Customer Service Reader

Ultimate notes

Notes on The Ultimate Question, by Fred Reichheld

• The average Net-Promoter Score (NPS) for U.S. companies is less than 10%
• Senior managers are delusional. 96% of senior managers said they were “focused” on the customer. 80% believed they delivered a “superior experience” to their customers. But when their customers were surveyed, only 8% of their companies were given a superior rating.
• Measurement is not enough. Pointless to set up an NPS measurement system if you don’t understand that delighting customers is the only path to true growth.
• If you do get it, three things you must do: (1) design value propositions that focus on the right customers, then create a complete customer experience capable of delighting each targeted segment, (2) deliver those propositions end-to-end, with all employees pulling in the same direction, (3) do all this over and over again.
• Good design is not enough. What counts is a company’s ability to deliver those propositions consistently.
• Delivery depends primarily on the spirit, enthusiasm, and cooperation of frontline employees - the people who actually produce the goods, or deliver the services and deal with the customers.
• And there's the problem. Bain surveyed North American employees who had worked ten years or more for the same company. Only 39% trust their leaders to communicate openly and honestly. Only 33% believe that employee loyalty at their company is valued and rewarded. Only 28% say that their company values people and relationships above short-term profits. Only 19% provide enthusiastic referrals for the company that employs them.
• To build an organization that creates promoters: (1) send the right messages to your people, (2) hire and fire to inspire, (3) pay well and invest in training, (4) keep teams small to enhance accountability and service, (5) link measures and rewards to company values.
• Don't tread on Fred. On Claes Fornell (principal author of the American Customer Satisfaction Index): "the Journal reported that Fornell had been buying or short-selling shares of companies surveyed by the ACSI prior to releasing the data for publication". On JD Power: "There are J.D. Power winners for flights over five hundred miles and flights under five hundred miles. Perhaps we'll soon see awards for the highest customer satisfaction among bankrupt airlines."

See also:
Excerpts from Chapter 1 (inc a link to a downloadable pdf version)
Reichheld on Loyalty, the war on customers, wrong yardsticks, keeping it simple
Fred Reichheld's net promoter slide show. A 3-minute presentation.
A Survey of Surveys
The Net Promoter Forum

Service self-assessments

The National Performance Review's Best Practices Report on "World-Class Courtesy" includes two surveys that you may adapt to assess your organization's ability to deliver outstanding customer service.

EMPLOYEE COURTESY ATTITUDE SURVEY

The following short survey tool has been used successfully by members of the study team in soliciting information from their organizations and stimulating dialog in small discussion groups about improving courtesy. You can use this survey to gain some preliminary information from members of your organization­at all levels­ regarding their beliefs about courtesy.

Please answer on a scale of 1 (very important) to 5 (not important):

1. When you are the customer, how important is "courteous behavior" compared to other characteristics of quality service that you value?
2. As someone who provides services to customers, how important is "courteous behavior" compared to other characteristics of quality service that you value?
3. Within your own work area, how would you rate the level of courtesy now practiced on a daily basis?
4. Please list any organization or type of service where you have personally experienced world-class courtesy? What made this experience stand out in your mind?

ORGANIZATIONAL SELF-ASSESSMENT ON COURTESY

This survey tool may be used to determine how close your organization is to providing world-class courtesy. Because this survey instrument will result in an item-by-item score as well as an aggregate score, it will be easy to assess and organize the findings. After reviewing it, feel free to reproduce or adapt it in any way to better meet your organization's customer service objectives. Use this survey with senior executive, mid-level supervisory, and nonsupervisory staff in your organization. The more employees who participate, the more useful the information will be.

Assessing Courtesy in your Organization

This self-assessment survey covers 10 areas organized as an easy-to-complete checklist. These 10 areas comprise important characteristics for an organization to consider in moving toward world-class courtesy. Answer this survey from your perspective in the position you presently occupy in the organization. Perspectives will differ from person to person, which makes the findings much more useful when they are discussed later.

