores over the past several years. More important, a growing number of companies have adopted the full Net Promoter SystemSM. Among the early adopters are corporate trailblazers such as Apple, Enterprise Rent-A-Car, and Philips. These companies have developed successful systems based on Net Promoter principles but adapted to their own business. Many practitioners share their experiences and lessons learned through mechanisms such as the NPS Loyalty Forum. Adaptability.As an open-source methodno high-priced vendors or "black box" statisticians requiredNPS can easily be put to work in a wide variety of business settings. Apple uses it in its retail stores, American Express after important servicing calls. Logitech, the computer peripherals manufacturer, uses the system to assess what customers think of every Logitech product. Charles Schwab employed Net Promoter System as it pursued a turnaround.Customer-related measurements have a long history, and each has its partisans. But we think no other method has as many advantages as the Net Promoter System.How is Net Promoter Score related to growth?Bain & Companyresearch has established a strong link between organic growth and a companys Net Promoter Score relative to the relevant competitors in its industry.To establish the correlation between relative NPS and growth, Bain teams identified the relevant competitors in a business and measured the Net Promoter Scores of each competitor using the same methodology and sampling approach. These relativeNet Promoter Scoreswere then correlated with organic growth measures. In most industries, NPS explained roughly 20% to 60% of the variation in organic growth rates among competitors. On average, an industrys NPS leader outgrew its competitors by a factor greater than two times.

To test the link between Net Promoter scores and growth, research teams compiled scores for leading companies in a wide range of industries. What they found was compelling. Though the scores themselves varied widely by industry,Net Promoter leaders on average grew at more than twice the rate of competitors.

In other words, a companys NPS is a good indicator of its future growth. But the relationship is stronger in some industries than in others. Its strongest when: The industry includes a substantial number of players, so customers have a real choice Network effects are minimal, so customers can easily switch providers The industry is mature, with widespread adoption and use of its products or servicesWherever these conditions do not hold, the relationship may be weak or inconclusive.Other factors may undermine the relationship as well, at least in the near-term. Companies with deep pockets can open loads of new stores or flood the market with promotions or discounts. Companies with partial monopolies and companies that dominate distribution channels sometimes grow despite weak Net Promoter Scores. And technological breakthroughs can create growth surges. But while loyaltyas indicated by high Net Promoter Scoresisnt the only factor determining growth, profitable organic growth cannot long be sustained without it.Theres another important caveat to the connection between high Net Promoter Scores and growth: a high score in and of itself is not the real objective. A high NPS by itself it does not guarantee success. NPS merely measures the quality of a companys relationships with its current customers, and high-quality relationships are a necessary but insufficient condition for profitable organic growth.For example, HomeBanc Mortgage Corporation, which was featured in the first edition of the book, had the highest NPS among mortgage banks at the time. But it still fell victim to the mortgage meltdown of 2007, which swept HomeBanc and many of its competitors into bankruptcy. A company must build an army ofloyal customers, as HomeBanc did, but it will squander the potential they create if it cant make effective decisions about risk, pricing, innovation, cost management and everything else necessary for sustainable, profitable growth.

Measuring your Net Promoter ScoreAsking the ultimate question allows companies to track promoters and detractors, producing a clear measure of an organization's performance through its customers' eyes, its Net Promoter Score. Bain analysis shows that sustained value creatorscompanies that achieve long-term profitable growthhave Net Promoter Scores (NPS) two times higher than the average company. And Net Promoter System leaders on averagegrow at more than twice the rate of competitors.Net Promoter System is based on the fundamental perspective that every company's customers can be divided into three categories. "Promoters" are loyal enthusiasts who keep buying from a company and urge their friends to do the same. "Passives" are satisfied but unenthusiastic customers who can be easily wooed by the competition. And "detractors" are unhappy customers trapped in a bad relationship. Customers can be categorized based on their answer to the ultimate question.The best way to gauge the efficiency of a company's growth engine is to take the percentage of customers who are promoters and subtract the percentage who are detractors. This equation is how we calculate a Net Promoter Score for a company:

More than a scoreThe score is at the heart of a Net Promoter System, but you cant take action if you dont know why a customer is or is not "likely to recommend." You should always follow up the Ultimate Question with an open-ended question: "Why?"The answers can help transform your organization. To learn how, check out theClosed loop,LearningandActionprocesses of the Net Promoter System.

