#42 – Customer Experience and Growth, and much more

 

Welcome to the 42nd edition of my customer strategy newsletter. The five topics this week are:

  1. Customer Experience as a growth initiative
  2. Relationship between NPS trends and market share / growth
  3. Latest blog posts
  4. Notable items from other sites – Fred Reichheld, Jared M. Spool
  5. Looking forward
Positioning Customer Experience as a growth initiative

Over my 40-year career I learned something critical about how company leaders view different types of work. I believe I can summarize it simply:

People who drive growth are perceived as geniuses. Everyone else is simply doing their job.

I spent the first four years of my career as an industrial engineer with the parent company of Wrangler jeans. We were measured on producing cost reductions that were at least a particular multiple of our salaries. Then I moved to the sales subsidiarey for France, Italy and the Benelux, based in Paris. What a change! In black-and-white terms, I discovered that nobody cared about cost. All that mattered was growth. If you worked on growth, you got the salary increases and bonuses. I quickly managed to position myself in the middle of the development of stonewashing, our most important growth area. $$$ followed, well, French Francs anyway.

With Digital Equipment Corporation, I was the business leader in charge of handling an anti-trust case brought against us by the European Commission. We were threatened with a $1.3 billion fine for alleged anti-competitive practices in our hardware services business. When I was put in charge, the advice I was given by the lead lawyer on the case was “Just try to settle it all for $100 million.” I had a different point of view. It took almost two years, but we managed to settle the case with the Commission for $0. When the time came for my annual review a few months later, I expected big bucks. My boss, the head of our business in Europe just gave me an average increase. When I expressed suprise, he told me “You just did your job.” That’s when I truly understood what I have written in italics above.

If you lead customer experience work, you have a choice to make. You can position your work as driving growth or as avoiding loss. Your work on customer loyalty can be positioned as ‘less customers leaving’ or as ‘more customers staying’. The latter is what you want. If your work is successful, renewal and upsell rates will be higher than their historical averages. If you work in software, activation rates will be higher. Position this work as a corporate growth initiative! Write the corresponding announcement for your CEO. Work with whoever is communicating the top five growth iniatives for your company to ensure customer experience improvement is one of them.

Let me give you one last analogy. We customer experience professionals feel proud of, and make a lot of noise about our ability to ‘put out fires’. But think about it; city fire departments who put out fires don’t get big rewards. They are just doing their jobs. Architects who design new buildings and lead the construction projects are the ones who get the big bucks. And they don’t even risk their lives. It may not be fair, but that is the reality.

So, that is my suggestion for your customer experience New Year’s resolution. Your work has to be communicated as being about growth, not cost. Happy New Year!

Relationship between NPS trends and growth

I continue to read articles that use anecdotal evidence to dispute the science behind the Net Promoter Score. I would like to clarify what Fred Reichheld and Rob Markey have to say about the subject. Their research showed that NPS trends predicted between 20 and 60% of market share / growth trends, depending on the industry. The relationship is strongest in mature industries, where there are many players, and where it is reasonably easy to switch providers.

This seems logical to me. One notable study that claims that NPS is relatively useless includes Norwegian retail gasoline sales as an example of the non-relationship between NPS and growth. However, during the three years studied, Statoil was the only retail gasoline chain in Norway, and the price of a barrel of oil dropped 30% in the second year. This is a great example of where you would not expect any customer experience metric to have predictive value.

You can the relevant information from Reichheld and Markey here.

 

Our latest blog posts

Here are the latest posts. Older posts are still available on the blog page.

imageThe main customer experience measurement and improvement systems – Part 6 – Proprietary systems

Various consulting companies propose proprietary measurement systems. Your company may have its own composite metric too. The Temkin Group, for example, has both the Temkin Loyalty Index and the Temkin Experience Rating. They are useful examples…

imageMost-read articles in 2017

A list of the five most popular articles on customerstrategy.net and the most popular article I wrote on LinkedIn in 2017. The LinkedIn article is not about customer experience, and is still worth a read, I think.

imageThe main customer experience measurement and improvement systems – Part 5 – The Wallet Allocation Rule

Authors Keiningham, Aksoy, Williams and Buoye describe the system in the book of the same name. Its focus is a composite metric should provide good predictions of revenue trends for companies, at least for large companies that have a good choice of suppliers.

Notable customer experience items from other sites

LinkedIn article by Fred Reichheld – What’s in a name?

In this article, Fred talks about the different names he has seen in use for the Net Promoter Score® and why they may make sense for you and for your company. However, the phrase that caught my attention was “…but with Net Promoter, perhaps the most important thing we are tracking is whether a life has been enriched.”

He also provides useful clarifications about the Net Promoter categories. Well worth a read here.

 Silliness – Jared M. Spool on the Net Promoter Score

I get the dubious privilege of reading quite a lot of silliness about customer experience in general, and about the Net Promoter System in particular. Such posts usually have two characteristics. First, they are often written by people who have not read either Reichheld’s original HBR article on the subject or The Ultimate Question 2.0, and have not learned about updates to the system by listening to the Net Promoter System podcast or reading books such as our own. The second characteristic is that they tend to have an academic background and will not accept pushback that unless it is in the form of an article in a peer-reviewed academic journal.

Jared M. Spool has both of these characteristics. Nonetheless, what he has written is worth reading. Perhaps not for the reasons he intends, but as a perfect illustration of pseudoscience. His main argument in his latest article is that since his personal experience of recommending companies differs from the (non-peer reviewed) research done by Reichheld and Satmetrix for the HBR paper, that research is worthless. This is what I call the fallacy of “My anecdote trumps your science.” You can read what I am talking about here.

 

Looking forward

It is time for all those New Year’s resolutions. What about your customers and a resolution to make their lives better? Our books can help! Here are links to each on Amazon.com. If you use a different country site, you can just open the link, then edit .com to .co.uk, .de or whatever:

Customer Experience Strategy – Design & Implementation

Net Promoter – Implement the System

Customer-centric Cost Reduction

“So Happy Here”: The Absurdist but Essential Guide to Better Business (Color edition)

“So Happy Here”: The Absurdist but Essential Guide to Better Business (Black & White edition)

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