Recently, I came across an interview of Rob Markey, co-author of the Ultimate Question 2.0, about the current state of the Net Promoter Score movement. The interviewer, Peter Fader, is the co-director of The Wharton Customer Analytics Initiative and a Professor of Marketing at the Wharton School. In the course of their discussion, they spoke about how organizations must focus their efforts on catering to those most profitable customers that have proven their customer loyalty to the organization through repeat purchases and high Net Promoter Scores.
According to Markey, the Net Promoter Score system “works best when it’s embedded in a culture or company that fundamentally believes that earning more customer loyalty from the profitable customers is the strategic outcome they are trying to create.”
Essentially Markey is saying that the Net Promoter Score system is a “divider” and that companies should use the data to determine which current customers believe they are receiving excellent customer service (Promoters), and then focus on providing excellent customer service at an even higher level to those customers, while not paying much attention to Passives or Detractors.
This kind of philosophy sounds completely legitimate for some companies, particularly B2B ventures that can narrowly focus on customers who pay their bills on time, order truckloads of product at deep discounts, or who for whatever reason find it convenient to do business with those companies.
A focus on Promoters only strategy, however, does not work in all situations where Net Promoter Score is measured. In fact, I would suggest that there are some businesses in which customer churn is such a critical problem that the importance of learning how to move customers up the customer loyalty ladder, from Detractors to Passives and from Passives to Promoters, is not only a smart thing to do, it is paramount for survival. In those cases, companies must be able to read Net Promoter Score or other customer loyalty data, digest it carefully and make the appropriate changes to improve their lowest scores.
The wireless and broadband industries illustrate this point. In those business sectors, the total base of customers is stable insofar as people who currently watch television or use handheld devices for cellular phone calls are not likely to cease their usage. By the same token, the total pie of current users is not likely to grow significantly over the next 5 to 10 years due to market saturation.
Although individual companies within these industries are scratching and clawing for every one of those customers they can get their hands on, at the same time, most customers feel next to zero customer loyalty to any one company in the industry. Cable network companies, for example, are forever offering attractive upfront incentives to lure subscribers away from their satellite and telecommunications competitors, but then struggle to keep those customers after the subscriber’s contract expires. In these industries, Net Promoter Scores and other customer loyalty scores are dramatically low. Consumers in these industries are not experiencing much of anything with one company or another that really demonstrates a stickiness that will cause them to become Loyal Promoters.
So what is the punch line here?
It’s that in many industries and industry sectors, tracking Net Promoter Score should not be merely an exercise in identifying the winners and catering to them with even higher levels of excellent customer service. That is a risky venture at best. The closer a company’s operations are to end-user consumers, the more if becomes necessary for the company to use customer loyalty measures like Net Promoter Score to uncover the purchaser mindset and discover the story behind a Passive or Detractor score.
Companies should use data to fix problems and move consumers up the customer loyalty ladder. For companies that are dependent on reducing churn and solidifying the customer base, Net Promoter Score can and should be used to identify problem areas so that improvements can be made to the customer service experience across the entire customer loyalty spectrum.