For the purposes of this survey, the following definitions are provided.

Courtesy: Using accepted and appropriate manners, as interpreted from the customer's perspective, to meet the expectations of the customer.

World-Class Courtesy: Using exceptional manners, as interpreted from the customer's perspective, to exceed the expectations of the customer.

Instructions: Please answer either (Yes), (No), or (N/A) to all characteristics. When you are not completely sure which to select, check the answer closest to your current understanding of the situation being described. Only (Yes) answers count toward your final score.

1. The cultural climate reflects the organization's attitude toward meeting and exceeding customer expectations.

• The physical environment (floor, halls, waiting areas, grounds, etc.) is attractive, clean, and otherwise conducive to meeting and exceeding customer expectations.
• Senior management ensures that all staff members have a clear understanding of the organization's mission and key objectives.
• There is a written document(s) that describes the organization's beliefs on how customers should be treated.
• The organization's beliefs regarding courtesy are included in a written document provided to all employees.
• Employees are provided with parking, food services, fitness and recreation facilities, and other comparable employee benefits.
• The organization features employee amenities.
• The organization solicits feedback from both customers and employees regarding the quality of service provided.

__________ Total number of yes answers

Consider: Employees who believe that they are valued partners in the organization are more likely to treat customers in the same way.

Possible strategy: Ask 10 customers currently using your services what their first impressions of your employees and environment were and why. Take notes. Discuss the results and make changes. Do this again in four months to see if there has been improvement.

2. Senior leaders demonstrate by example the organization's commitment to exceptional courtesy.

• Leadership has developed a written strategy, mission, and vision that include courtesy.
• Senior managers demonstrate by personal example the organization's commitment to providing the highest quality service to customers.
• Mid-and entry-level supervisors demonstrate by personal example the organization's commitment to providing the highest quality of service to customers.
• Courtesy among employees is as important to Senior-, mid-, and entry-level managers as courtesy provided to customers.
• The organization's leadership development program includes a segment on courtesy.
• Leadership plays a significant role in new employee orientation.

__________ Total number of yes answers

Consider: Among world-class organizations, courteous behavior is an intrinsic and inseparable aspect of the customer service strategy, and is supported by senior leaders and all employees who seek to lead and improve the organization.

Possible strategy: Who in your organization seems to be a leader in courtesy? Seek out these people and talk to them about their approach to courtesy. Work with them to design and implement a courtesy program in your organization.

3. Employees are empowered to fully meet the needs of their customers.

• Employees are fully empowered to perform their jobs at a high level of competency (e.g., sufficient training and mentoring, good computer support, functioning equipment, adequate space to perform their jobs, and strong management support).
• Employees are empowered to do whatever it takes to satisfy the customer.
• Employees are encouraged to be innovative, take risks, and seek out opportunities to improve services provided to customers.
• Employees are formally rewarded for outstanding work, skills, and accomplishments pertaining to customer service.
• Employees are informally rewarded for outstanding work, skills, and accomplishments pertaining to customer service.

__________ Total number of yes answers

Consider: Who in your organization is most likely to be the first person your customers will see or hear? You really need to focus on this idea and on this person: In his or her first few seconds of contact with the customer, this person will be seen as the exemplar of everything your organization knows about courtesy and customer service.

Possible strategy: Ask your employees what would better empower them in meeting and exceeding customer expectations. Act on these suggestions and give your employees what they need to do their job.

4. Courtesy is practiced by everyone throughout the entire organization.

• Substantive efforts are made in this organization to provide and encourage the same level of courtesy to employees, contractors, and stakeholders as is provided to customers.
• Management and union representatives conduct business in an atmosphere of mutual respect and courtesy.
• Employees are as courteous to and respectful of each other as they are to the external customers of the organization.

__________ Total number of yes answers

Consider: Employees treated with dignity and respect will provide the same to their customers and co-workers.

Possible strategy: Write down what you consider the three most important aspects of being a good friend. Now ask "Do I practice these behaviors with my co-workers? With my boss?" Reflect on your answers with an eye to possible improvements.