While easy to grasp, NPS metric represents a radical change in the way companies manage customer relationships and organize for growth. Rather than relying on notoriously ineffective customer satisfaction surveys, companies can use NPS to measure customer relationships as rigorously as they now measure profits. What's more, NPS finally enables CEOs to hold employees accountable for treating customers right. It clarifies the link between the quality of a company's customer relationships and its growth prospects.How do companies stack up on this measurement? The average firm sputters along at an NPS efficiency of only 5 percent to 10 percent. In other words, promoters barely outnumber detractors. Many firmsand some entire industrieshave negative Net Promoter Scores, which means that they are creating more detractors than promoters day in and day out. These abysmal Net Promoter Scores explain why so many companies can't deliver profitable, sustainable growth, no matter how aggressively they spend to acquire new business. Companies with the most efficient growth enginescompanies such as Amazon,Rackspace,TD Bank, Harley-Davidson,Charles Schwab,Zappos, Costco,Vanguard, and Delloperate at NPS efficiency ratings of 50 percent to 80 percent. So even they have room for improvement.In concept, it's just that simple. But obviously, a lot of hard work is needed to both ask the question in a manner that provides reliable, timely, and actionable dataand, of course, to learn how to improve your Net Promoter Score.Loyalty economics Print E-mail Promotersthe loyal, enthusiastic customers who love doing business with youare worth far more to your company than passive customers or detractors. You can quantify that difference and then use the result to assess and choose among investments in improving the customer experience.The first step is to calculate the lifetime value of your average customer. (If youre unfamiliar with this procedure, you canlearn about it here.)Using that average as a baseline, tally up the difference in lifetime value for promoters, passives and detractors. Here are the factors youll need to measure and take into account:RelatedCustomer lifetime valueRetention rate. Promoters generally defect at lower rates than other customers, which means that they have longer, more profitable relationships with a company.Annual spend and share of wallet. Promoters increase their purchases more rapidly than detractors, because they tend to consolidate their purchases with their favorite supplier. They are more interested in new offerings and brand extensions than detractors are.Pricing. Promoters are often less price sensitive than other customers, particularly detractors. Examine the market basket of goods or services purchased by each group over a six-to-twelve-month period and then calculate the margin on each basket. While many loyal customers expect the best deal you have to offer, others stay with you for reasons other than price. Its important to know which of your promoters are price sensitive and what impact that has on your financial performance.Cost efficiencies. Promoters typically require less in sales, marketing and advertising costs than other customers. Moreover, their average order size is typically larger, leading to lower transaction costs per unit of revenue. They generally have fewer complaints and account for fewer credit losses. Their positive attitudes have a hard-to-quantify but important effect on boosting employee morale and productivity.Word of mouth. Promoters generate 80 percent to 90 percent of referrals. Quantify (by survey if necessary) the proportion of new customers who selected your firm or product because of reputation or referral, and allocate the value of those customers to promoters. Conversely, detractors account for most negative word of mouth, so allocate the cost of this drag on growth to them.These factors can add up to a significant difference. A Bain study of affluent banking customers, for example, found that promoters are worth an average $9,500 more to a bank than detractors.

This kind of rigorous economic analysis isnt easy, but it can help any company gauge the likely return on investments aimed at creating more promoters and fewer detractors.Root cause Print E-mail Asking customers why they would or would not recommend your product or company is as important as asking for a Net Promoter score itselfperhaps more important, in some cases. Customers know whether or not theyre excited about doing business with you, of course. And theyll tell you what they believe caused them to feel that way. But for Net Promoter System organizations, that feedback is just a starting point in uncovering the real issue: the root cause.The true root cause of a customers experience often lies deep within your organization and operations, the result of its underlying policies, processes, people, culture or even of the expectations you set. Uncovering these deep underlying causes can be a journey of discovery.The journey starts, ideally, with a manager reaching out to the customer to gather more information about what the customer experienced (and, if possible, to solve that individuals problem immediately). At Charles Schwab, branch managers call back individual detractors, usually within 24 hours, to learn more about their problem. Companies that do high-quality root cause analysis discoverquicklythat it takes at least three or four follow-up questions to determine the real problem that needs attention.RelatedClosed loopThe Ultimate Question 2.0The next question isnt for the customer, but for the organization itself: What do we know about this customer, the situation, our marketing, our products and our operations that produced this result? This is not a question that can be handed to a market research firm. Figuring out the root cause of a customers concerns typically requires digging into information about both the customer and the transactionknowledge no outside telephone interviewer can have.A car rental company, for example, might need to know if a detractors experience happened in a temporarily understaffed branch, or whether the customer was a first-time renter or repeat customer. When software maker Intuit first launched its Net Promoter effort, the results from its telephone survey vendor were woefully inadequate. Promoters frequently praised the simplicity of a product, while detractors of that same product griped about its complexity. The company obviously needed to drill deeperand it built business teams to do so for each product.Finding the true root cause is an iterative effort. Net Promoter System companies often find it useful to think in terms of the Five Whys Total Quality Management approach, repeating why for each answer until they arrive at the root cause, the point at which an internal change would prevent the situation from happening again.Of course, once a root cause is identified, organizations must also weigh the relative impact of addressing it. Some have greater impact on performance than others, while some require substantial investment, so its important to develop the ability to construct cost-benefit analyses. After Charles Schwab launched a Net Promoter program, it reduced prices aggressively, invested in its branches, overhauled its website and embarked on a two-and-a-half-year plan that wiped out the nuisance and penalty fees that were creating detractors.Those steps, driven by Schwabs understanding of the root cause of its customers experiences, represented huge changes and massive investments. Today, Schwab executives view the companys client service as a competitive advantage. They continue to invest heavily in call centers and IT systems that alert branch managers to detractorsand they continue to probe for the root cause.

