Why Australian Marketers Need To Evolve Their Scores

Why Australian Marketers Need To Evolve Their Scores
SHARE
THIS



In this guest post, David Lambert (pictured below), global head of Medallia Insights Consulting, says a majority of Australian marketers are remunerated based on a Net Promoter Score (NPS) that fails to measure the strength of their customer relationships and drive them to develop customer-centric strategies…

Since being thrust into the business lexicon 15 years ago after the publication of the seminal Harvard Business review article ‘One number you need to grow’, the Net Promoter Score (NPS) has become the common global metric by which executives measure the loyalty of a company’s customer relationships.

David Lambert

Based on responses to a single question ‘How likely is it that you would recommend our company/product/service to a friend or colleague?’ respondents answer on a 0 to 10 scale to give a  overall positive or negative NPS score that reflects if a brand or business has ‘promoters’, ‘passives’ or ‘detractors’. This information can then predict if customers will continue to buy, promote the brand through positive word of mouth or not switch to a competitor. The promise was that higher NPS could help your company grow at up to two times the growth rate of competitors with lower NPS.

However, there’s a problem. Many companies don’t understand that there are at least three customer NPSs and they all predict different future customer behaviours more strongly than others. Employee NPS is the new frontier, but that is for a future article.

Many executives in Australia have ‘NPS’ on their balanced scorecards and their bonuses are linked to performance on this number. The NPS they have is usually the ‘competitive benchmark NPS’, which is usually asked in quarterly double blind research studies. Both their own customers and the customers of their competitors are asked ‘How likely are you to recommend brand X/Y/Z?’ Most companies call this their Market NPS, Strategic NPS, Competitive NPS or Relative NPS.

Executives in the US don’t usually have this type of NPS on their scorecard. Well, they do but they don’t call it NPS, they call it their brand health and it’s usually owned by marketing. Instead, they have the other two types of NPSs on their scorecard – Relationship NPS and/or Experience NPS.

  • Relationship NPS measures their own customers’ relationship with the company, and is unconnected to any one experience a customer has had. This number strongly predicts future purchase/retention behaviour and word of mouth economics.
  • Experience (or touchpoint) NPS on specific experiences/touchpoints. This number is very effective at helping businesses take cost and effort out of their operations.

Why is only having a competitive benchmark NPS a problem for companies? An email I often get from Australian marketers goes along these lines: “Dear David, Our competitor recently had a [insert problems] and our competitive NPS improved significantly! Everyone got their bonus paid this month and now the executives are asking how do we drive this improvement again. Help! I’m being tasked to deliver retention in revenue and all my executives care about is the strategic number and we have no idea how to drive it.’”

In essence, Competitive NPS is a great brand tracker that can compare your position with that of your competitors, but there are factors outside of improving the customer experience that can cause fluctuations in NPS. For example a telco may have a severe network outage, the company may be involved in some sort of crisis or the CEO may be in the news for behaving badly. This will likely result in a drop in their NPS and an increase in that of its competitors as the likelihood to recommend has been reduced.  

The limited number of published studies on Competitive NPS are able to link it to changes in future relative market share (but not individual customer retention or repeat purchases, and not lower cost to serve). This is a great thing for executives to understand. However, a company’s ability to drive competitive NPS is limited, expensive and less sustainable for creating long term value. How do you control your competitors mistakes? How sustainable is it to keep outspending your competitors on marketing? This is in contrast to a company’s ability to create more effortless experiences for its own customers, close the loop to rescue at-risk customers and activate its own promoters to drive increased word of mouth new customer acquisitions – all of which the ‘other’ NPSs deliver and which are very hard for competitors to copy once your organisation does these things systematically.

Marketing is ‘easy’ compared to an entire organisation coming together to create consistent customer experiences that deliver on the customer promise for each and every customer. But which one creates more sustainable long term profitable growth? M&A research in 2015 found that the strength of customer relationships is now worth almost two times brand value in terms of the enterprise value of acquired firms. The inverse was true in 2003.

Do I think CEOs need to remove Competitive NPS from their scorecard? No, it predicts changes in relative market share. Do I think companies need to evolve the way they measure the strength of their customer relationships with a portfolio of metrics that are more actionable? Yes, and this is the key to unlocking the customer-centric strategies that 89 per cent of CEOs say they are pursuing today.