5. Specific and ongoing training in courtesy is provided.

• Employee orientations specifically address the organization's expectations regarding courtesy.
• Employee orientations include presentations by senior-level management on the organization's expectations regarding customer courtesy.
• A training manual or other written material used for training exists that specifically addressees customer courtesy.
• Employees are given specific courtesy or customer service training.

__________ Total number of yes answers

Consider: Timely and innovative training should be linked to the organization's key values and services.

Possible strategy: Create a list with two columns, one titled "Customer Service Goals" and the other "Training." Write down your organization's key customer service goals in the left column. Then list the completed or planned training for that goal in the right column. Are there any goals for which no training is offered? And, if you are providing training, who is attending? Should others also attend?

6. Formal and informal screening techniques are used to hire employees with exceptional skills in courtesy.

• A screening protocol or process that addresses courtesy is used when hiring employees for positions requiring customer service skills (such as multiple interviews or personality testing).
• Customer courtesy is included as an element in an employee's job or position description.

__________ Total number of yes answers

Consider: Can you imagine The Ritz-Carlton hiring a concierge who didn't smile, speak clearly, dress neatly, or seem particularly enthusiastic or helpful to customers? Why not? Because this hotel understands the requirements of a professional concierge and selects only those employees who are best suited and expertly trained for this type of work.

Possible strategy: Coordinate a meeting of key staff in your area of the organization and thoughtfully answer the following questions.

• How do you know you're hiring the right people for the right job?
• What options are available to you to ensure a "hire right the first time" model?
• How might your organization achieve the same certainty of success that The Ritz-Carlton has when hiring?
• What two things can your organization do now to begin needed improvements in this area?

7. The organization establishes systems to measure the value of its services to customers.

• At least one reliable and validated system of measuring customer feedback is used in this organization (e.g., customer survey cards, employee survey cards, team meetings, focus groups, complaint-handling system).
• Data collected from this system are analyzed and distributed throughout the organization for review.
• Specific improvements in customer service were made over the past year as a direct result of the system for measuring customer satisfaction.
• Customer waiting times for services are monitored, analyzed, and otherwise used to produce continuous improvements in services.
• An integrated and effective complaint-handling system is in place that is easily accessible to all customers in the organization.
• Organization-specific customer service standards exist, and are periodically monitored, and results are provided back to the customer in a timely manner.
• The organization solicits feedback regarding services provided.
• Customers are encouraged to provide specific feedback regarding their perceptions about courtesy.

__________ Total number of yes answers

Consider: Characteristics that relate to courtesy like "sincerity," "respect," "dignity," and "being treated as a valued person," are best determined through the use of a validated survey tool that asks customers to determine whether, and to what degree, they feel these qualities were present.

Possible strategy: Ask 10 customers about the following behaviors they observed in your organization, then record the answers and discuss them with an appropriate courtesy team.

• Initial contact­ Did your greeting include a smile and a handshake?
• Use of eye contact­ Did employees maintain good eye contact with you?
• Appearance­ Was the employee's appearance neat, well-groomed, and appropriate for the setting?
• Customer assessment­Did you say anything to the employee that would imply satisfaction or concern?
• Use of customer's name­ Was your name used appropriately in the context of the dialog?
• Tone of voice­ Did the employee's tone reflect confidence, helpfulness, and friendliness?
• Body language­ What effect did the employee's body language and posture have on the interaction?

8. Services are provided seamlessly from the customer's perspective.

• Computer technology and other technological support mechanisms are fully utilized to support employees who serve in a front-line role with the customer.
• Front-line employees are encouraged and expected to take a prominent and active role in determining how to improve services to their customers.
• Front-line employees are authorized to take whatever actions are required to ensure that customers receive the full measure of service expected by the organization.

__________ Total number of yes answers

Consider: As your customers are transferred from one employee to another (handed off), their perception of your service quality will most likely decrease in satisfaction and expectations.