Three types of Net Promoter ScoresIts not unusual for a company to crow about a high Net Promoter Score. You may have seen a companymaybe a competitorissue a press release touting a score as high as 75% or more. Often, the company will compare its Net Promoter Score to scores we published inThe Ultimate Question 2.0.High Net Promoter Scores are certainly better than low ones. They indicate that a company has earned more promoters than detractors. But how do we interpret the scores these companies are reporting? What is a good score? How should we set goals and targets for improvement?To begin, we should make sure we look at the right sort of Net Promoter Score. Seasoned practitioners of the Net Promoter System gather feedback from their customers in three different ways:

Competitive benchmark. Finally, leading practitioners of the Net Promoter System sample all target customers for their products or services. They seek feedback not only from their own customers but also from their competitors customers. Competitive benchmark Net Promoter Scores provide an objective and fair basis for comparing your companys feedback to the feedback your competitors earn. Done right, they can provide the basis for goal setting and prioritization at the highest levels of a company. Relationship. Net Promoter System companies regularly contact a sample of their own customers, asking them how likely they would be to recommend the company to friends or colleagues, and why. Feedback like this provides an overall assessment of the relationship between company and customer. It provides input to account teams, relationship managers and others so they can make decisions and take actions to improve selling, servicing, product design, pricing or other policies, based on what they learn. Experience. Net Promoter System practitioners ask for feedback from their own customers after selected experiences, transactions or episodes. For example, they might do so after the purchase of a product or an interaction over the phone. This type of feedback focuses on understanding how customers experiences at those moments influenced their overall loyalty so you can figure out ways to improve those experiences.The competitive benchmark Net Promoter Score is often overlooked or undervalued. Yet it adds an important level of information the other two are likely to miss. It allows a company to learn what respondents think about an entire value proposition, not just their relationship with one particular company.Experience and relationship Net Promoter Scores fuel continuous improvement. Competitive benchmark scores inform a different set of decisions. They tell a company how it is doing, not just against direct competitors but against every competing alternative in the marketplace. That knowledge helps leaders know where the major threats and opportunities lie. It helps them determine strategic priorities, such as where and how aggressively to invest. The feedback can also provide valuable specifics. For example, you may find that competitor X has suddenly become popular with customers because of a new product or pricing system. Then you can ask whether it makes sense to try emulating or leapfrogging the innovation.MethodologyCompetitive benchmark surveys are a form of traditional market research. Researchers, usually from a third-party firm, ask respondents which companies in a given category they patronize. They ask how likely the respondents would be to recommend each one, and they probe for the reasons. In most cases, they gather data about the respondents purchases so they can estimate their economic value as customers. They also ask demographic or psychographic questions to locate the respondent in a particular customer segment. The methodology is almost always double-blind: the respondents dont know which company is asking the questions, and the customers remain anonymous to the company. As with most market research, the surveys can take 15 or 20 minutes and are designed to provide true comparisons between a company and its competitors. A higher score than the competition, even if it seems low in absolute terms, is a reliable indicator of future growth. The opposite is true as well.Competitive benchmarking eliminates the responder bias thats likely to crop up when you survey only your own customers. In your own surveys, people who dont like doing business with you may decide that it isn't worth their time to participate. With a third party doing the asking, youre equally likely to hear from everyone on the love-you/hate-you spectrum.Competitive benchmarking also eliminates the built-in difficulty of comparing absolute Net Promoter Scores from one geographical region with another. Say your operations in Asia score lower on the Net Promoter zero-to-10 scale than your other operations. A third-party survey will help you establish your performance relative to other companies operating in the same market, eliminating the worry about whether Asian customers are less likely to hand out 9s and 10s than customers in other regions. When you look at your performance relative to competitors in the same market, cultural bias becomes irrelevantClosed loopThe single most important key to meaningful progress in the Net Promoter System is this: building customer feedback into a companys daily operations and then closing the loop by sharing the feedback with the employee responsible for creating the customers experience and talking to the customer so you can take appropriate action.This is most relevant in what we call bottom-up NPS feedback systems, in which you solicit feedback from your own customers after an important interaction or as part of a relationship assessment.Closing the loop begins with sharing the feedback from a customer as soon after it is received as possibledirectly with the employees most responsible for creating the customers experience. In many situations, this means sharing it with a sales or service representative and his or her supervisors. In other situations, it might mean sharing the feedback with an account team. Often, it also will mean sharing the feedback with product designers, engineers, pricing executives or others who create the policies, processes or product features that shape a customers experience with the company.RelatedLearningRoot causeThe next step in closing the loopperhaps the most importantrequires digging in to find the root causes of an individual customers problem, and, whenever possible, fixing the situation for that customer. This means you have to get back in touch with those customers whose feedback deserves follow-up so you can probe deeper. Your primary goal should be to fix their individual problems, but this follow-up can also help you identify and address more systemic issues, which can guide you in improving products, policies, services and processes so that every customer gets a better experience and problems dont recur.