Please login with linkedin to comment

David Lambert Medallia Insights Consulting

Latest News

“Leading By Example Is One Of The Most Powerful Things Brands Can Do” Gumtree’s Erin Holt On How Sustainability Drives Customers
  • Marketing
  • Media
  • Opinion

“Leading By Example Is One Of The Most Powerful Things Brands Can Do” Gumtree’s Erin Holt On How Sustainability Drives Customers

Marketplace Gumtree is always conducting research to better understand Australian consumers. The result is that the marketing platform is able to find new and interesting ways to connect with Australians.  Gumtree is a platform where you can buy, swap, and sell used goods. You can get anything from an upcycled bike to a brand new […]

Seismic Announces New Zealand Partnerships To Empower Businesses And Workers
  • Technology

Seismic Announces New Zealand Partnerships To Empower Businesses And Workers

Seismic has announced an expanded New Zealand (NZ) presence to support the transformation of sales and marketing teams, and enable the nation’s employers to focus on upskilling their workforces to overcome a digital skills shortage. The company has also signed NZ-based specialist consultancies, Fresh Perspective Sales (FPS) and Jumping Fox Interactive, as its first two […]

The Inspired Unemployed Launch Their Own Podcast Via Spotify
  • Media

The Inspired Unemployed Launch Their Own Podcast Via Spotify

The Inspired Unemployed are launching a Spotify Original podcast, giving Australians even more insight into the larrikin’s unexpected fame and adventures. Commissioned by and only available on Spotify, the first ever podcast from the duo will bring a whole new dimension to the adventures of Matt and Jack, two best mates who still can’t quite […]

Diversity Is Good For The Bottom Line, So Why Isn’t Anyone Listening?
  • Opinion

Diversity Is Good For The Bottom Line, So Why Isn’t Anyone Listening?

In this guest post, Garth Williamson (main photo), country manager ANZ at Shutterstock, says all the evidence is in for a more inclusive workplace, but asks why are so many still shunning the idea? The evidence is clear; inclusive marketing increases brand reach, consumer engagement and drives customer brand advocacy. And yet, few brands are […]

Opinion

by B&T Magazine

B&T Magazine
PHOTOGRAPH BY NIGEL WRIGHT. 
WRIGHTPHOTO1@MAC.COM

THE MASKED SINGER S3. EP5

THIS PICTURE SHOWS: EPISODE 5 REVEAL…MAHALIA BARNES















.
  • Media

Tuesday TV Wrap: Masked Singer Reveal Falls From Monday As Pavlova Is Uncovered

The Masked Singer’s big reveal saw a slight drop off in audience from its Monday night episode, netting an average of 654,000 viewers. That’s a decrease of 49,000 from the previous night where, as you are sure to remember, the dancing pinata was revealed to be Lote Tuqiri. Last night was the reveal of a […]

by B&T Magazine

B&T Magazine
Ray White Goes In-House For New “Proudly” Campaign Just In Time For Spring Selling Season
  • Campaigns

Ray White Goes In-House For New “Proudly” Campaign Just In Time For Spring Selling Season

Australasia’s largest real estate agency has released its biggest brand campaign ever that was all done in-house. The spring campaign, “Proudly Ray White”, was created to help service the more than 730 Australian offices under the leading group’s umbrella. Spearheaded by Ray White marketing manager Todd Alexander and brand manager David Williamson, the campaign was […]

The Lab Expands Executive Team With Three Promotions
  • Marketing

The Lab Expands Executive Team With Three Promotions

Leading cultural insights and strategy company The Lab today announced the promotion of three senior staff members to executive positions in its Melbourne and Sydney offices. The promotions follow strong growth for The Lab, with the addition of new clients and the launch of its innovative new artificial intelligence and machine learning division, Lab AI, […]

Booktopia’s Alex Huntley On Partnering With SaaS Platform Freshworks And Tackling The Pandemic
  • Marketing

Booktopia’s Alex Huntley On Partnering With SaaS Platform Freshworks And Tackling The Pandemic

Alex Huntley, Booktopia’s head of customer experience, recently appeared at software company Freshworks’ recent digital CX summit RE:SOLVE. During the summit, Huntley shared his thoughts on future-proofing customer service architecture.Huntley sat down with B&T to discuss Booktopia’s partnership with Freshworks and how it has helped their platform develop. B&T: Why did Booktopia first decide to partner […]

Nestlé Oceania Adds The Edison Agency To Strategic Design Roster
  • Marketing

Nestlé Oceania Adds The Edison Agency To Strategic Design Roster

The Edison Agency has made four new appointments in its Sydney office to service the continued growth across key account The Arnott’s Group and the recent appointment to Nestlé Oceania’s strategic packaging design roster. Over the past 12 months, the culmination of strategic and creative work across the Uncle Toby’s brand and continued growth of […]

SCA Launches Smart Speaker Experience Tom & Olly’s Guide To Lockdown
  • Media

SCA Launches Smart Speaker Experience Tom & Olly’s Guide To Lockdown

SCA has announced a new smart speaker experience for the Hit Network, with Tom and Olly’s Guide to Lockdown. A voice-activated way to get inspiration and information on fun activities that can be done at home, the guide is curated to appeal to a wide audience. Smart speaker users will find a range of ideas […]