Possible strategy: Write three examples of what you consider to be seamless service between two parts of your organization. Then write two examples of what you consider poor hand-offs between two parts of your organization. What makes these situations different? What opportunities can you explore to improve the poor hand-offs? Where could you start immediately to apply these lessons to other parts of your organization?

9. There is zero tolerance for discourteous service.

• Discourteous behavior to customers, if observed, is viewed by the vast majority of employees in the organization as a situation requiring their immediate attention.
• Discourteous behavior among employees, if observed, is viewed by the vast majority of employees in the organization as a situation requiring their immediate attention.

__________ Total number of yes answers

Consider: Effective complaint-handling systems provide a pathway for quick resolution of allegations of discourteous service. How's your complaint-handling system?

Possible strategy: The next time you are waiting for a telephone call or have a few moments to spare, perform a quick check of your attitude and evaluate your performance in the midst of an otherwise hectic day. Ask yourself:

How good was I with my last customer?

• Am I really listening to my customers to determine their needs?
• If I fail to meet my customer's expectations, do I apologize sincerely and stay with the customer until the problem is solved?

10. Courtesy improves customer loyalty.

• The vast majority of employees in this organization take pride in their ability to exceed customer expectations.
• The organization presently enjoys a reputation within its community and among its peers as "best in class" in the area of customer support and services.
• The organization has been publicly recognized for its outstanding customer service and support within the last year by an outside evaluator.
• The organization spontaneously and frequently recognizes outstanding staff achievements.

__________Total number of yes answers

Consider: World-class organizations strive for 100 percent customer satisfaction. How would a goal of 100 percent customer satisfaction work in your organization?

Possible strategy: Save articles with outstanding customer service ideas in a file. Keep this file and refer to it often in your customer service areas. Play "secret shopper" and explore customer service areas in other organizations rated as world-class. While visiting, rate the aspects of the organization that relate to your own.

ASSESSMENT RESULTS

• Organizations that provide world-class courtesy generally score at least 35 on this survey; a perfect score is 43.
• Based on initial results from organizations that volunteered to pilot this self-assessment, a typical score is 24 or less. If you score substantially lower than 24, do not be discouraged. Each world-class organization went through the phase you are now in. They were committed to world-class courtesy, and never stopped identifying opportunities and implementing improvements.
• You can do the same: Use the exercise to identify those areas in which you have opportunities for improvement. Plan, experiment, and implement in order to create an organizational culture that will be identified by the exceptional courtesy provided to your employees and customers.

Satisfaction drops again

Customer satisfaction in the retail sector dropped another 0.3% in Q4Y5 vs Q4Y4, and is 4.4% lower than when satisfaction in the sector was first measured, the ACSI survey shows.

Claes Fornell, Director of the National Quality Research Center at the University of Michigan, which runs the American Customer Satisfaction Index, attributes the drop in satisfaction to a misplaced emphasis on sales at the expense of service. "As with many other service industries, the challenge is often how to best balance productivity per sales person with quality of customer service. Too much pressure on staff to generate sales can have a detrimental effect on the quality of service that the staff is able to provide, which, in turn, has a negative effect on repeat buying," Fornell said. "Since many retailers measure and manage productivity, but don’t usually have good measures of the quality of customer service, it seems possible that some companies put too much emphasis on productivity at the expense of service."

10 Biggest Gainers

1. Kmart Corporation +4.50%
2. Charles Schwab +4.20%
3. Target +4.00%o
4. Expedia +3.90%
5. Amazon +3.60%
6. Aetna +3.20%
7. Albertson's +2.90%
8. AAFES +2.80%
9. Supervalu +2.70%
10. Lowe's +2.60%

10 Biggest Losers

1. Home Depot -8.20%
2. MetLife -7.80%
3. Prudential -6.50%
4. Farmers Group -5.20%
5. Wells Fargo -4.30%
6. UnitedHealth -3.00%
7. Circuit City -2.80%
8. State Farm  -2.50%
9. 1-800-Flowers -2.50%
10. Safeway -1.40%