Note: Closing the loop isnt only about addressing problems. Its also an excellent way to find out what your company is doing rightwhat sorts of experiences are wowing customers and turning them into promotersso you can do more of it.

Ultimately, what a company learns through closing the loop can help reorient the companys fundamental strategy and priorities, focusing the entire organization on meeting customer needs and providing a superior customer experience.Closed-loop feedback, learning, and action must involve everyone, from customer-facing employees through the most senior leaders: Closing the loop at the front line. At most NPS companies, front-line employees or managers contact every customer who reports a problem and try to resolve the issue. The process helps shape employees daily priorities and behaviors on the job. It also enables companies to spot patterns and determine which processes and policies they need to address at a higher level. Perhaps most important, it sends an essential signal to customers that their feedback was received and acted on, enhancing their trust in and relationship with the company. Closing the loop for midlevel managers. If functional leaders and other middle managers dont get a steady flow of customer feedback, tight budgets and other constraints can lead them to concentrate on departmental goals at the expense of customers. So NPS companies ensure that they do receive direct feedbackon products, services, pricing and policies. By getting feedback in the customers own words (through open-ended verbatim responses to the initial survey) and by speaking directly with customers during follow-up calls, these managers get to hear the customers true voices, up close and personal. The combination of hard data and real verbatim comments help managers keep the customer experience and the customers voice in the foreground as they make their daily decisions. Closing the loop for senior executives. Leading NPS companies put senior executives and board members in direct touch with customers, front-line employees and the feedback from both groups. Some ask customers to attend executive-team and board meetings. Others ask top leaders to review customer feedback every week. Many ask senior leaders to participate in the follow-up calls, engaging directly with customers about their experiences and feedback for the company. By engaging senior leaders directly in the bottom-up closed-loop process, these companies help them stay closer to customers, become more aware of the realities of their interactions with the company, and gain a visceral and practical view of what its like to be on the front lines of the company.Companies also close the loop in two other critical ways:1. They continuously circle back with customers to let them know about the actions the company is taking in response to the feedback the customer provided.2. They create communities of customers from whom they collect ongoing input and ideas for innovation. The LEGO Group, for instance, helps to support conventions and exhibits hosted by LEGO Users Groups. Executives say they benefit enormously from these face-to-face interactions with customers.

