The Top One Thing That Will Cause Your Net Promoter Program to Fail!!!

The Top One Thing That Will Cause Your Net Promoter Program to Fail!!!

INSIGHTS
The Top One Thing That Will Cause Your Net Promoter Program to Fail!!!
JOURNAL

The Top One Thing That Will Cause Your Net Promoter Program to Fail!!!

Why claiming an NPS of 100 reveals a popular but illogical mistake.

The marketing team is keen that I get the hang of this clickbait business. Apparently, “Top 5” lists score highly, but I’m not sure I’ve got the hang quite yet. Still, of all the things you can do to make nonsense of your CX initiative, I do think I have a favorite. What is it? Keep reading.

I was inspired by reading of a tech company that recently publicized that they had an NPS of 100. Naturally I was intrigued. Cynically, my first thought wasn’t “wow these guys are loved by their customers,” more along the lines of “what on earth?” only with more colorful language.

Deeper examination of the claims of this company “unprecedented in the industry” quickly reveals the glitch in their thinking.

Let’s think of this through the lens of probabilities. It’s not impossible to achieve 100-point NPS, just improbable. Highly improbable. There are some companies that legitimately achieve high 80’s or low 90’s, but sooner or later, you run into some customers who just don’t love you that much. Boom, there goes your perfect no-hitter. Of course, you might just have one customer, which certainly gives you a better shot, but I was already willing to wager that this was less a sample problem, more a case of fundamental misunderstanding. Yup.

Deeper examination of the claims of this company “unprecedented in the industry” quickly reveals the glitch in their thinking. It’s a popular one, and it’s my pick for the top way to mess up: They measure the technical support experience, ask the recommend question, then call the result NPS.

With the exception of a certain corner case, which I’ll share in a minute, that’s not even vaguely correct. The foundation of NPS is its linkage to financial performance and is based on the idea that NPS reflects the sum of all experiences. In this instance, if your NPS was just technical support, the quality of the product, your implementation experience, sales experience, pricing – none of those would matter. Heck, if they shipped you the wrong product four out of every five times, nobody would apparently care. Nope, it’s just the tech support call, which presumably only a subset of your customers even attempts. Even better, don’t let them get through to the tech support lines, try and filter them for some easy issues – a bot should be particularly good at that.

Tech support, customer support, customer success calls – these are events that tend to score high, because the customer is, quite reasonably, judging you on the resolution of the problem they have, not their overall experience. Pick your favorite metric to measure this – I personally like the Customer Effort Score – but don’t go thinking you are going to outstrip the competition exclusively on the basis of your tech support.

Think about this: According to the logic of equating tech support experience with NPS, if you have a perfect product, one that requires no technical support at all, you are depriving yourself of the opportunity to create all those promoters! Better get some bugs programmed in, stat. We should start referring to “call avoidance” solutions as “promoter avoidance” solutions and cut back on all our tech spend in the contact center.

I did suggest a corner case. As NPS is supposed to summarize all the relevant experiences, it’s possible that the technical support call does represent all those experiences. That would be because you are fundamentally in the business of providing support. Logically, this doesn’t have to be an “all or nothing situation” – the closer you get to that model, the more relevant the support call is. You could argue that one of the historic NPS leaders, Rackspace, was basically a support company for a customer who purchased a “commodity solution” from them. If the only differentiator in their industry is support, and all other factors are negligible, support experience converges on overall customer experience. No wonder they built their franchise around the concept of “fanatical support,” since that’s really what their business was.

For the rest of you, including the 100-point NPS guys I mentioned, don’t confuse support experience with the complete customer experience. Your customers won’t.

ABOUT RICHARD OWEN

As CEO, Richard’s singular professional focus: Delivering financial value through CX. He co-founded OCX Cognition to combine technology and programmatic consulting in pursuit of that goal, and now leads the company’s coordinated efforts to deliver the right solutions for its clients.

Richard’s 30-year career has centered on transforming business operations with technology, and he is one of the best-known CX thought leaders. While CEO at Satmetrix, his team led the development of the Net Promoter Score® methodology with Fred Reichheld, creating the world’s most widely used CX measurement approach. With Laura Brooks, he co-authored Answering the Ultimate Question, the best-selling “how to” guide for NPS practitioners.

Richard transformed the supply chain and built what was then the world’s largest e-commerce business at Dell, and has led two software companies, AvantGo and Satmetrix, to successful exits. With an MBA from MIT Sloan Management School, he has served on several boards and committees at public and private companies and is an active venture investor and international business thinker. Richard has lived on three continents; he and his family now divide their time between Arizona and London.