See also: A survey of surveys, I should've bet some money

Driving service at Enterprise

Excerpts from Driving Customer Satisfaction
Andy Taylor, in Harvard Business Review

• Satisfying customers is a challenge for any service company. It's one thing for people to believe in providing superior service and quite another to ensure that busy, ambitious, and largely autonomous managers stay focused on delivering it.
• The problem was, the operating managers who were driving our growth (and who were being richly rewarded for that) didn't believe we had a serious, systemic problem. Building a consensus that something really was broken, then focusing the team's full energy on fixing it, proved to be a long and complicated process.
• How did we improve the consistency of our service? We started by developing a solid method for measuring customer satisfaction. And we involved the full organization in the process, rather than just hiring consultants to handle it.
• By letting the operating managers help build the questionnaire, we encouraged them to own the measurement.
• Then we worked hard to make the index as actionable as possible. At first we reported scores by region or group. But the regional managers wanted to zero in on individual branch performance; that way, the branches that were having service problems couldn't hide behind the high aggregate scores.  We agreed to it, because the end result was a tool that would help hold branch offices accountable.
• In the process, we exploded the myth that good managers already know where they need to improve.
• Similarly, we found that "complete satisfaction" doesn't mean perfection. Our customers, we learned, care most about friendly service. Some of our "completely satisfied" customers had experienced glaring problems with their rentals, but what they remembered most was how quickly and courteously our people resolved the problem. That message gave branch managers a concrete target to shoot for. And it led us to focus the survey on those "completely satisfied" customers, who we learned were three times more likely than "somewhat satisfied" customers to choose Enterprise again.
• As the index gained legitimacy, we made a big deal about it. We posted the scores prominently in our monthly operating reports - right next to the net profit numbers that determined managers' pay. The operating managers were able to track how they were doing, and how all their peers were doing, because we had ranked everybody, top to bottom.
• Two years into the process, everyone generally understood the scores and accepted their validity. But we were still missing something: a sense of urgency. We got the message that it was time to put teeth into our efforts. We revamped our criteria for promoting employees: Field managers couldn't move up without achieving customer satisfaction scores at or above the company average. This big gun wouldn't have worked at the start, but with the ground carefully prepared, it was effective.
• Finally, in the late 1990s, the scores began to rise. After being stuck in the high-60% range for years, the company average for "completely satisfied" reached the high-70% range in 2001 and it's still climbing, along with our market share. More important, we've narrowed the gap between the top- and bottom-performing branches - from 28 percentage points when we began to 11 percentage points now, a key indication that we are delivering more consistent service.
• We certainly could have done a better job of preparing people for what became a long and highly experimental process. But we don't regret the process itself. We learned a lot about our customers and ourselves - including the lesson that quick-fix solutions won't work when it comes to delivering something as vital as high-quality customer service.

Holiday surveys

e-tailing group - 8th Annual Mystery Shopping Study

This fourth-quarter 2005 study of 100 online retailers found an overall decline in the level of customer service compared to a year earlier. Overall, merchants appeared to be less vested in customer service:

• More drill-down was required to find answers to questions on-site
• Contact information was not readily available
• FAQs and guarantees were less visible
• Address-checking tools and return registration log-ins were not always correct
• Shipping deals were more qualified
• Average clicks from product selection to checkout rose from 4.8 to 5.3
• Real-time inventory status was shown on 76% of sites in the study, down from 79% in 2004
• Customers recieved packages within 4.4 days, against a standard of 4 days
• The number of sites offering a toll-free customer service telephone number dropped to 93% from 95%
• Email response time rose to 30 hours, compared to 26 hours a year earlier

Only 10 shopping sites met all criteria: Ann Taylor, Bluefly, Blue Nile, Brookstone, Crutchfield, Finish Line, J. Crew, Sephora, SmartBargains, and Tower Records.