LearningIts easy to understand why speed is important when closing the loop with unhappy customers: wait too long and theyll just take their business elsewhere. But speed is also important to another Net Promoter process: employee learning.Fast-cycle closed-loop feedback provides employees with a scoreand actual reactions from the customers they servedwithin a very short time of those interactions, and while they are still fresh in the employees minds. In this way, the Net Promoter system corresponds to the way we all learn: we take an action, we see the outcome, we draw conclusions and we repeat the cycle.Leading Net Promoter System practitioners such as Schwab and Apple work hard to contact every detractor, usually within twenty-four hours. Such a prompt response tells customers that those companies really do care. Its also an opportunity for coaching. Verbatim comments from customers, delivered quickly and in full detail to frontline employees, are a way of providing constructive feedback when service falls short.RelatedClosed loopThe Ultimate Question 2.0Before calling the customer, for example, Schwab managers and supervisors check with employees so that they have the context and background they need to help resolve the problem. This dialogue helps employees remember the transaction in question and is also a natural opportunity for coaching and discussion about what went wrong.And this process is not just about problems. There is no more powerful reinforcement for an employee who provided great service than hearing in a customers own words why their actions had such a positive effect. Celebrating any time a customer gives a score of 10 fuels employee engagement and motivation, and it ensures that the learning process is as much about reinforcing what employeesshould doas it is about correcting what they did wrong.And fast-cycle closed-loop learning goes well beyond the frontlineit also forces the organization itself to listen, learn and act. Dialogue between employees and customers frequently brings to light real opportunities for improvement. Once these opportunities have been sorted according to the highest impact potential (see Interaction Prioritization), organizations can use them to design and develop training programs. Allianz, for example, discovered that most employees could benefit from training that teaches them how to communicate with unhappy customers and programs to improve their listening skills and teach them techniques for discovering root cause. Allianz also scheduled regular forums where employees could share best practices and discuss challenges they could not solve on their own.Such training and coaching is essential, but it only truly works if it is married with the sort of frequent regular feedback provided by a closed-loop system. Employees cant learn to change their behavior by studying customer feedback or a training manual: They need the clear understanding that comes from hearing first-hand how their actions affected another individual and from resolving or celebrating the results.

ActionOnce you are able to consistently capture and understand the voice of your customers, you are ready to take action; to equip every level of the organization to learn from that feedback and continuously improve.Getting from insight to action typically involves several important steps: Make sure you have robust closed-loop processes, ensuring that detractors are contacted quickly and their issues resolved on the spot, where possible Provide your customer-facing employees training, guidelines and shared values so they can solve customer problems or come up with innovative ways to wow customers on their own Engage customer-facing teams in problem-solving and best practice sharing Mine customer comments and root cause analysis to find systemic issues that need to be addressed Use controlled tests to develop and refine innovative ways to create more promoters or avoid creating detractorsAs an example, American Express freed its call center employees to exercise judgment so they could focus on enhancing relationships with customers, rather than focusing on just churning out transactions. By installing robust closed-loop feedback and learning processes, training customer care professionals, and creating clearer guidelines within which they could operate, American Express armed them to take the initiative on behalf of customers, creating more promoters every day.RelatedInteraction prioritizationOf course, this wasnt just about rules and procedures. The team also found they needed to change hiring criteria, training and performance metrics. They removed average handling time goals for calls, instead teaching the customer care professionals to recognize how quickly the customer wanted to move. They increased emphasis on first-contact resolution by getting to the heart of the matter more quickly. Importantly, they addressed policies that stood in the way of creating promoters. Supporting all of this, they changed their training emphasis from 70 percent technical skills and 30 percent soft skills to 70 percent soft skills and 30 percent technical.

Do you know which interactions with your business delight your customersand which antagonize them? Mapping the interactions that customers have with your business is a key part of the Net Promoter System.Read more about interaction prioritization.