ABOUT OCX COGNITION

OCX Cognition delivers the future of NPS. We ensure customer experience success by combining technology and data science with programmatic consulting. In our Insights section, we present a comprehensive and evolving collection of resources based on our research and expertise, collected for CX leaders committed to delivering business outcomes.

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The Top One Thing That Will Cause Your Net Promoter Program to Fail!!!

What Can NPS Teach Us About “Responsible” Capitalism?

INSIGHTS
What Can NPS Teach Us About “Responsible” Capitalism?
JOURNAL

What Can NPS Teach Us About “Responsible” Capitalism?

Focused, thoughtful metrics can be a powerful tool for social good.

Capitalism and markets have always felt like the worst possible system for organizing an economy, until you consider the alternatives. Yes, they generally create the right incentives. There is an underlying element of meritocracy. They usually maximize growth, and growth  usually – lifts everyone. 

But they have downsides as well. Markets do not care about inequities, it’s more about spoils going to winners. And markets made the Kardashians wealthy. How can any system that does that make sense?

Doing right by employees and customers is not just a moral imperative; it’s good business.

Yet capitalism does not have to be a static concept. It can change for the better, and in the face of social upheaval these days, many are insisting that it must. Perhaps our emphasis on innovative measurement in business could be a big part of broader solutions that teaches valuable lessons about how business does, and does not, respond to change. 

In a democracy, the economy serves the public, and if the system does not achieve public goals, it deserves reform. And today there is a growing sense that reform is needed. During a period of unprecedented prosperity here in the United States (as measured by unemployment or GDP), real wages for the least educated have barely moved. Now, you may think that levels of inequality are the product of a “rigged system,” or just the reality of meritocracy and competition, but regardless they are an unsatisfactory outcome from a societal viewpoint. Aside from social stress, prosperity isn’t very prosperous if half the population doesn’t see personal progress. 

Business leaders have responded by calling for “responsible capitalism” or “stakeholder capitalism” – models that suggest we need different objectives for the corporation, perhaps even alternatives to the profit motive. They hint that profit comes at the cost of social good. But is that necessarily true? I would contend that what corporations and their investors really need are better ways to measure the performance of business that demonstrate the connection between good business practices and good profits. 

OK, I’ll grant you “measurement” is not a particularly sexy topic. You were hoping for something a bit more prescriptive, perhaps? Maybe even definitive: Let’s regulate the outcomes we seek! 

But prescription or regulation tend to be less effective than incentives in market economies, and what we need is leverage, which comes from millions of independent decision makers moving in the right direction. Yes, measurement is sexy in markets. 

The argument for “stakeholder” or “responsible” capitalism by and large comes down to the same thing: There is a right way to achieve profits, and a wrong way. We imagine the former to be a business model that rewards employees appropriately, protects the environment, works to correct inequality in our society and provides equal opportunity. And that is just my wishlist – you probably have your own. “Responsible” capitalism, its proponents imply, requires monitoring and balancing several outcomes, including profit, environmental impact, social impact and others.  

But that can create both legal and practical conflicts that are conveniently overlooked but massive in ramification. Ironically, it can create incentives for management to spend corporate resources selfishly or inefficiently and risks cronyism and bias. When the owners or enterprise, the shareholders, lose faith in management protecting their interests, value usually gets destroyed and not just for the shareholders but for society overall. 

Still, if we don’t love the results of today’s seemingly profit obsessed business, and alternative goals have their own drawbacks, how do we change? To paraphrase the old joke, if capitalism is hurting, you just aren’t doing it right.  

Consider this: the widespread popularity of NPS is driven by a belief that doing the right thing by your customers actually drives profits, if you measure it the right way. Based on that simple idea, thousands of boards, management teams and leaders have adopted NPS as a measurement, often with teeth – accountability and compensation. In other words, massive leverage for good profits.  

Now, we know that businesses with high NPS outperform their peers in terms of growth and profits, the two most significant variables in stock price valuation. We also know that employee alignment matters; companies with the right culture, right engagement of employees find positive linkage with both NPS and profitability. In other words, all three of these variables tend to occur in high stock performance companies. Doing right by employees and customers is not just, or even primarily a moral imperative; it’s really good business.  

Better yet, we know that customers and employees want to associate themselves with ethical businesses. That means more than “don’t be a crook” these days, it means doing right by all those stakeholder groups we started with. Sure, someone still chooses to work for those robo-calling “scam the aged” companies, but I’d suggest that they aren’t exactly talent magnets. 

On this point, one final observation is worthy of note: The “transmission mechanisms” that makes high levels of employee engagement impact profitability and growth often flows through customer outcomes anyway. Engaged employees drive customer outcomes drive financials.  

