Reichheld’s New Metric: The Net Promoter Score

MarketingROI: What does the net promoter score tell you beyond the fact that some customers like you?

Reichheld: It’s the best predictor of organic growth that we have seen to date. In over 24 industries that Bain has analyzed, the net promoter score leader is growing at more than 2.5 times the rate of its competitors.

MarketingROI: But isn’t it a tough sell when you’ve got CEOs demanding a quick return on investment?

Reichheld: No. Executives have been deeply frustrated that they haven’t had a way to hold people accountable for generating the right kind of profits, so it’s an easy sell. The difficult part is recognizing that it takes work and that you can’t just add the 40th question to your 39-question survey. You have to ask the ultimate question carefully and frequently, and have closed-loop processes so that when a customer says they’re neutral or worse, someone’s responsible for following up and trying to fix that.

MarketingROI: Who’s doing it right?

Reichheld: General Electric tested the Promoter’s Scores for six to nine months in its healthcare division, and has since rolled it out across all 500-plus businesses. Twenty percent of all its executive bonuses are driven by Net Promoter Scores.

MarketingROI: Anyone else?

b>Reichheld: Intuit is one of the first firms to adopt the net promoter score. In their TurboTax business, they manage to grow net promoter scores by 15 points and have for the first time in over a decade gained substantial share and grown that business the right way.

MarketingROI: What changes did they have to make internally?

Reichheld: Number one, they had to find a way to measure Net Promoter Scores that was credible, not just internally but to their investors. You just can’t sort of take your satisfaction surveys and do them twice as often and offer that up and expect Wall Street to accept it. They also found appropriate ways to link it peoples’ bonuses. And they found that you really have to allocate a certain amount of time at each executive meeting, and to make sure everyone’s trained in it. You have to make it one of the top priorities at your firm. It can’t be No. 7 or 8.

MarketingROI: Are most companies patient enough to stick with this process?

Reichheld: Wise leaders recognize that it’s never simple to do anything important. How do you get your customers to give you the time to give you candid, thoughtful feedback after years of wasting their time with irrelevant surveys,? That’s a tough challenge. How do you make sure that your front line employees aren’t out there pleading for higher scores and bribing customers? That’s a tough challenge.

MarketingROI: A number of the firms cited in your book, like Amazon and Enterprise, are fairly young, entrepreneurial companies driven by a very strong personality at the top. What about firms that are more mature and not being run by their founder?

Reichheld: Most of the superstars in my book didn’t initially get there by measuring net promoter scores. What they did was get more promoters and fewer detractors without the benefit of a hard metric. Enterprise is one of the few who really did have a hard metric for seven or eight years now, and that really did play a very important role in their progress. Overall, the net promoter score is of the greatest value to large public firms that owe a responsibility to shareholders that this is financially rational.

MarketingROI: Now that you have asked the ultimate question, what’s next?

Reichheld: Some pundits have said, that my next book will obviously be “The Ultimate Answer.” One thing I’m interested in is taking this to the employee side of the organization. That same question is really the core issue for employees as well: To what degree would you recommend this as a great place to work? Too many firms forget that you can’t earn customer loyalty unless you’ve first earned the loyalty of your front-line employees.

MarketingROI: Will this help chief marketing officers extend their job tenure?

Reichheld: Chief marketing officers have drifted the same way as satisfaction surveys: towards irrelevance. Marketing should be the center of a business organization, but it’s not for most. The CFO and the financial side have become dominant. What the Net Promoter Score offers to marketers is a rigorous, reliable metric that can put them back to front and center in terms of driving the corporate agenda. If they do that, the CMO job is going to be a lot more rewarding.