Fred Reichheld, Creator of the Net Promoter System: How to Transform Your Customers Into Your Best Promoters
Written by: Satta Sarmah Hightower
“The Net Promoter Score is essentially your balance sheet of what impact you've had on the people you've touched. It's inherently inspiring. It's not ‘how much money did I take out of your wallet.’ It's ‘how good a job did I do at brightening your day and making the world better.’” — Fred Reichheld, Creator of the Net Promoter System
For nearly 20 years, the Net Promoter Score has been the gold standard by which many Fortune 500 companies measure their customer experience and customer loyalty.
Its creator, Fred Reichheld, who introduced the methodology in a 2003 Harvard Business Review article, “The One Number You Need to Grow,” says companies have more advanced tools to measure and improve their customer experience, but turning customers into promoters still requires a real mindset shift within organizations.
Reichheld says treating your customers well is the best way to grow a profitable, sustainable business. Digital tools now make this much easier than nearly two decades ago when the Net Promoter System first emerged.
“Today, with these web-based tools in digital commerce, you're in a position to actually measure how well you're doing at getting customers to come back for more and bring their friends. Whereas before, when you were insulated from your consumers by retailers and distributors, you really had a hard time keeping track of this. Today, businesses are in a much better position to build loyalty and follow this net promoter philosophy,” says Reichheld.
The Importance of Customer Trust
Digital also has created more competition among brands and made it easier for customers to gather information about companies, whether it’s through reviews or social media posts.
Reichheld says in this landscape, consumer trust has become even more vital. Recent Digital Shelf Institute research supports this: 86% of consumers who were recently surveyed said they are willing to pay more for a product or service when it comes from a brand they trust.
Trust may drive the choices consumers make on the digital shelf, but Reichheld says the definition of trust has changed in the digital age.
“The interesting thing is that trust used to be what the retailer said about you or what the broker said about you or the expert. Increasingly, it's becoming what all of your customers say about you, because that can be accessed online in increasingly reliable ways. So, the notion of treating your customers well and earning their loyalty becomes the basic foundation of growing the business.” — Fred Reichheld, Creator of the Net Promoter System
Reichheld says this requires companies to not just measure their success in terms of revenues and profits, but in terms of their customer experience.
“The measure of success is of all the customers you touched, how many feel like their life has been so enriched that they would want to share that with a loved one and recommend you enthusiastically to a friend?” Reichheld says. “ [With this mindset] You start to think of the customer as an asset as opposed to some financial fiction our accountants have made up for us.”
Leading Net Promoter Businesses
Only a handful of brands have mastered this, including Apple, Tesla, and Intuit, Reichheld says.
Apple was one of the first companies to adopt Net Promoter and use it in innovative ways. Any time a customer gave the company a 0-6 score on a 10-point scale, one of the store managers would call the customer back and find out what happened and do their best to fix it. Intuit was also an initial adopter. Its founder — Scott Cook, a fellow Bain alum — once told Reichheld he felt the company didn’t “deserve any profit until our customers are happy.” Tesla is also a promoter business — it actually has the highest net promoter score in the automotive industry.
“When you dig into why — well, it’s a cool car and it's electric — but they have taken over the dealer function and gotten away from that horrible negotiation experience [when you buy a new car]," Reichheld says.
“Tesla has designed that whole experience to be in the consumer's best interest. When you go online, you have to answer three or four questions to buy a $60,000 car. They do net promoter surveys, but it's not to bribe you to give them a 10. It's to learn how they can get better. These companies who are acting in the customer's best interest, they are just crushing the old-school competitors,” he adds.
The Customer Experience Challenge for Brand Manufacturers
Becoming a promoter business may be easier for some companies than others, depending on the industry. Brand manufacturers, in particular, must shift their mindset because they’ve traditionally viewed retailers and distributors as their main customers.
“The evidence is pretty clear that companies who think about that end consumer — of course, you have to be a good partner to the retailer and find ways to make it easy to do business — but the real brilliant success stories have put their energy into innovating ways to help consumers have a better experience because that's where the ultimate brand comes from,” Reichheld says.
“The instant you start thinking of the retailer or the distribution as your primary customer, you're willing to do things to take advantage of the consumer who has less knowledge, less experience and doesn't really know who to trust,” Reichheld adds. “The moral high ground is acting in the best interest of the consumer.”
Creating Effective Feedback Loops
For companies to build customer trust and loyalty, they must develop effective feedback loops.
Companies can create effective feedback loops in several ways. They can take Apple’s approach of monitoring detractor scores and following up with customers, or they can do what Logitech has done.
Instead of sending customer feedback from customer service agents to engineers, Logitech removed this layer and had customer feedback sent directly to its engineering team.
Hearing about customers’ paint points directly from the source resonated more with Logitech’s engineers and created a more effective feedback loop. D2C channels also can create more effective feedback loops because they provide richer data than brands often get from their retailer partners.
Reichheld says companies also can create an effective feedback loop if they “think about the user's experience in using your product — everything from the shopping, purchasing, receiving, getting it set up and ongoing usage, getting it repaired and buying consumables — and break that into episodes in a way the consumer thinks about it.”
“Then, find ways to get information back from the consumer, or at least a sample of consumers, after they've experienced that episode in the journey. Look for people who are wowed and just loved it, and make sure you understand why and how you can do that more often. Also understand when people are really disappointed and get to the root cause.” — Fred Reichheld, Creator of the Net Promoter System
“Digital Wows” and Loving Your Customers
Once companies have operationalized their systems of feedback, they can find more opportunities where they can wow customers. Reichheld, who calls these moments “digital wows,” says companies should make an effort to delight customers from the moment they unbox their product or begin to use their service. That initial welcome is key, he says.
“Anytime you have an emotional moment with a customer, that's an opportunity to wow them in a memorable way,” Reichheld says.
In today’s highly competitive ecommerce environment, companies must have a more customer-centric focus. That’s because transforming customers into promoters has positive implications across the enterprise, from reducing sales, marketing and customer acquisition costs to producing a more positive company culture and increasing the business’s competitive advantage.
Though the Net Promoter Score is only one metric, it reflects a core tenet that brands who want to compete on the digital shelf need to make their guiding philosophy: enrich the lives of your customers. After all, as Reichheld says, “loving your customers is an unbeatable strategy.”
Listen to the full podcast to learn howtreating your customers well is the best way to grow a profitable, sustainable business.