It would seem that in market economies, all roads to profit tend to lead through employees and customers. And many of our socially desirably outcomes are what both groups want. Is the profit motive really at odds with a better society? 

Maybe we should ask: if this is such an obvious alignment, why is it not happening already? 

First, to be effective as a measurement for investors, a given metric needs to be accepted as de facto or de jure. In practice, that means that either the government comes in and defines it, or everyone agrees on a standard because it just works in practice. Generally, it seems the public markets prefer the former, which is why Rob Markey of Bain & Company makes a compelling case for FASB (Financial Accounting Standards Board) to force standardization around customer reporting. Doing so, he argues, would build more reliable, transparent metrics, and would be taken seriously by investors as a driver of profit.  

That’s true, but might not happen, or even be needed. Private investors, wall street analysts and boards of directors all have a strong, profit-driven interest in better metrics. Transparency would convince employees, customers and the public that the company was sincere in its efforts and enable calibration of progress. Many private investors – the oft-maligned venture capitalists and private equity firms – have figured out that any new metric that provides a glimpse into productivity or future growth – is worth the effort. And worth the effort to do it right; understand the measurements, refine the calculations and hold management accountable for both accuracy and performance. They demand transparency, because they understand that measurement without transparency is like unrequited love: You can cry yourself to sleep at night, but nobody notices. 

Now, I am not suggesting that we come up with some kind of “community adjusted EBITDA” like WeWork attempted. There is a big difference between providing investors with forward-looking insights versus inventing new metrics to give a falsely positive impression of your performance. The former is referred to as “transparency” whereas the technical term for the latter is “bonkers.”

The market can drive consensus around metrics that work, metrics that link to financial outcomes. The challenge is one of corporate governance. For many leaders and boards, innovation around measurement has not caught up with the modern corporation. 

As an example, as NPS has been adopted for management compensation by many of the world’s largest corporations, boards and CFOs both find themselves in an unfamiliar territory, that of non-financial, nonstandard metrics that matter. It is just not sufficient to post scores that are not fully understood and too many metrics cited on earnings calls don’t withstand even superficial scrutiny. Leadership needs to do the work of understanding the critical metrics they rely on and building the right measurements. The same lessons apply to a raft of innovative measurement that link socially desirable outcomes to profitable performance, such as employee population diversity. 

If the path to a better society runs partly through enterprises, we should understand better what makes enterprises work. Profit is not necessarily in conflict with responsible business and thinking that way might cause as many problems as it solves. Rather, let’s better equip leadership to finding paths to higher profitability and growth and show, with data, that responsible business is good, profitable business.

     

    ABOUT RICHARD OWEN

    As CEO, Richard’s singular professional focus: Delivering financial value through CX. He co-founded OCX Cognition to combine technology and programmatic consulting in pursuit of that goal, and now leads the company’s coordinated efforts to deliver the right solutions for its clients.

    Richard’s 30-year career has centered on transforming business operations with technology, and he is one of the best-known CX thought leaders. While CEO at Satmetrix, his team led the development of the Net Promoter Score® methodology with Fred Reichheld, creating the world’s most widely used CX measurement approach. With Laura Brooks, he co-authored Answering the Ultimate Question, the best-selling “how to” guide for NPS practitioners.

    Richard transformed the supply chain and built what was then the world’s largest e-commerce business at Dell, and has led two software companies, AvantGo and Satmetrix, to successful exits. With an MBA from MIT Sloan Management School, he has served on several boards and committees at public and private companies and is an active venture investor and international business thinker. Richard has lived on three continents; he and his family now divide their time between Arizona and London.

    ABOUT OCX COGNITION

    OCX Cognition delivers the future of NPS. We ensure customer experience success by combining technology and data science with programmatic consulting. In our Insights section, we present a comprehensive and evolving collection of resources based on our research and expertise, collected for CX leaders committed to delivering business outcomes.

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    Does Customer Experience Really Mean Business?

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    Does Customer Experience Really Mean Business?
    JOURNAL

    Does Customer Experience
    Really Mean Business?

    In a changing business landscape, CX matters now more than ever.

    As a customer experience leader in a B2B business, I had to sit through many meetings to defend what my team and I were doing. I have been challenged many times regarding the statement: “Customer experience is all well and good, but does it really contribute to the bottom line?” The current situation with COVID-19 has amplified this question as executives trying to drive revenue recovery ask their CX leaders why achieving a high NPS is so important now. This challenge is understandable. COVID-19 has pushed us – and everybody we are doing business with – into a corner. And coming out of this corner requires energy and courage and a certain amount of psychological safety. But first of all, it requires a stabilized cash-flow to make sure your business can survive.

