Richard Owen, CEO, Satmetrix

You Would Think with $130 Oil They Have Problems Enough

Transactional or relationship? It seems that never a day goes by without someone confusing the two.

Of course, I'm talking about survey design or NPS touch point measurement. You know, that basic idea of getting feedback.

Transactional or relationship? It seems that never a day goes by without someone confusing the two.

Of course, I'm talking about survey design or NPS touch point measurement. You know, that basic idea of getting feedback.

Closing the Loop, One Voter at a Time

Several people sent me this gem from my homeland, the UK. The BBC reported the fact that Prime Minister Gordon Brown was making personal phone calls to voters to respond to their feedback on his government's performance.

I Promise I Got There First

Right after I wrote about the airlines, I heard this on NPR; if you are tracking the perspective on long term customer experience impact on airlines, listen to some of the comments by Howard Putnam, former Southwest CEO talk about fee based tactics rather than just raising fares....

My favorite quote, when asked if American should have simply raised fares, Putnam says" As an alternative to nickle and diming us, I think it would be a better customer service approach."

Yup.

Right after I wrote about the airlines, I heard this on NPR; if you are tracking the perspective on long term customer experience impact on airlines, listen to some of the comments by Howard Putnam, former Southwest CEO talk about fee based tactics rather than just raising fares....

My favorite quote, when asked if American should have simply raised fares, Putnam says" As an alternative to nickle and diming us, I think it would be a better customer service approach."

Yup.

Nickels and Dimes

The much maligned airline industry as once again in the news every day; oil prices have put a hurt on the industry that will force major restructuring as a survival tactic - once again - for many of the major players. This begs the question, how are the airlines dealing with customer loyalty through this transition? What can we all learn?

The much maligned airline industry as once again in the news every day; oil prices have put a hurt on the industry that will force major restructuring as a survival tactic - once again - for many of the major players. This begs the question, how are the airlines dealing with customer loyalty through this transition? What can we all learn?

More Detractors, Please!

You would think it would be crazy to build a business around the idea of creating detractors. However, one industry is going a step further, building a business model around the idea that you hand over your money, don't consume their services, give up and go away.

I'm talking about the fitness industry. In an interview with an industry executive (who you can bet will remain nameless) one major health-club firm is actually running out of customers to churn because they are exhausting the potential pool in their locations. How does this happen?

You would think it would be crazy to build a business around the idea of creating detractors. However, one industry is going a step further, building a business model around the idea that you hand over your money, don't consume their services, give up and go away.

I'm talking about the fitness industry. In an interview with an industry executive (who you can bet will remain nameless) one major health-club firm is actually running out of customers to churn because they are exhausting the potential pool in their locations. How does this happen?

Return To Sender

In an article in the WSJ this morning (subscription required) the journal points out the eye-popping costs associated with returns in the consumer electronics industry. $13.8bn is the round number they suggest manufacturers and retailers incur as a result of consumers bringing back product they don't want. So what?

In an article in the WSJ this morning (subscription required) the journal points out the eye-popping costs associated with returns in the consumer electronics industry. $13.8bn is the round number they suggest manufacturers and retailers incur as a result of consumers bringing back product they don't want. So what?

Putting Your S-1 Where Your Mouth Is

If Symantec is making a big deal of it's Net Promoter Program, well Rackspace just went one better. Or at the very least made a public commitment to customer focus.

On Friday, the hosting company filed it's S-1 with the SEC and explicitly referenced NPS as part of it's business model.

If Symantec is making a big deal of it's Net Promoter Program, well Rackspace just went one better. Or at the very least made a public commitment to customer focus.

On Friday, the hosting company filed it's S-1 with the SEC and explicitly referenced NPS as part of it's business model.

No Used Car Sales Reps Need Apply

There used to be a joke that in the computer software industry, the only difference between a software sales rep and a used car sales rep was that the used car sales rep knew that he or she was lying. Doug Mitchell's free download outlines some confessions from the field, or you can read the summary on Zdnet here. So it's fantastic to see a company sincerely committed to getting customer focused - Symantec.

We interviewed John Thompson for the book we are writing on Net Promoter and were more than impressed by his commitment to NPS and the entire NPS culture/discipline. But these guys put it right in front of you... check out their website pages. They could end up setting the pace in their industry. Does your company put it's commitment in plain sight? More importantly, do you act on it?