Change behavior and service deliveryEngaging the customer-facing employees the way American Express did often requires helping them feel more personally engaged with customers. One of the best ways to ensure that customer feedback packs an emotional punch is to let employees hear the actual voice of the customer, not just a managers interpretation or a statistical summary. Hearing the customers voice lets the employee absorb the tone and feel the emotional impact; that helps motivates learning and changes in behavior, with little additional coaching required.A few tips for using customer feedback to change behaviors: Make sure feedback is delivered so soon after an interaction that the people most responsible for it can remember what they did Direct the feedback to the person whose behavior needs to change Ensure that employees focus on the customers comments and what can be learned from them, rather than on the scores themselves Encourage leaders and supervisors to use feedback as a coaching tool, instead of a purely evaluative tool, to help employees meet their own and the organizations goals Design training programs to reinforce the value of relationship-building and the role that customer feedback can play in helping achieve thatProduct/service designNet Promoter client feedback can be an invaluable asset to improve current products and services or design new offerings, as long as it is captured in a timely manner that supports prompt revisions and adjustments. Set up feedback channels that direct the voice of the customer to the product team and engineers as quickly as possible. They can sometimes find themselves disconnected from the customer experience, and giving them a constant flow of customer feedback helps them internalize it and understand it more completely. To facilitate continuous improvement, customer feedback needs to become a part of standard business processes and rhythms (in this case, part of the standard product development and launch process flow).For example, almost immediately after launch, Logitech found that its much-heralded MX 5000 keyboardits first to incorporate Bluetooth functionalitywas falling short of its target NPS. Analysis of detractor comments revealed the three most serious problems: the Bluetooth connectivity wasnt sufficiently reliable, the LCD screen was hard to read, and recharging was difficult. Because the customer feedback came in so quicklynearly six months earlier than it would have if Logitech had not been using the Net Promoter Systemthe engineering team had the data in time to incorporate changes in the next product cycle. By focusing the engineering redesign on these three issues, the company was able to boost Net Promoter scores by 27 points on the next model.Robust operational infrastructureAt the heart of the Net Promoter System is fast-cycle closed-loop feedback. This requires support from a robust operational infrastructure that can trigger feedback requests, capture the responses, send them to the right employees, track follow-up, and support data-mining and insight generation.Leaders face this challenge early in almost every Net Promoter System journey. Large, complex organizations that run on enterprise software require significant IT investments to integrate NPS into their broader operating systems and support a functioning closed learning loop system.Several specialized software providers offer services that can help support a high quality Net Promoter System. These include Satmetrix, Medallia and CustomerGauge, for support of the data collection, reporting and auctioning, as well as Clarabridge and Attensity, which support the text analytics needs associated with open-ended feedback and follow-up call comment capture. (For more, see theNet Promoter System vendor page.)RelatedLeadership and communicationClosed loopComplex demands on ITNet Promoter System requirements can be complex. An insurance firm that wants to conduct transaction surveys, for instance, must have a system capable of combing the transaction database to create an appropriate sample of customers who dealt with the company following important interactions. The sample needs to be large enough to yield an appropriate number of responses for each department, or possibly even each representative, yet must avoid over-surveying any individual customer. Once the Net Promoter System has sent surveys to those customers, it must route customer responses to the desktop of the appropriate rep and his or her supervisor, along with details about the transaction, the NPS survey response (scores and verbatim) and other basic customer information.The system must also flag those customers who need a follow-up interaction, routing the follow-up request and all the relevant information to the appropriate person. It must track the time between the request and actual customer contact (or failed contact), along with the data generated during the contact, including actions taken and call outcomes. For example, once a representative or supervisor completes the follow-up call, performs root-cause analysis, and takes appropriate recovery action, he or she needs to put all of that information into the system for future analysis.Analytic capabilities are very important for informing actions to improve the customer experience or the product design. Say, for example, the claims department wants to determine the effect on Net Promoter score of the time it takes to complete a claim. It must be able to sort through a database of claims interactions for which surveys were completed, sorting by time to resolution. It must be able to sort further by product, customer segment, claims type, claims outcome and several other factors. Moreover, among those assigning low scores to the experience, the claims leadership needs to be able to dig into comments and follow-up call records for those customers who gave low scores so that they can discover what impact time-to-resolution had versus other factors, such as rep treatment. The same goes for any number of other types of analysis a company would likely need, cutting the data by geography, customer tenure, share of wallet and other variables to help determine how to improve the process in the future.IT-related opportunitiesSophisticated IT capabilities also create great opportunities for wowing customers and ensuring that employees pay close attention to customers experiences. For example: Hand-held checkout devices in retail stores speed transactions. They can also link every sale to an individual employee, enabling managers to monitor salespeoples performance. A system of automatic alerts can flag customers who change their ratings by two or more pointswhether up or downon consecutive surveys. That enables teams to seize on signals from customers about improvements and declines in relationship status so they can intervene or otherwise act on the change. Mobile information-sharing can allow remote service employees to know more about the customers theyre dealing with and address specific concerns they have raised in the past.At large companies, IT is an essential part of Net Promoter System. It requires thoughtful planning and ongoing oversight to ensure that a robust operational infrastructure continues to support the system.Leadership and communicationCompanies using the Net Promoter system can vastly improve the experience they offer their customers and thereby boost customer loyalty, growth and profitability. But theres one essential condition: the senior leadership teamand especially the CEOmust embrace the goal of creating more promoters and fewer detractors as a mission-critical priority.There are at least five key reasons why senior leadership must make this commitment and actively communicate it:Net Promoter System is a balancing act.At its best, a Net Promoter System is inspirational and motivational. Employees naturally want to delight customers, and they feel great when they can do so. But they must do it in economically rational ways (its easy to delight customers by giving things away for free). The CEO and CFO must understand loyalty economics and ensure that the organization has the tools for making appropriate tradeoffs when necessary.RelatedEmployee NPSNet Promoter System requires confronting bad profits.If a company is making money by exploiting its customersfor example, by tacking on hidden service feesemployees will see the double standard and wont take seriously the companys claim that it wants to improve customer loyalty. Without the full commitment of senior leaders, high impact near-term revenue or profit tradeoffs that benefit long-term growth and profits probably wont get made.Senior leaders need to pull the organization together.A Net Promoter System affects virtually every aspect of a company. Finance, operations, marketing and other departments traditionally have differing goals and incentives, but now they must work closely together. Senior leaders may need to change organizational and incentive structures to facilitate this kind of cooperation (e.g., many Net Promoter System companies have found it necessary to remove or change incentives based on process metrics such as average handle time in call centers, because they conflict with the mission of doing what is right for customers).Top executives must assign the right people to lead the charge.Net Promoter System leaders need the right skills, experience, personal qualities and energy. At the highest levels, someone who is broadly respected and trusted across the organization can set and reset priorities to focus on wherever the need is greatest. That person should report directly to the CEO or an important business units general manager. And he or she must have earned the respect of other senior leaders in the company. But the senior leader wont be successful without a way to reach deeper into the organization. Therefore, its also critical to build what Bain calls the Sponsorship Spine from the bottom upcreating an unbroken chain of effective and engaged sponsors from the frontline to the C-suite.Creating and sustaining momentum usually requires dramatic action.Employees at most companies have seen many initiatives come and go. But Net Promoter System isn't a tool or a program; it's a way of running a company. Without visible signs of serious commitment at the top, many employees will conclude that this is just another flavor of the month. Visible, symbolic action often jolts the skeptics into realizing that the leadership team is serious this time. Timed appropriately, these dramatic actions can help sustain focus and instill confidence in the mission of earning enthusiastic loyalty from customers.