    The key question is whether customer experience really means business. This is the time when this question comes to a test.

    Spoiler alert: Yes it does, and it actually is part of the foundation of your business success.

    Your and everybody’s business success depends on one simple factor: Do you have a product or service that people want and can buy? Viewed like this, your business success is in the hands of your customers – much more than in the hands of your investors and banks. While your people and resources such as money, raw materials or relationships create your products and provide your services, it is only customers who spend their dollars, euros, pounds or francs with you that let you be in business.

    But how do you manage CX effectively and connect it so that senior leaders and everyone in an organization fully support it? First, you need to be able to understand and manage how well customers perceive their experience with your business with the same attention to detail as you understand and manage your financials. While most of us have become very proficient in managing financials, it is still only the best companies who also look at customer and employee data to get a more balanced view of future business success.

    In my experience, the most successful approach in convincing executive leaders was showing them their own customer experience data and its relationship to financial outcomes. Customer experience data has proven to be highly indicative of future behavior and is therefore a robust indicator of customer lifetime value. It is also a very good early warning system, giving you the opportunity to take action and correct problems before you see a negative impact in your financial results. 

    Future-oriented executive leaders have realized that measuring and managing CX in addition to getting a good view on your people and your financials is crucial to stay ahead in business. If we want to compare it with a car analogy: Looking at financial performance will give us mostly a look through the rearview mirror where we can see the nice landscape we just passed. It also tells us whether there is still enough gas in the tank (or power in the battery). CX can provide us with the indication of how fast we are driving and in what direction. So the question also for executive leaders is: “Do you know where you are heading? And do you also know how fast you are going?”.

    What is also especially important to understand is that the lockdown has made us adopt new habits. Some of our behaviors have changed. Let’s take another simple example. Most of us haven’t eaten in a restaurant for a long time. While it was easy three months ago to go to this or that place for that nice lunch or dinner, it has become very difficult these days. Delivery is only a meagre replacement. But many of us look forward to going out and have this exciting lunch or dinner one of these days soon. Where will you go first? It is highly likely you will go there where you had the best experience, also where you feel a certain sense of loyalty to the place. That way you will also support that restaurant to getting back into business. And let’s be sure, the restaurant will get out of their way to make your experience memorable so that you will come back and tell your friends about them.

    This restaurant example highlights what is the case with most businesses, including yours: People remain loyal and buy more from businesses from which they get the best experience and value. If you have provided a solid customer experience before, people will come back – they might even shift business from other places to you. Having provided an excellent customer experience is the entry ticket to a fast revenue recovery. You win if you provide an experience that your customers perceive more valuable than what they can get elsewhere.

    When it comes to revenue recovery, managing your customer experience actively has become even more important than before. The lockdown has been long enough for everyone to develop these new behaviors and preferences. Whether in B2B or in B2C, customers are consciously and unconsciously assessing where they will spend the money and will make sure that they get the best value for it. I would argue that it is the job of every leader and in particular every CX leader to understand what this value means for each customer and how we can ensure that this value is better than any alternative offering. Those who understand the needs of their customers and consumers better than their competitors will rebound faster and will be able to build a more sustainable business. 

    But what happens if you have not provided a great customer experience before the crisis? Perhaps you were lucky that you had a product or service that people needed and didn’t have much choice. But now you have an opportunity to rebound. Post-COVID, customers will look twice and this provides an opportunity to redesign how you perform in the eyes of your customers and prospects: Act now, listen more to their needs and requirements and become their partner of choice.

    You have to look at your business like any restaurant owner: It’s not only the menu and the prices that count (they are important, no doubt about that), but it is how it is being served and how you are being treated that makes you want to come back. Customer experience is a key strategy to stay in constant dialogue with your customers and consumers. This dialogue allows you to create a better offering which allows more people to buy and engages your employees to deliver better. And all in, this will support a quicker and more sustainable revenue recovery and allow your business to flourish longer term.

    If you haven’t started yet, start now to focus on revenue recovery. And start wearing your customer experience glasses: Actively managing your financials, people and customer experience allows you to actively manage the future of your business especially in the “new normal” because a customer-centric approach also provides important guidance when looking at refocusing business to recover revenue and safeguard important cash flow streams.

    ABOUT BJOERN KALIN

    Björn Kälin has been heading Customer Experience and Insights Teams at leading global companies in the B2B and B2C area. He is a Senior Partner and Leadership Advisor with StrategyPod, an Advisory company that is guided by analytics and diagnostics to drive strategic alignment, people empowerment, and build mission-critical capability.

