7 truths of putting NPS to work for your business


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Printed leave behind from the Holland Mark CEO Series event helping CEOs understand and apply Fred Reichled's seminal work on customer loyalty.

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7 truths of putting NPS to work for your business

  1. 1. Habit #? Headlinetruths of putting NPS towork for your businessAn overly abridged view of Fred Reichheld’sseminal work on customer loyalty
  2. 2. introductionSince the beginning of time, the leaders of countries, companies, and countryclubs have been in search of formulas and frameworks that would guaranteeprofitable growth. And centuries later, the terrible truth, the nasty reveal, is thatthere are none. If there were, Greece would not be Greece, RIM would be on therebound, and the Catholic Church would not be selling real estate. But that truthmay not in fact be true, thanks to the seminal work done by Fred Reichheld atBain & Company over the last decade. An internationally recognized consultant,author, and speaker, Fred’s work on the Net Promoter Score (NPS) has beentranslated into 15 languages and rendered in several books, with the most recentoffering “The Ultimate Question 2.0.”And what it all simply and provocatively proves is that loyalty is everything.Brands and businesses that create (and measure) loyalty create distinct andsustainable value that translates into higher levels of growth, profitability, andshareholder returns. What follows is our over-simplification of Fred’s powerfulwork. It’s designed as somewhere between a teaser and a cheat sheet, with thehope that you’ll read the unabridged version and ultimately apply the ultimatequestion to your business. Thanks for joining us. And now, the 7 truths …
  3. 3. truth #1 customer loyalty: it’s the consequence and the cause customer loyalty is the consequence of doing a lot of things right. From motivating employees to care to taking care of every touchpoint between your brand and all the constituencies you serve. Loyalty is not a function of “I like” but “I love.” And when you drive higher levels of loyalty as reflected in higher Net Promoter Scores, you cause higher performance across every financial metric: revenue, profit, earnings per share, lifetime value, etc. Fundamentally, the most effective way to build a successful and ever-growing business is to have loyal customers, and the best way to measure loyalty is by the proportion of customers who will recommend you to others. 1
  4. 4. truth #2 love minus hate or ho-hum is what matters2
  5. 5. Habit #? Headlinethe net promoter score and system focuses on the difference or “net”between those who love you (Promoters) minus those who really don’t (Detractors)without valuation of those that are just satisfied (Passives). Companies with lowNPS scores cannot compete with competitors that are generating growth throughcustomer loyalty (those with the highest NPS in the industry). The average companyhas an NPS of 5%–10%. Companies like Apple, JetBlue, Zappos, and USAA havescores of 50%–80%. And, not coincidentally, they are all market leaders. 3
  6. 6. truth #3 S really stands for system nps isn’t just a score or a way to measure customer satisfaction. It’s a way of doing business, a philosophy, supported by proven frameworks and systems. To extract the real value from calculating the score, companies must create closed-loop learning and improvement processes and build them into their everyday operations. This means on-the-spot fixes (closing the loop faster every time), experimentation to see what works best for you, and creating forums where ideas that work can be shared. NPS customer feedback needs to be hardwired into key decision processes in all aspects of the organization. It’s not treated as a separate department4 or program, but fully integrated/infiltrated into the fabric of daily and monthly priorities.
  7. 7. truth #4 give the power to your people there is a direct correlation between organizations that have high employee loyalty and those that have high customer loyalty. Many of the leading NPS-led organizations measure the Net Promoter Score of their employees. Understanding their loyalty and empowering them with the tools and latitude to create customer loyalty is key. When there is individual motivation and concomitant accountability, things will get done, better decisions will be made, and better outcomes will be achieved by all for all. 5
  8. 8. truth #5 all profit is not created equal fred’s work clearly shows that in any organization there can be “good profits” and “bad profits.” Bad profits are the consequence of activities and offerings that ultimately alienate customers by taking advantage of them, charging them nuisance fees (flown lately?), and forcing contracts that trap them (I don’t want my DirectTV). Bad profits undermine the virtuous cycle of loyalty economics and demoralize employees in the long run, diminishing inspiration, resulting in a downward spiral of bad service and false and fleeting economic growth.6
  9. 9. truth #6 the answer is everything driving higher customer loyalty and higher Net Promoter Scores is not the responsibility of marketing, or finance, or operations. It’s the responsibility of everybody and the consequence of everything. The board must be on board. The CFO must care. The front-line staff must under- stand. It’s about bringing every aspect of the organization to bear on the task of creating distinct, relevant, and sustainable value for the customer. It’s economic, experiential, and at times even a little bit spiritual. 7
  10. 10. truth #7 NPS begins and ends with you it must be the centerpoint of your business strategy and your day-to-day decision making. NPS is the flag you plant, wave, and rally around. You will need to intimately understand and relentlessly convey the economic and moral imperative to deliver more value. It’s not a rainy-day activity or even an annual event. It’s a long journey and commitment to cultural change, organizational synchronization, and singular focus on what really matters to your customers and your employees.8
  11. 11. Habit #? Headlinea final note and a thank youAs Fred so aptly points out, the fundamental truth behind these seven truths and theentire Net Promoter System is the golden rule: Do Unto Others As You Would HaveDone Unto You. When you do, and when your organization does, good things, reallygood things, will happen.Thank you, Fred. 9
  12. 12. www.ceoseries.org