I like to look beyond any research based on hypothetical situations: “would you recommend…” and complement it with observation of actual behavior “did that customer actually refer somebody else?”
The advantage of NPS lies on its simplicity. It is a singular question that is easy to understand and connotes action: to recommend the product to friends, while CSat could be interpreted on many ways: satisfaction with the service, with the billing experience, with the way I use the product? But NPS does not replace a good CSat survey, as CSat offers more insight into the drivers affecting the customer experience.
On web 2.0 services we can complement the NPS indicator by observing/measuring if the customers are indeed recommending the service/product to others, by either “instrumenting” properly the tracking mechanisms into any “refer-a-friend” program or thru more sophisticated features that are viral in nature and encourage networking effects alas Facebook or LinkedIn. For those services one can argue that there is no need for a NPS score because the actual act of referral and repeated usage is what keeps the property working, hence measuring usage and referrals could be enough. The challenge is that in some innovative and leading edge products, customers might not have a choice, hence “usage” and “referrals” are high, but one has “hostages” instead of loyal customers and they will defect when the opportunity arises.
In web2.0 companies, the R.U.N.™ triangle: Referrals-Usage-NPS adds a more comprehensive view to product performance and acceptance. For example if one finds a lack of direct correlation between referrals and NPS (high NPS, low actual referrals), it could point to an opportunity to create viral mechanisms or refer-a-friend features that are easier to use. High usage and low NPS could signal a “hostages” situation, etc.
Web 2.0 ignites WOM at a faster speed, research by Bain & Co group indicates that 70% of recommendations are based on a personal experience that beats expectations, and while 80% of the surveyed CEOs in the USA think their brands offer a superior experience, only 5-10% of their customers agree and in these days where everybody is connected, those 85% customers that are not pleased will disseminate their message fast. Web2.0 offers instant gratification (or deception), simplification and a platform for multichannel engagement. This can work both ways for a brand and requires addressing the issues on Customer’s Experience and coordinated digital marketing mechanisms.
As important as having the methodology implemented, is to have the processes and tools to make R.U.N an actionable set of metrics that translate into revenue growth. Without this approach, the NPS becomes just another reason to be worried or happy. We need to make it actionable through good and basic marketing that addresses the needs of the segment by improving the product/service experience.
Implementing a loyalty measurement practice:
- Align - Get executive buy-in by communicating the benefits and the correlation with growth.
- Define - Deploy a consistent cross-business unit practice at the company.
- Measure - Capture VOTC data with quality and with enough level of detail that permits taking action after establishing a baseline. Do competitive benchmark.
- Take action - Understand the drivers, identify levers, appoint leads.
- Manage - Manage the organization’s behavior with a well-defined scorecard, compensation tied to results and well structured internal communication plan, and in general making NPS and Customer Experience part of the organization’s culture.