NPS in NYC

If you don’t recognize either of these acronyms and you are in the customer service business (the majority of American companies) you need to read this posting and then email the link to everyone you know.

I just attended the 2 day inaugural Net Promoter Score (NPS) conference in New York City (NYC).

Sitting in the room were 250 people from companies as big as Disney, as innovative as GE, and as way freaking tattoo-worthy cool as Apple. Some of these people flew from far off places like New Zealand (the farthest we decided) and Germany and India to hear the author of The Ultimate Question, Fred Reichheld answer their questions about how to measure brand.

As I’ve said before on this blog, I believe that brand is your reputation. If you have a bad one, all the marketing in the world cannot help you. If you have a good one, do you know how to protect it? How to measure it?

The Net Promoter Score is a measurement tool that was 20 plus years in the making. On the surface it seems quite easy, in fact a lot of organizations THINK they are getting an NPS because they are asking the Ultimate Question:

“How likely are you to recommend us to a friend or family member?”

0 = never and 10 = very likely.

The company with the highest recorded NPS in the land is USAA at about 82% (the scores can fluctuate slightly from month to month). That means that 82% of the customers who responded to the Net Promoter Score survey after “experiencing” USAA said they were very likely (scored it between 8-10) to recommend the company.

Mr. Reichheld is quick to remind the audience that NPS is a discipline, not just the survey. NPS is to Customer Relationship Management what Six Sigma is to Total Quality Management. That’s how big this thing is.

George Hoffheimer of the Filene Research Institute presented his findings from a research project they did in 2006. They enlisted 17 credit unions and sent 50,000 surveys getting a 13% response rate. Of those that responded the credit union with the lowest NPS was 19% and the highest was 79%. The CU industry average came out to 54.3%.

That’s pretty good. In fact, credit unions have outscored banks in customer service for decades. But the credit union movement as a whole is not growing for the first time in their almost 75 year history. How can that be if they are so loved?

Some of the answers can be found in the follow-up-open-ended-ongoing-focus-group-super-valuable question after the Ultimate One:

“Why did you answer the way you did?”

Key drivers to the credit union Net Promoter Score are, in order: reputation, customer service, overall product and service quality. Those that had the fewest open-ended responses: the ownership structure and marketing.

If brand is your reputation, let’s look at how the credit union reputation has evolved.

When the credit union world began, it was built on a true common bond. The stories are amazing. School teachers pooling resources in a shoe box to help other school teachers, Edward Filene himself loaning farmers in Indiana $20 to start their own financial cooperative. Loggers in the Northwest pooling their money to help get families out of the “company house” and into one of their own. And the list goes on….

There was no marketing. The credit unions grew entirely through word-of-mouth. There was very little delinquency, because they had the “shame factor.” You truly were borrowing money from your co-workers (or friends and family) and if you didn’t repay, they knew it. These credit unions had no competition. They provided a service that no other bank would provide.

This is the core of “loyalty economics.” Targeting an audience with a common bond and serving them in a way that makes the competition irrelevant. When you are able to do that (Apple) you can also charge more for your product. BUT, you have to stay LOYAL to that target or you’ll lose them.

Today, Hoffheimer admits, there is very little true “common bond.” Most credit unions have adopted some kind of community charter. This creates a field of membership that is a territory — not necessarily a target. Segmentation is the key to profitability. Differentiation in the banking industry is becoming harder and harder. To the consumer, banking is an errand. Most people have no emotional connection anymore to their financial services provider. In fact, the banking industry has one of the lowest NPS’s in the land.

I predict that NPS will become a component of the CAMEL rating for credit unions in the very near future. Do you know what your NPS is?

Next post — Cultural Anthopology……stay tuned!!