Interaction prioritizationDo you know which interactions with your business delight your customersand which antagonize them? Mapping the interactions that customers have with your business is a key part of the Net Promoter System.Ultimately, it helps you do two critical things: a) identify the most critical touchpoints where you should conduct bottom-up surveys so you can learn how to continuously improve and b) figure out which investments in the customer experience will provide the greatest returns.1. Define and map customer interactionsRelatedActionThe Ultimate Question 2.0Interactions are one- or two-way actions between a company and its customers (e.g., a customer receives a letter to sign up for a credit card, logs in to pay a bill or calls with a problem).Create a map that shows all customer interactions, whether driven by the customer (put these on top) or by your company (put these on the bottom). As best you can, group individual interactions into complete end-to-end experiences as your customers would define them.

2. Collect or use existing data about those interactionsYoull need to gather data on several dimensions of each interaction. Frequency of interaction.How often do your (target) customers experience this? Todays quality of interaction.What percent of the time do you create promoters with this interaction? How often do you create detractors with it? Competitive performance.How does your interaction quality compare with what your competitors offer? Is there a positive or negative gap?Before you begin collecting this data, youll want to consider whether to base your decisions on how well you do for all your customers, or focus primarily on performance for your target customersoften the most profitable or highest profit potential customers.One way to develop an understanding of the impact that different interactions have on your customers overall loyalty is to review Net Promoter System feedback. After asking customers how likely they are to recommend your product or services, follow up by asking why they provided the score they did. Categorize promoter, passive and detractor responses related to different interactions to identify the biggest causes for loyalty and antagonism.With this data in-hand, you can create a delight vs. anger matrix to help you visualize the relative impact of different experiences on your customers. Rate each interaction on its potential to create promoters, when it goes right, versus its potential to create detractors, when it goes wrong. Plot each one on the chart. Note the frequency of interaction and the competitive gaps for each interaction

