Reducing costs by gaining loyalty: Net Promoter Score Conference, London

by Matthew Moore on 9th June 2009

With the current economic climate, cost-cutting and gaining market share is high on everyone's agenda.

The trick is knowing where to cut costs whilst still giving the customer the best possible value, Customer retention is also particularly vital in these uncertain times. Therefore finding out your customer's needs and opinions is paramount, and this is where Net Promoter Score comes in.

The annual Satmetrix NPS Conference is held to promote the system as well as to provide a benchmarking forum for those organisations which already employ it. Representatives from companies such as Virgin Media, Bupa International, IBM, Aggreko, Harvard Business Review, Fiat, Symantec, Lenovo, Phillips, Aviva, ING and many others were there to share their experiences and gain new knowledge.

Net Promoter Score (NPS) is a powerful customer loyalty measure that first appeared in 2003. Based upon asking the customer a simple question and using the answer to gauge whether they are a 'promoter' or a 'detractor' of your organisation, it is far more powerful than it's simplicity would suggest. Utilised properly, it can be used to promote employee engagement, gain customer loyalty, identify areas for improvement and cost cutting, as well as ultimately guiding and focusing strategy.

The conference brought together over 30 guest speakers and under the theme of Embracing Customer Experience in a Challenging Market. "Companies are being stress tested, not just by regulators but, more importantly, by their own customers," noted John Abraham, General Manager of Net Promoter Programs at Satmetrix. The goal of the conference, he said, was: "to get you thinking differently about customer loyalty."

Fred Reichheld, author of The Ultimate Question the first published book on NPS, gave a lively presentation. Fred admitted that he usually talks about profitable growth, but instead he discussed costs, as that is what people are focused on today. How does loyalty save companies money? Here are just a few of the ways that Fred mentioned:

Lower acquisition costs.
Fewer problems and complaints.
Longer tenure, which spreads fixed costs over a longer customer lifetime.
Lower risk of lawsuits.
Less need to spend on PR.
Employees get treated better, which reduces turnover.

When considering where to cut costs, it is important to look at the economics of detractors: they are often costing your company money. In one example he shared from research done by Bain&Company, it showed that detractors' lifetime costs can be 140% of lifetime revenues for the same group of customers.

Fred asked the audience to consider this thought: you have 10 million minutes in your life - how will you measure your success? For your company, think about it as the number of Promoters you create, and your reputation will be your legacy.

Virgin Media have been using NPS to great effect for two years now. Neil Berkett, CEO, has used NPS to gain insights into his business that he believes they would not have got without it. As the leader of an organisation in a sector with relatively high customer churn (turnover), Neil firmly believes that "customer advocacy drives growth", and consequently customer metrics are at the core of future growth. In addition, with a direct relationship between happy customers and lower costs, NPS is "a tool that completely focuses on the customer and can thus can be used to drive growth and lower costs".

It is impossible to win the loyalty of the customer without winning the loyalty of the employees, and it is this area of employee engagement that Anna-Marie Fielding of Bupa International focused on. Though relatively new to NPS, Bupa International have used it to "change attitudes" within the organisation already and pushed results out to employees so they can understand the impact they have, repeat positive behaviour and avoid negative.

Previously engaging in yearly customer surveys, Anna-Marie claimed that Bupa International have "gained more insight [using NPS] in the last 6 months than they had done in the previous 11 years", and have used that to drive improvement and work it up into tangible, specific action plans.

Author Name: Matthew Moore

Provider: Satmetrix