    ABOUT STRATEGY POD

    StrategyPod is a boutique strategic planning and analytics advisory firm with 45 staff based in offices in Geneva, London, New York, Philadelphia and San Francisco. We start with your existing strategy and work with you to leverage and align your existing business capabilities. As a result you improve strategy implementation. We implement lasting solutions for you on topics like strategy implementation, leading change, business portfolio management, growth and value creation, capability building, growing talent and shifting culture. Learn more at strategypod.com.

    ABOUT OCX COGNITION

    OCX Cognition delivers the future of NPS. We ensure customer experience success by combining technology and data science with programmatic consulting. In our Insights section, we present a comprehensive and evolving collection of resources based on our research and expertise, collected for CX leaders committed to delivering business outcomes.

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    Treat Your Employees Like Your Customers Are Watching

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    Treat Your Employees Like Your Customers Are Watching
    JOURNAL

    Treat Your Employees Like
    Your Customers Are Watching

    CX darling Revolut slips up on layoffs, and it matters.

    Fintech high flying startup Revolut is getting flack in the press for its handling of employee layoffs, and as we have had good things to say about companies like them as innovators in CX, it’s worth a closer look.

     At the heart of the issue is their process for handling layoffs on what is, on the surface, a pretty small number of folk. For a company that claims 2000+ employees, 50-60 people being let go feels more like cleaning shop than actual belt-tightening. And with apparently unlimited access to venture funding at stratospheric valuations, it’s hard to see this as a last-gasp balance-sheet defense. However, what it does is remind us that customers buy more than your product, they buy your brand and – by implication – the way they perceive you treat your employees.

    We maintain our premise that high performing companies maintain a level of balance and alignment between shareholders, employees and customers and that all three relationships are stressed by crisis, economic or otherwise.

    A contrast is called for. AirBnB went through layoffs of 1,900 staff out of a total of 7,500 in the first half of May. Now, I’m sure that retail financial services are not immune to the impact of the pandemic, but I’d wager that the rent-a-room business got the shorter stick when it comes to lost revenue. AirBnB’s brand of innovation is not without its share of controversy, including impacts on neighborhoods, or dancing around regulations and tax issues. Yet, the narrative circulating about the layoffs and the way that CEO Brian Chesky handled them was glowing. So glowing – fawning even – that quite naturally we didn’t believe a word of it. Except it seems to be true.

    Many laid off employees – rarely the greatest advocates for their former employer – have shared experiences that painted a picture of a leadership team that went far beyond the minimum, the expected, or even the generous. It wasn’t just about money. In fact, I suspect it had little to do with money. It was about respect.

    I’m not going to document the stories, you can look them up easily enough, but I was reminded by a leader in their CX organization that the “peak-end rule” applies just as well to employees as it does customers, perhaps even more so. The high points of her career will naturally stay in her memory, but the way she was treated as she left will leave her a promoter of the company forever. I have nothing but sympathy for corporations in financial collapse that have little in the way to offer their employees, but those with ample access to capital should consider the investment AirBnB made in people who, in many instances, will likely never work for them again.

    Customers and employees are symbiotic in many ways. A whole generation of talent wants to work for companies that share their values, that demonstrate that capitalism and profits thrive as a result of great teams, not at the expense of them. Customers want to do business with ethical companies; even more so for a company like Revolut that markets to younger demographics. We maintain our premise that high performing companies maintain a level of balance and alignment between shareholders, employees and customers and that all three relationships are stressed by crisis, economic or otherwise. Management teams need to achieve results across all three groups to sustain a great business: call it “stakeholder capitalism” if you like, but for us it’s just honest capitalism, plain and simple.

    For many privately held high flying startups, shareholder retrenchment may be moving faster than their public counterparts. After all, venture funds assume the absolute failure of many of their investments, whereas the public markets rarely price in the risk of a stock going to zero. And public investors, certainly in the US, seem inclined to shake off the risks of recession (at the time of writing, we hasten to add). Those companies may be about to experience the flip side of an amazingly forgiving investor environment that they have enjoyed for the past decade; in such cases they will have to make rapid adjustments to keep that “leg of the stool” from collapsing completely. How they treat employees and customers while their financials go through surgery will say a lot about their long-term prospects.

    ABOUT RICHARD OWEN

    As CEO, Richard’s singular professional focus: Delivering financial value through CX. He co-founded OCX Cognition to combine technology and programmatic consulting in pursuit of that goal, and now leads the company’s coordinated efforts to deliver the right solutions for its clients.

