The Customer Confidential Podcast
Fred Reichheld would rather that fewer companies use NPS—that is, if it would mean that it would more often be used correctly. Fred, a Bain fellow, founder of Bain's Loyalty practice, creator of the Net Promoter Score, and author of Winning on Purpose, says that too many companies misuse and abuse NPS. Instead of chasing a Net Promoter Score, Fred suggests that more companies focus on earning growth by generating more referrals.
“With referred customers, you get better customers than you’d expect,” Fred says. He believes those customers who come in primarily on referrals tend to be of even higher quality than those who referred them because their engagement level—fueled by trust—is perhaps more deeply rooted and personal from the start. He urges companies to measure and truly understand how Earned Growth links to long-term success.
Companies earn strong revenue growth, Fred says, when they show so much love for customers that they not only come back for more but they bring their friends, too.
“When you do that, you have treated a customer right. You’ve enriched their life in such a manner that they feel obligated to share it with the people they care about,” Fred says. “It’s an act of love.”
He now puts so much emphasis on measuring Earned Growth, he says, because NPS is too often misused. When NPS tools focus on pure accountability, love is removed from the equation. When that happens, according to Fred, a 10-out-of-10 survey rating becomes all that matters.
Although many leaders believe in the logic behind this type of score-driven approach, Fred believes it’s ineffective, saying, “When scores are the objective, they no longer help people. It doesn’t inspire them to learn. All they want is a 10.”
“Only 10% of companies believe that you have to put customers first,” Fred says. “You have to get back to the core purpose and the power of loving customers as the animating energy.”
In this episode—sponsored by NPSx℠ and recorded with a live audience providing Q&A—Fred and I discuss the importance of Earned Growth, key considerations for operational indicators, and some of companies’ most common Net Promoter Score missteps.
In the following excerpt, we discuss what an open-minded Net Promoter Score approach looks like.
Rob: A key theme of our conversation has been about balancing the NPS metrics with other metrics and how to achieve improvement when people are just narrowly focused on Net Promoter Score as a KPI.
Fred: Yes. Bad things happen when you just focus on it as a score. You can catch the real bad actors with a sloppy NPS system. But what you can't do is identify the real delights and the true 10s. People don't bother giving feedback if they feel like it's just manipulated and gamed.
This isn't an act of love; it's just a bonus for that individual. And I can tell by how they're telling me that only 10s are passing grades. For really good businesses that need to be experimenting with how to delight customers and turn them into true promoters, then you need a more accurate system.
I think the energy around that is about leadership philosophy. If you can't delight customers, you're not going to grow a healthy business.
You need leaders who deeply believe that.