3. Identify priority interactionsCombine your interaction map, delight vs. anger matrix and some added business judgment to identify which interactions should be top priority targets for improving the customer experience.Take the following considerations into account as you decide which interactions to prioritize or sequence first: Should your initial emphasis be on rooting out problems, or on differentiating your company from its competitors? How much should you focus on reducing detractors (by fixing interactions likely to anger)? How much should you focus on creating promoters (by emphasizing interactions likely to delight)? Do certain interactions need to be addressed before others, because they are related to each other? Which interactions will your organization be most ready to tackle and change in response to feedback? Are there organizational, technological, skill-based or other challenges that need to be addressed before real progress can be made? Where are the improvement priorities obvious? Where do you need to gather more operational data or customer feedback before you can really understand how to drive improvements?You will find it valuable to have a formal process for addressing these types of issues as you encounter them, and will also benefit from having all relevant departments take ownership for their roles in improving the customer experience.How to calculate customer lifetime value Print E-mail Investing to earn the loyalty of your customers often requires trade-offsyou must decide which of the many investments you could potentially make will result in the greatest return. A clear understanding of your companysloyalty economicswill help you make those decisions. It will give you a quantitative basis for investments in long-term customer assets and provide a defense against the short-term, sub-optimal, "quarterly earnings" mind-set that often tempts leaders to generate "bad profits."It is possible to calculate loyalty economics with great precision, if you have the resources and the tools to do so. If not, you can also make rough estimates that can help guide decision-making. This page describes a relatively simple way to get reasonable, rough estimates of the potential value that can be created by improving your companysNet Promoter scoreand earning the loyalty of more of your customers.(Note: the calculations presented below are simplified versions of the work that Bain does with clients. To learn more about how Bain can help your company calculate customer lifetime value and referral value,contact us.)RelatedLoyalty economicsThe Ultimate Question 2.0Lifetime valueLoyalty economics quantify the differences in customer lifetime value between promoters, detractors and passives. The first step to understanding those differences isquantifying the lifetime value of your average customer.From this average customer, you can then estimate the differences for promoters, passives and detractors. The simple formula for estimating the lifetime value of a customer is:

Thenumber of years a customer remains activedescribes the average duration of a customers relationship with your company. (Forsome companies, it may be easier to think in terms of churn or attrition rates. For instance, if you have a 5 percent annual churn rate, the average customer remains active for 20 years.) Typically, you will find that promoters have lower churn or attrition rates than detractors and therefore have more active years. Each business and each customer segment will show different variations between promoters, passives and detractors.Theannual variable contribution per customercan get a bit more involved, if you dont have a reasonable handle on which of your costs are fixed versus variable. Nevertheless, for many purposes, a simple gross margin can suffice. To calculate the annual variable contribution per customer for your whole customer base, on average, you would simply divide your annual variable contribution (or gross margin) by the number of customers on the books. To get an estimate of how this differs for promoters versus passives or detractors requires understanding three key elements that will drive differences:1. Share of wallet and number of products purchased:calculate how the annual purchases of your promoters, passives and detractors vary. This will help you estimate revenue differences. If you have actual revenue per customer, youll be able to estimate more precisely, of course.2. Cost to serve:calculate how the costs to serve customers vary among promoters, passives and detractors. At its simplest, you could use the percentage of your average gross margin multiplied by the revenue per customer. Of course, if product mix varies among these groups, youll want to use a prorated variable cost estimate, based on how costs and margins vary by product. And if you wanted to get even fancier, you could factor in differences in customer tenure, which are often quite different for early tenure customers than for customers who have been buying from you for a long time. The cost to serve will be subtracted from the revenue calculated in the first step.3. Cost to acquire:calculate the cost to acquire each group of customers. The simple version of this uses the average cost to acquire a new customer (perhaps by adding up all the sales and new customer marketing and on-boarding costs, and then dividing by the number of new customers acquired) and amortizes it over the life of the customer. Because promoters, passives and detractors have different expected number of years as active customers, you would amortize over different periods, resulting in a different annual cost to be subtracted. A more sophisticated approach might also take into account other factors, such as the cost of selling different products or the differences in customer acquisition costs for promoters versus detractors, based on the mix of market segments represented among each group. These annual cash flows should be discounted appropriately to reflect their present value.Value of a referralMany companies fail to take into account one of the most important sources of value differences between promoters, passives and detractors: the value of the positive and negative referrals they make.The value of referrals can be difficult to estimate with precision. Nevertheless, you can make reasonably accurate estimates. The formula is:

Many companies estimate the percentage of new customers coming via referral and the number of referrals made, based on surveys of new customers (for example, they may ask a sample of customers to name the most important reasons they chose to buy from their company). With those estimates in hand, and the lifetime value calculation from above, you should be able to calculate the value of a referral. Then you can use referrals as the positive baseline for estimating the impact of negative comments (generally three to four times the power of a positive). The final step is to estimate the number of positive versus negative referrals made by promoters versus passives and detractors so that you can then add up all the referrals and their value, and add those in with the customer lifetime value for each.With a solid understanding of the critical differences in lifetime value for promoters, passives and detractors, you can make investment trade-offs built on a more solid understanding of the potential value that could come from turning more detractors into passives or promoters.