18
Apr

Why (pure) NPS and KAM are not compatible

Recently I was having a discussion on a topic of common interest with the GAM Program Director of a Digital Marketing & Branding service provider. When sharing ideas on how to manage the Customer Experience, he mentioned their intention to use NPS, the Net Promote Score. Having heard the impressive elements on how GAM is driven I this company, and being (too?) genuine, I could not prevent myself from commenting that, in my humble opinion, they are far too good to use NPS. I meant to use NPS only. This reminded me of another GAM specialist I had met a few months ago who was complaining that the NPS process used by her company was not feeding her and her GAM Team with the quality and depth of information she needed to manage the largest customer of this 6.000 people company.

These two conversations have inspired this post about the need to use much more than NPS as part of a solid management of Key & Global Accounts.

THE PRINCIPLE OF NPS

A lot of companies use NPS, the Net Promoter Score as a key indicator of Customer Satisfaction and Loyalty. NPS measures the willingness to recommend a company or a brand to others. To the question “How likely would you recommend us (the company, a product, a service) to others”, with possible answers being a  scale of 0 to 10, people who answer with a 9 or 10 are considered as Promoters, people who answer with a mark of 0 to 6 are Detractors and those who give a mark of 7 to 8 are Passive.  The question on the overall readiness to recommend is complemented with an open question to explore the reasons behind the opinion of the polled person. Asking the 2 questions to a large sample, the NPS score is calculated by subtracting the percentage of customers who are Detractors from the percentage of customers who are Promoters. In addition the material gathered through the open questions is supposed to provide an insight into perceived strong points and areas for improvement.

Developed Fred Reichheld and a few people from Bain & Company and Satmetrix in 2003, Net Promoter Score has reached rapidly a high degree of popularity among Marketers and Executives based on the belief that it offers a good measure of current performance and a viable predictor of future growth.

RELEVANCE OF NPS: A FIERCE DEBATE AND A MATTER OF INTERPRETATION

The key merit of NPS is its simplicity compared to classic customer satisfaction surveys and its ease of use at least if one considers only the generation of a score (which is of course not the complete story).

As with all models that generate a lot of hype, there has been a combination of strong enthusiasm and sharp critics. Enthusiasts have claimed to use the one single indicator that tells the whole story on the Customer Experience and future growth.

On the contrary, critics have attacked the shakiness of NPS as a viable predictor of growth from a statistical point of view,  which Reichheld himself eventually had to admit. ). Critics also mocked the bias introduced by the interpretation of open questions and the even stronger cultural bias when people from various countries are requested to give a mark to which a fixed label such Promoter or Detractor) has been attached.  Another key topic fuelling the debate is the link between NPS,  loyalty (the stability of the business relationship) and Advocacy (the willingness to recommend),  especially when using these concepts in a B2B space.

IT SHOULD NOT BE  ABOUT PROMOTER SCORE BUT ABOUT THE COMPANY’S CUSTOMER CENTRICITY

As an explicit recognition of some built-in limitation and dangers of the Net Promoter Score and while still promoting it as a viable predictor of growth, F. Reichheld and Bain have in fact shifted the focus by putting emphasis on the NET PROMOTER SYSTEM, a registered Trade Mark, which consists in aligning the organization to better listen to the Customer, using of course NPS, and to react collectively across functions in order to improve what needs to be improved, striving to deliver an excellent sustained Customer Experience.  In fact, a  lot of companies do exactly this without any reference to NPS. It remains however that the NPS score is an interesting indicator on how a company or brand is perceived by the community of its customers considered from a statistical point of view. This is where the contradiction with true Key Account Management appears as KAM is not at all about statistics, it is about what is specific to ONE really important Account.

TRUE KEY ACCOUNT MANAGEMENT REQUIRES MUCH MORE THAN A NET PROMOTER SCORE

Compared to other Accounts, true Key Accounts (previous post on this matter) have a special importance for your company. This special importance is based on their strategic impact and on the established or intended quality of relationship.

Are you going to rely on NPS to manage this special relationship and measure satisfaction? . Here are 2 very strong reasons not to do so.

  • The relationship with a Key Account means the ambition to bring more Value to both parties. Creating value for the customer can have multiple dimensions: simplifying and improving operations, reducing capital investment and/or operating cost, improving the outcome of the Key Account business, enabling a faster development in a new market, co-developing a technology or even something else. With a Key Account the ambition of value creation is higher and should yield a higher loyalty. This implies a continuous dialogue with people in various functions in order to align your offering with their priorities and KPIs. The pure NPS process is far too narrow both to allow you to orchestrate this type of dialogue efficiently and to measure how it satisfies your contacts.
  • Evaluating the strength of your position and the opportunity for future growth with NPS might be completely misleading. You can have most of your operational contacts being Promoters and still lose the business because the key decision maker has a strong reason for bringing in another vendor. On a single Account a NPS score can be meaningless and you should never forget this. What matters is how well you are connected to your ecosystem of contacts on the Key Account.

WHAT KAM DIRECTORS & EXECUTIVES SHOULD DO

First, build the foundation of how you measure Customer Satisfaction and ensure delivering a good Customer Experience with ALL Accounts. This is the foundation of your business and the KAM-specific practice and behaviour should elaborate on your basic Customer Experience practice, not replace it. Here, you will have to decide if NPS is relevant and how to complement it with other tools. However you do it, measuring Loyalty and Advocacy – if done properly – can only help.

Second, as a key part of your KAM methodology, you will have to:

  • Define the recurrent processes and communication practices with Key Accounts. Will you build the plan with the Account? This is strongly recommended but not always possible. Will you run regular Business Reviews and at which level in the organization?  As an example, an industrial company selling raw material used in the production process of its customers, runs quarterly reviews with each plant of the Key Accounts as well as quarterly reviews with the central organisations.
  • Decide on how formal feedback on experience and satisfaction should be collected (anonymous satisfaction survey, personal interviews, combination of both). One player in the food industry fully delegates the customer satisfaction survey (which includes a NPS metric) to a specialized vendor while a global Digital Marketing Agency uses a combination of online survey and interviews by its senior managers to measure the satisfaction and advocacy of their customers
  • Align the organization to drive the required improvements? In a German maker of pressure and temperature pressure who uses a true philosophy of Lean Management, Customer Satisfaction and Advocacy index have an impact on the bonus of all managers

All in all, the way you measure what contacts on your Key Accounts think about you, what they feel about the relationship with you and their level of Advocacy is a key element of your KAM Methodology. This surely cannot be elaborated on a Net Promoter score.

If you have found this article useful, I invite you to read previous posts on this blog and, if you want to suggest a topic for a future post, share experience and discuss a business need, please get in touch.

About Olivier Riviere
I am a consultant helping companies of all size optimize their Marketing and Sales Performance and drive a Cultural Change. My focus is on General organisation dynamic, Sales Effectiveness, Key Account Management, Solutions Marketing & Sales, Prescritive Selling and Influencer Marketing. I am a European citizen of the world working in 3 languages and with a passion for diverse multicultural work environments.