Service is decisive

A survey conducted by Harris Interactive found that customer service is the deciding factor when it comes to shoppers increasing or decreasing their shopping budget. Other findings:

• 85% said they were somewhat to very likely to purchase additional products if they had interaction with a knowledgeable sales associate
• 82% will only wait for less than 15 minutes
• 45% shop for themselves during the holiday season
• If shopping conditions are not optimal, consumers will return goods to the shelf

The survey was sponsored by Kronos Incorporated

The ultimate question

Excerpts from The Ultimate Question, Chapter 1
Fred Reichheld

Together with my colleagues at Bain & Company, I began investigating the connection between loyalty and growth almost twenty-five years ago. We first compiled data demonstrating that a 5 percent increase in customer retention could yield anywhere from a 25 percent to a 100 percent improvement in profits. Later, we showed that companies with the highest customer loyalty (we labeled them loyalty leaders) typically grew revenues at more than twice the rate of their competitors. 

What we needed was a foolproof test — a practical metric for relationship loyalty that would illuminate the difference between good profits and bad. We had to find a metric that would permit individual accountability. We knew that the fleeting attitudes expressed in satisfaction surveys couldn’t define loyalty; only actual behaviors can gauge loyalty and can fuel growth. So we concluded that behaviors must be the real building blocks. We needed a metric based on what customers would actually do. After considerable research and experimentation, we found one such metric.

We discovered the one question you can ask your customers that links so closely to their behaviors that it is a practical surrogate for what they will do. By asking that question systematically, and by linking results to employee rewards, you can tell the difference between good profits and bad. You can manage for customer loyalty and the growth it produces just as rigorously as you now manage for profits.

Customer responses to this question yield a simple, straightforward measurement. This simple, easy-to-collect metric can make your employees accountable for treating customers right. It’s one number you need to grow. That’s why we call the question that produces it the Ultimate Question: this question will determine the future of your business.

Asking the Ultimate Question

What is the question that can tell good profits from bad? Simplicity itself:

How likely is it that you would recommend this company to a friend or colleague?

The metric that it produces is the Net Promoter ® Score. Net Promoter Score (NPS) is based on the fundamental perspective that every company’s customers can be divided into three categories. Promoters, as we have seen, 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 according to their answer to the question. Those who answer nine or ten on a zero-to-ten scale, for instance, are promoters, and so on down the line.

A “growth engine” running at perfect efficiency would convert 100 percent of a company’s customers into promoters. The worst possible engine would convert 100 percent into detractors. The best way to gauge the efficiency of the growth engine is to take the percentage of customers who are promoters (P) and subtract the percentage who are detractors (D). This equation is how we calculate a company’s NPS:

P – D = NPS

In concept, it’s just that simple. All the complexity arises from learning how to ask the question in a manner that provides reliable, timely, and actionable data—and, of course, from learning how to improve your NPS.

Our research over a ten-year period confirms that, in most industries, companies with the highest ratio of promoters to detractors in their industry sector typically enjoy both strong profits and healthy growth. This might seem counterintuitive. After all, the high-loyalty firms tend to spend much less on marketing and new-customer acquisition than do their competitors. They also focus intensely on serving existing customers and are highly selective in pursuing new customers, which you might suspect would limit these firms’ growth. But the data doesn’t lie: the faster growth of the loyalty leaders is driven by the superior efficiency of their growth engines. Earning growth rather than buying it sustains top-line momentum while generating richer profits.

See also:
Ultimate notes
A Survey of Surveys
Reichheld on Loyalty
Reichheld on the war on customers
Fred Reichheld's net promoter slide show. A 3-minute presentation.

