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Monday, June 11, 2012

Construction marketing and the Net Promoter Score (some more thoughts)

Can you apply the Net Promoter Score (NPS) to your construction marketing approaches?

The concept, advocated by Fred Reichheld, is that a simple measure of whether clients would be willing to refer others to your business can indicate its overall health -- and that measures to induce changes both to increase the number of enthusiastic supporters and reduce the number of unhappy client detractors will pay off in growth and success.

The question is simple enough:

How likely are you to recommend (name of your business or organization) to a colleague or friend?

Customers who respond to the survey answer this question on a one to 10 scale, with one representing total dissatisfaction, with 10 representing enthusiastic recommendation.  For NPS, nines and 10s are counted as promoters (P), while answers six and under are regarded ad detractors (D).  The more promoters and the fewer detractors, advocates Reichheld.

Bain and Company's website explains the concept further:

The best way to gauge the efficiency of a company's growth engine is to take the percentage of customers who are promoters (P) and subtract the percentage who are detractors (D). This equation is how we calculate a Net Promoter Score for a company:
P — D = NPS
While easy to grasp, NPS metric represents a radical change in the way companies manage customer relationships and organize for growth. Rather than relying on notoriously ineffective customer satisfaction surveys, companies can use NPS to measure customer relationships as rigorously as they now measure profits. What's more, NPS finally enables CEOs to hold employees accountable for treating customers right. It clarifies the link between the quality of a company's customer relationships and its growth prospects.
All of this seems reasonable enough to grasp.  After all, successful architectural, engineering and construction businesses report that 75 per cent of their business arises from repeat and referral clients.  Clearly, anything that increases the enthusiasm of clients to refer others is a good sign.
Like any simple concept, of course, there are challenges.  We've all been customers of businesses using this metric, where employees tell customers they are being scored, and beg for a higher score.  I've seen plenty of artificially blunt efforts to game the results.
More seriously, you can measure the wrong thing or the response rate may not indicate true attitudes.  If, for example, clients who have no reasonable probability of being able to do business with you again or to refer other business give you a high score, what have you got? Conversely, if influential clients who really can induce more business either cannot answer because of policy reasons (such as government officials) or because, well, they don't want to complete your survey, how can you really measure anything useful?
Of course, consultants advocate using their services to solve these sorts of challenges, but I think a simpler approach is to appreciate the survey and the question is one of many business tools and should be regarded with both respect and humility.  It is unlikely most readers of this blog will want to engage expensive surveyors and consultants to develop high-level systems tools to implement this NPS measurement.
But most businesses can build the question into a simple survey, and respond creatively if the responses are either really negative or really positive, individually.  If they are negative, we can look at why things went wrong, and explore how we can improve service to make things right.  If they are positive, we can invite testimonial comments and referrals.  The key is not to "force" the answer ahead of time, so caution is necessary to avoid employees and junior managers from trying to game the system.
Do you have any thoughts about the NPS concept?  If so, please feel free to comment.

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