    Richard’s 30-year career has centered on transforming business operations with technology, and he is one of the best-known CX thought leaders. While CEO at Satmetrix, his team led the development of the Net Promoter Score® methodology with Fred Reichheld, creating the world’s most widely used CX measurement approach. With Laura Brooks, he co-authored Answering the Ultimate Question, the best-selling “how to” guide for NPS practitioners.

    Richard transformed the supply chain and built what was then the world’s largest e-commerce business at Dell, and has led two software companies, AvantGo and Satmetrix, to successful exits. With an MBA from MIT Sloan Management School, he has served on several boards and committees at public and private companies and is an active venture investor and international business thinker. Richard has lived on three continents; he and his family now divide their time between Arizona and London.

    ABOUT OCX COGNITION

    OCX Cognition delivers the future of NPS. We ensure customer experience success by combining technology and data science with programmatic consulting. In our Insights section, we present a comprehensive and evolving collection of resources based on our research and expertise, collected for CX leaders committed to delivering business outcomes.

    Featured Insights

    REPORT

    Will CX Leaders and Teams
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    CX professionals report changes to governance, focus, and operations.

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    Leading a CX Program in Extreme Circumstances

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    JUST RELEASED

    What Is the New NPS Manifesto?

    Two years of research built on 15 years of CX leadership.

    The Top One Thing That Will Cause Your Net Promoter Program to Fail!!!

    Avoiding Digital Overcompensation in the Name of CX

    INSIGHTS
    Avoiding Digital Overcompensation in the Name of CX
    JOURNAL

    Avoiding Digital Overcompensation
    in the Name of CX

    Think carefully about the online customer experience before you join the stampede.

    When anyone suggests to you that a major trend is inevitable, check your pockets. Usually they have wonderful technology to sell you (full disclosure, we are no different). But a couple of insightful commentary pieces on CNBC recently should remind us that a dog that actually catches the post office van might not like what it finds.

    This feels like one of those “duh” moments that we so often miss: a winning growth strategy looks like hybrid solutions.

    In the rush to survive the enforced “staycation” opportunity we are all enjoying during COVID-19, retailers are naturally falling back on their online capabilities, either pure online (Click. Buy. Ship. Enjoy.) or some kind of hybrid model (Click. Drive. Put on mask. Yell through window. Collect curbside. Drive like it’s a bank getaway.). The theory goes that, as online is the perfect customer experience, the winner is the most “online” retailer. Ditch the real estate, embrace the web. Missed the last wave, embrace the new one! How hard can it be?

    Not only is it hard, it might not be the best idea.

    First, the hard bit. Online execution at scale is expensive and competing with Amazon often futile. Walmart quietly wrote off their $3B acquisition of Jet to zero. Z-E-R-O, which according to my carefully constructed, Goldman-Sachs-quality valuation model is more or less $3B less than they paid. Which might, of course, say more about their M&A valuation prowess than the challenge associated with online execution, but it should remind us that differential experience needs differential thinking. And that tech prowess cannot be bought. Or perhaps can be bought for 1000x what it’s worth. SoftBank should probably chat to Walmart about a couple of properties it would like to unload.

    Now the interesting question: Is a purely online solution even a good idea in the first place? Whether or not you’re in retail, it turns out it might not be, because of all things, maybe customers might not want it.

    If you have read our material in the past you will know we subscribe to a theory that all successful enterprises achieve a balanced alignment between customers, employees and shareholders. Measure all three properly, match them up, that’s your recipe for success. Any one out of whack and it’s that two-legged-stool-meets-gravity theory. How does this look for online retail?

    It might surprise you to know that online retailing is often less profitable than bricks and mortar. One of the big cost advantages of technology has been that you outsource part of your value chain to the customer. Self-service technical support gives you the opportunity to waste hours of your time on fascinating forums and knowledge bases that completely fail to answer your question but always ask you if they were useful. If you’re lucky, you find some 17-year-old in Des Moines who has written up the perfect solution to the problem for free, the same problem the corporate engineers didn’t bother with. But my point is that, despite all that, we prefer it all to calling the vendor. We want the problem outsourced to us, and the company saves money. Win-win, and voila we have a hobby thrown in for free.

    When a retail store sells online, they often find they are insourcing the customer’s job. Whereas you or I may drive to our local Target, browse the isles, load the car and drive it home (not to mention buying a metric ton of confectionary on the way out) the online retailer may be doing all those things for the customer, with no premium for shipping (thanks, Amazon!). Working impulse purchase into curbside pickup just isn’t the same – those monster packs of M&Ms will just melt in the sun. Bottom line is that a shift to online for many retailers is not necessarily good bottom line.