Keep the survey simple

Excerpts from The One Number You Need to Grow
Frederick F Reichheld in Harvard Business Review

• One of the main takeaways from our research is that companies can keep customer surveys simple. The most basic surveys - employing the right questions - can allow companies to report timely data that are easy to act on. Too many of today's satisfaction survey processes yield complex information that's months out of date by the time it reaches frontline managers. Good luck to the branch manager who tries to help an employee interpret a score resulting from a complex weighting algorithm based on feedback from anonymous customers, many of whom were surveyed before the employee had his current job.
• Contrast that scenario with one in which a manager presents employees with numbers from the previous week (or day) showing the percentages (and names) of a branch office's customers who are promoters, passively satisfied, and detractors - and then issues the managerial charge, "We need more promoters and fewer detractors in order to grow" The goal is clear-cut, actionable, and motivating.
• In short, a customer feedback program should be viewed not as "market research" but as an operating management tool. Consider Enterprise Rent-A-Car. The first step in the development of Enterprise's current system was to devise a way to track loyalty by measuring service quality from the customer's perspective. The initial effort yielded a long, unwieldy research questionnaire, one that included the pet questions of everyone involved in drafting the survey. It only captured average service quality on a regional basis - interesting, but useless, since managers needed to see scores for each individual branch to establish clear accountability. Over time, the sample was expanded to provide this information. And the number of questions on the survey was sharply reduced; this simplified the collating of answers and allowed the company to post monthly branch-level results almost as soon as they were collected.
• The company then began examining the relationships between customer responses and actual purchases and referrals. This is when Enterprise learned the value of enthusiasts. Customers who gave the highest rating to their rental experience were three times more likely to rent again than those who gave Enterprise the second-highest grade. When a customer reported a neutral or negative experience, marking him a potential detractor, the interviewer requested permission to immediately forward this information to the branch manager, who was trained how to apologize, identify the root cause of the problem, and resolve it.
• Despite the system's success, CEO Andy Taylor felt something was missing. Branch scores were not improving quickly enough, and a big gap continued to separate the worst-and best-performing regions. Taylor's assessment: "We needed a greater a sense of urgency." So the management team decided that field managers would not be eligible for promotion unless their branch or group of branches matched or exceeded the company's average scores. That's a pretty radical idea when you think about it: giving customers, in effect, veto power over managerial pay raises and promotions.
• The rigorous implementation of this simple customer feedback system had a clear impact on business. As the survey scores rose, so did Enterprise's growth relative to its competition. Taylor cites the linking of customer feedback to employee rewards as one of the most important reasons that Enterprise has continued to grow, even as the business became bigger and, arguably, more mature. (For more on Enterprise's customer survey program, see "Driving Customer Satisfaction" HBR July 2002.)

Who benefits from complexity?

• If collecting and applying customer feedback is this simple, why don't companies already do it this way? I don't want to be too cynical, but perhaps the research firms that administer current customer surveys know there is very little profit margin for them in something as bare-bones as this. Complex loyalty indexes, based on a dozen or more proprietary questions and weighted with a black-box scaling function, simply generate more business for survey firms.
• The market research firms have an even deeper fear. With the advent of e-mail and analytical software, leading-edge companies can now bypass the research firms entirely, cutting costs and improving the quality and timeliness of feedback. These new tools enable companies to gather customer feedback and report results in real time, funneling it directly to frontline employees and managers. This can also threaten in-house market research departments, which typically have built their power base through controlling and interpreting customer survey data. Marketing departments understandably focus surveys on the areas they can control, such as brand image, pricing, and product features. But a customer's willingness to recommend to a friend results from how well the customer is treated by frontline employees, which in turn is determined by all the functional areas that contribute to a customer's experience.
• The path to sustainable, profitable growth begins with creating more promoters and fewer detractors and making your net-promoter number transparent throughout your organization. This number is the one number you need to grow. It's that simple and that profound.

See also:
A Survey of Surveys
Ultimate notes
Reichheld on the war on customers, on Loyalty, and on "The Ultimate Question"
Fred Reichheld's net promoter slide show. A 3-minute presentation.