There used to be a joke that in the computer software industry, the only difference between a software sales rep and a used car sales rep was that the used car sales rep knew that he or she was lying. Doug Mitchell's free download outlines some confessions from the field, or you can read the summary on Zdnet here. So it's fantastic to see a company sincerely committed to getting customer focused - Symantec.

We interviewed John Thompson for the book we are writing on Net Promoter and were more than impressed by his commitment to NPS and the entire NPS culture/discipline. But these guys put it right in front of you... check out their website pages. They could end up setting the pace in their industry. Does your company put it's commitment in plain sight? More importantly, do you act on it?

With Scores Like These, The Outlook For Political Growth Is Not Looking Good...

It had to happen eventually. You might be glued to the results from Penn tonight with the democratic primary being called, but the NPS prognosis for the candidates is less than favorable.

The folks at BIGresearch took the trouble to compute the NPS for the presidential hopefuls, and the results are, well, interesting. Interesting in the sense of grim. If the candidates were a business, they would be going out of business. If we consider their business the management of The United States, perhaps we should all be concerned.

Regardless of your politics, a lot of detractors out there. Looks like first to zero could win the election.

It had to happen eventually. You might be glued to the results from Penn tonight with the democratic primary being called, but the NPS prognosis for the candidates is less than favorable.

The folks at BIGresearch took the trouble to compute the NPS for the presidential hopefuls, and the results are, well, interesting. Interesting in the sense of grim. If the candidates were a business, they would be going out of business. If we consider their business the management of The United States, perhaps we should all be concerned.

Regardless of your politics, a lot of detractors out there. Looks like first to zero could win the election.

The Bait or the Switch?

Subprime Lending, Teaser Offers, and NPS

The headline of our day is the mortgage crisis in the U.S. In particular, a new term has entered our lexicon, the “subprime” mortgage. Of course, subprime simply refers to loans made to people with a relatively weak credit history; the free market economy solution to this problem is that those who are eligible for such a loan should pay a higher rate of interest, to reward the lender for the additional risk of non-payment they take on. This is a demand killer in this market, as those participants with poor credit are usually in that segment because of their limited ability to pay at normal interest rates, let alone penalty rates.

From an economics point of view, there is nothing inherently abnormal about the idea of higher interest following higher risk. What is interesting, excuse the pun, was the apparent real cause of the problem – teaser rates. In the mortgage market, this meant offering a low interest rate for a fixed period of time, say a year, followed by the rates rising steeply. Back to the point that lenders require a higher rate of interest to compensate them for the higher risk. Teaser rates have the opposite effect, signaling lower rates for higher risk to solve the demand killer problem we started this discussion around. You are a higher risk, but you get a cheaper rate – clearly a reckoning is coming and it takes the form of above market rates in later years, tied to an unknown, the monetary policy of the U.S.

If you have read this far you are probably wondering what on earth this has to do with NPS. It’s the teaser offer that interests us.

These kind of offers are not unusual. They are common in financial industries such as credit cards (a free balance transfer, or an introductory interest rate) but also any number of subscription services such as cable TV, mobile phones, etc. The pattern of Net Promoter Score (NPS) for this group of customers does seem fairly consistent based on our data and is worth discussion. Let’s say that there is a “true” NPS for one of these products. Recipients of the teaser offer typically demonstrate a higher NPS during the teaser period and then drop below the norm when the teaser expires. The “shock” of transition pushes them considerably lower, even into detractor status. The order of magnitude of both the switch and the delta from the true rate may result in the overall NPS being mostly a function of the percentage of customers who are in the teaser period.

Now this gets interesting when you understand the economics of this group of customers. Of course, this varies based on the product or service, but in at least a couple of recent instances we have been able to determine that the economics of this group is less attractive than that of the average customer. Perhaps even negative from a lifetime value standpoint.

Let’s run with that assumption for a second, as it makes some intuitive sense. At least some proportion of buyers attracted to teaser offers will not be attractive long term customers; they are simply seeking a below market deal and will switch whenever possible. Losses sustained on the teaser offer to recruit them are unlikely to be offset by their long-term custom, especially given their longer-term detractor status.