    What might be more surprising is that customers may be going in a different direction also. Evercore, the investment bank, reported that their recent study indicated that customers preferred multi-modal retail (online + physical) to both physical only and online only. This feels like one of those “duh” moments that we so often miss: a winning growth strategy looks like hybrid solutions, offering lots of options for customers that let them put their own journeys (literally and metaphorically) together.

    That should not surprise us. Physical has some advantages (immediacy, although less pronounced these days) physical touch, and certain anchor products such as groceries that still attract in person buying. Amazon gets this, and has been buying physical operations, notably Whole Foods. Purchase patterns for some products, especially clothes, benefit from hybrid online/physical purchase answers, especially in stores which do not seem to be using my exact fit model, if you know what I mean.

    Many of these lessons will apply to businesses outside the retail space. Understand your customer segment and their unique journey preferences; provide flexibility and do not anticipate a dogmatic, linear customer journey. Fine tune models of integrated, multi-modal operations with the customer at the center, rather than the functional design of the company.

    Easier said than done of course, but if you would prefer, I can sell you a quick fix for just $3B.

    ABOUT RICHARD OWEN

    As CEO, Richard’s singular professional focus: Delivering financial value through CX. He co-founded OCX Cognition to combine technology and programmatic consulting in pursuit of that goal, and now leads the company’s coordinated efforts to deliver the right solutions for its clients.

    Richard’s 30-year career has centered on transforming business operations with technology, and he is one of the best-known CX thought leaders. While CEO at Satmetrix, his team led the development of the Net Promoter Score® methodology with Fred Reichheld, creating the world’s most widely used CX measurement approach. With Laura Brooks, he co-authored Answering the Ultimate Question, the best-selling “how to” guide for NPS practitioners.

    Richard transformed the supply chain and built what was then the world’s largest e-commerce business at Dell, and has led two software companies, AvantGo and Satmetrix, to successful exits. With an MBA from MIT Sloan Management School, he has served on several boards and committees at public and private companies and is an active venture investor and international business thinker. Richard has lived on three continents; he and his family now divide their time between Arizona and London.

    ABOUT OCX COGNITION

    OCX Cognition delivers the future of NPS. We ensure customer experience success by combining technology and data science with programmatic consulting. In our Insights section, we present a comprehensive and evolving collection of resources based on our research and expertise, collected for CX leaders committed to delivering business outcomes.

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    COVID-19 and the Acceleration
    of Pre-Existing CX Condition

    “Daddy, what was a movie theater?” and other questions from the future of NPS disruption.

    Times of crisis bring rapid innovation as the stakes get higher and business and society get focused. World War II accelerated industrial production, innovation and ultimately nuclear fission. COVID-19 will accelerate significant changes to business structure and customer relationships, while amplifying the gaps between leaders and laggards, whether you measure by NPS, profitability, or just survival.

    Leaders in customer experience – and NPS – have always outpaced laggards, but the gap is only going to grow.

    None of this should surprise anyone. The enemy of innovation isn’t just lack of ambition, it’s the absence of existential threat. Most people – and by implication many management teams – won’t undertake risky transformation unless forced to do so by the realization of immediate downside risk. That goes for losing weight or reinventing your business. It’s our nature to over-discount the future.

    Against this backdrop, the current crisis is an accelerant for innovation as many business leaders come to realize that their prior level of performance comfort may have gone, forever. The question is, how will they respond?

    In some instances, long term trends are playing out at an accelerated pace. The movie industry was already challenged before this most recent body blow. A combination of improvements in quality of home electronics and the availability of high definition video and audio streaming was creating a substitute to, well, overpriced popcorn and worn seats.

    This is not a sudden emergence; the trend toward home viewing has been in place for a decade, but the industry was slow to respond. The creation of better theatre experiences did accelerate in the last two to three years, with improved seating and added food and beverage services, but if it wasn’t all too little, it certainly appeared to be all too late. Personally, I would need a drop feed of cocktails to survive the fourth visit to “Frozen 2” with a pre-teen niece, but premium price tags require premium experiences.

    Some industry innovators, such as iPIC, had flirted with insolvency before the virus and others will no doubt face a similar fate. The reality is that the movie theatre distribution system is kept alive by the willingness of studios to provide them with a head start on the release of blockbusters; a classic case of a forced distribution strategy that the consumer doesn’t see as valuable, but aims to protect existing industry structure. These arrangements rarely hold up in the long term, but more importantly, they take pressure off industry transformation. If the movie companies had limited this protection to a maximum of 5 years, starting in 2010 say, perhaps the theatres would have been forced to accelerate their pace of transformation. Now it looks too late.