Wrong yardsticks

Excerpts from The One Number You Need to Grow
Frederick F Reichheld in Harvard Business Review

• Because loyalty is so important to profitable growth, measuring and managing it make good sense. Unfortunately, existing approaches haven't proved very effective. Not only does their complexity make them practically useless to line managers, but they also often yield flawed results.
• The best companies have tended to focus on customer retention rates, but that measurement is merely the best of a mediocre lot. Retention rates provide, in many industries, a valuable link to profitability, but their relationship to growth is tenuous. Furthermore, retention rates are a poor indication of customer loyalty in situations where customers are held hostage by high switching costs or other barriers, or where customers naturally outgrow a product because of their aging, increased income, or other factors.
• An even less reliable means of gauging loyalty is through conventional customer-satisfaction measures. Our research indicates that satisfaction lacks a consistently demonstrable connection to actual customer behavior and growth. This finding is borne out by the short shift that investors give to such reports as the American Consumer Satisfaction Index. The ACSI, published quarterly in the Wall Street Journal, reflects the customer satisfaction ratings of some 200 U.S. companies. In general, it is difficult to discern a strong correlation between high customer satisfaction scores and outstanding sales growth. Indeed, in some cases, there is an inverse relationship; at Kmart, for example, a significant increase in the company's ACSI rating was accompanied by a sharp decrease in sales as it slid into bankruptcy.
• Even the most sophisticated satisfaction measurement systems have serious flaws. I saw this first-hand at one of the Big Three car manufacturers. The marketing executive at the company wanted to understand why, after the firm had spent millions of dollars on customer satisfaction surveys, satisfaction ratings for individual dealers did not relate very closely to dealer profits or growth. When I interviewed dealers, they agreed that customer satisfaction seemed like a reasonable goal. But they also pointed out that other factors were far more important to their profits and growth, such as keeping pressure on salespeople to close a high percentage of leads, filling showrooms with prospects through aggressive advertising, and charging customers the highest possible price for a car.
• In most cases, dealers told me, the satisfaction survey is a charade that they play along with to remain in the good graces of the manufacturer and to ensure generous allocations of the hottest-selling models. The pressure they put on salespeople to boost scores often results in postsale pleading with customers to provide top ratings --even if they must offer something like free floor mats or oil changes in return. Dealers are usually complicit with salespeople in this process, a circumstance that further degrades the integrity or these scores. Indeed, some savvy customers negotiate a low price--and then offer to sell the dealer a set of top satisfaction survey ratings for another $500 off the price.

See also:
A Survey of Surveys
Ultimate notes
Reichheld on the war on customers, on Loyalty, and on "The Ultimate Question"
Fred Reichheld's net promoter slide show. A 3-minute presentation.

A survey of surveys

Overview: The American Customer Satisfaction Index is the best known customer opinion survey. Gallup criticizes the ACSI for measuring the wrong things. They say customer satisfaction doesn’t count, that it’s customer engagement that matters. Gallup recommends that organizations use its CE11 instead.

Jackie Huba and Ben McConnell tested the survey, and found that it has problems of its own. It does ask the right questions, but some of them are confusing and difficult to answer.

Another survey, promoted by Fred Reichheld (who Tom Peters, in his usual understated way, calls the “God-Guru of Customer Loyalty”), maintains that ultimately only one question matters: "How likely are you to recommend [company] to a friend or colleague?"

Net Promoter launched a discussion forum on the third week of Jan 2006, and I posted a topic there, in the hope that we might have a sound discussion on customer surveys.

See also:

American Customer Satisfaction Index
Customer Satisfaction is the Wrong Measure
Customer Satisfaction Doesn’t Count
A description of Gallup’s CE11
Tom Peters on Fred Reichhed’s Net Promoter concept
Fred Reichheld in his own words
Reichheld on Loyalty, the war on customers, wrong yardsticks, keeping it simple
Ultimate notes
Blog entries on surveys

Hear also:

McConnell and Huba test the CE11 survey. This 21-minute audio file includes a segment on how a small bank beat up the bigs boys through customer service and word-of-mouth marketing.
Fred Reichheld's net promoter slide show. A 3-minute presentation.