So this creates an interesting interplay of data. Want to boost your NPS? Recruit more teaser customers – it pushes your average score up. Destroy shareholder value? Do exactly the same. An inverse correlation where we are looking for a positive one.

Of course, if your management metrics are principally subscriber growth, without a good understanding of either NPS or lifetime customer value, that’s exactly where you might end up. To spot the trap, you would need to segment your NPS to filter out the effect of teaser offers and understand both the true rate of NPS and your propensity to buy short-term NPS scores with poor long-term NPS.

The business solution? Well, if the analysis points this way, you might want to seriously cut out teaser offers altogether. Or at the very least finesse the offer to the point where it makes both NPS and long-term economic sense. We have seen firms do both in practice, with short-term subscriber weakness and long-term profitability improvements either through better customer segmentation of customers or complete elimination of a customer segment.

There is an old saying that if you owe your bank $50k you are in trouble, if you owe them $150k then the bank is in trouble. I sincerely doubt that the biggest problem subprime lenders face is that they have a low NPS amongst their customers, although I don’t doubt they have such scores. It’s important to your business health that you understand the implications of buying NPS with bait – you might not like the switch.

From an economics point of view, there is nothing inherently abnormal about the idea of higher interest following higher risk. What is interesting, excuse the pun, was the apparent real cause of the problem – teaser rates. In the mortgage market, this meant offering a low interest rate for a fixed period of time, say a year, followed by the rates rising steeply. Back to the point that lenders require a higher rate of interest to compensate them for the higher risk. Teaser rates have the opposite effect, signaling lower rates for higher risk to solve the demand killer problem we started this discussion around. You are a higher risk, but you get a cheaper rate – clearly a reckoning is coming and it takes the form of above market rates in later years, tied to an unknown, the monetary policy of the U.S.

If you have read this far you are probably wondering what on earth this has to do with NPS. It’s the teaser offer that interests us.

These kind of offers are not unusual. They are common in financial industries such as credit cards (a free balance transfer, or an introductory interest rate) but also any number of subscription services such as cable TV, mobile phones, etc. The pattern of Net Promoter Score (NPS) for this group of customers does seem fairly consistent based on our data and is worth discussion. Let’s say that there is a “true” NPS for one of these products. Recipients of the teaser offer typically demonstrate a higher NPS during the teaser period and then drop below the norm when the teaser expires. The “shock” of transition pushes them considerably lower, even into detractor status. The order of magnitude of both the switch and the delta from the true rate may result in the overall NPS being mostly a function of the percentage of customers who are in the teaser period.

Now this gets interesting when you understand the economics of this group of customers. Of course, this varies based on the product or service, but in at least a couple of recent instances we have been able to determine that the economics of this group is less attractive than that of the average customer. Perhaps even negative from a lifetime value standpoint.

Let’s run with that assumption for a second, as it makes some intuitive sense. At least some proportion of buyers attracted to teaser offers will not be attractive long term customers; they are simply seeking a below market deal and will switch whenever possible. Losses sustained on the teaser offer to recruit them are unlikely to be offset by their long-term custom, especially given their longer-term detractor status.

So this creates an interesting interplay of data. Want to boost your NPS? Recruit more teaser customers – it pushes your average score up. Destroy shareholder value? Do exactly the same. An inverse correlation where we are looking for a positive one.

Of course, if your management metrics are principally subscriber growth, without a good understanding of either NPS or lifetime customer value, that’s exactly where you might end up. To spot the trap, you would need to segment your NPS to filter out the effect of teaser offers and understand both the true rate of NPS and your propensity to buy short-term NPS scores with poor long-term NPS.

The business solution? Well, if the analysis points this way, you might want to seriously cut out teaser offers altogether. Or at the very least finesse the offer to the point where it makes both NPS and long-term economic sense. We have seen firms do both in practice, with short-term subscriber weakness and long-term profitability improvements either through better customer segmentation of customers or complete elimination of a customer segment.

There is an old saying that if you owe your bank $50k you are in trouble, if you owe them $150k then the bank is in trouble. I sincerely doubt that the biggest problem subprime lenders face is that they have a low NPS amongst their customers, although I don’t doubt they have such scores. It’s important to your business health that you understand the implications of buying NPS with bait – you might not like the switch.