    There will be plenty of other, similar case studies. The automobile distribution system in the USA is protected by a patchwork quilt of state laws, developed in the mid 20th century, designed to protect not the consumer but the local dealership. Legal solutions to perceived problems at any given moment rarely have the flexibility to survive changes in society or technology. But the loss is not just to the consumer. The distributor, protected for too long from competition, doesn’t embrace the burning platform for change until it’s too late and the momentum is firmly established for the new entrant.

    Plenty of fundamental industry disruption was happening before the pandemic. Uber and Lyft had essentially competed out of existence taxi services that failed to provide either innovation or good service. Fintech companies were rapidly stealing market share from retail banks that embraced neither customer experience imperatives nor the opportunities presented by mobile or internet technologies. In many industries, if the horse hadn’t actually bolted, it had left the stable and was eyeing the open fields.

    Now, however, everything is accelerated by the pandemic. Leaders in customer experience – and NPS – have always outpaced laggards, but the gap is only going to grow. Those who spent the last decade putting in place the building blocks of a modern, successful business will capitalize on their investments. Comprehensive data assets, a customer centric employee culture, a financial measurement infrastructure that focuses on long term growth, incentive systems that reward sustainable customer driven profitable growth.

    It won’t come as a surprise that many of these elements are either jointly present or completely missing in a given enterprise. Perhaps we have been missing a fundamental nature of correlation in business performance? The cause of high performance is, at its heart, adventurous and forward-thinking leadership. Great NPS performance, engaged employees, lifetime value economics and transformational deployment of digital technologies; these are just the fruits of a healthy management tree. Companies aren’t selectively good or poor at these things; they get it all right, or nothing.

    Recently, we collected data that revealed higher levels of customer engagement in businesses during the current crisis. Why would customers, in the midst of all their personal challenges, want to spend more time filling in surveys?

    They don’t. But our sample, was, by its very nature, biased. When we focus on companies that have robust CX programs already in place, we should not be surprised to see that they are the same companies that have high quality customer relationships. Perhaps even less surprising: Customers want to stand behind those brands and businesses that stood with them during economically good times. After all, isn’t that what loyalty essentially means?

    If on one hand there is a dividend for the being at the vanguard of CX, on the other hand those who are behind the curve are likely to experience a more rapid deterioration. Entering the crisis with poor customer relationships, the same management philosophy that created that problem in the first place is unlikely to be one that generates the right choices today. Thoughtless cost management rather than targeted efficiencies; short sighted actions at exactly the time far sight is called for. A retreat to financial fig leaves when customers, employees and business innovation should be the guiding principles for what are no doubt difficult choices.

    That’s not to suggest that all businesses have the luxury to even make smart choices. For many, survival is no forgone conclusion; there may be little the local restauranteur can do to stay in business. But for many major enterprises, a call to arms has been long overdue. For some, their response will be far too late; for others it was a call heeded long ago and they stand prepared. Hopefully a third group will show that those who missed the opportunities of the past, but see crisis as a spur to change can capitalize on what could still be a bright future.

       

      ABOUT RICHARD OWEN

      As CEO, Richard’s singular professional focus: Delivering financial value through CX. He co-founded OCX Cognition to combine technology and programmatic consulting in pursuit of that goal, and now leads the company’s coordinated efforts to deliver the right solutions for its clients.

      Richard’s 30-year career has centered on transforming business operations with technology, and he is one of the best-known CX thought leaders. While CEO at Satmetrix, his team led the development of the Net Promoter Score® methodology with Fred Reichheld, creating the world’s most widely used CX measurement approach. With Laura Brooks, he co-authored Answering the Ultimate Question, the best-selling “how to” guide for NPS practitioners.

      Richard transformed the supply chain and built what was then the world’s largest e-commerce business at Dell, and has led two software companies, AvantGo and Satmetrix, to successful exits. With an MBA from MIT Sloan Management School, he has served on several boards and committees at public and private companies and is an active venture investor and international business thinker. Richard has lived on three continents; he and his family now divide their time between Arizona and London.

      ABOUT OCX COGNITION

      OCX Cognition delivers the future of NPS. We ensure customer experience success by combining technology and data science with programmatic consulting. In our Insights section, we present a comprehensive and evolving collection of resources based on our research and expertise, collected for CX leaders committed to delivering business outcomes.

      Featured Insights

      WEBINAR

      The Impact of COVID-19 on CX

      Original research provides insight on how programs worldwide are adapting.

      REPORT

      Leading a CX Program in Extreme Circumstances

      Learn to manage your program today while preparing for the post-pandemic “new normal.”

      JOURNAL

      Dirty Rotten Scoundrels vs. NPS

      How automation without planning causes a CX disaster.