CREATING A CULTURE OF CUSTOMER ADVOCACY SESSION: AP068

CREATING A CULTURE OF CUSTOMER ADVOCACYSESSION: AP068

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent

3Microsoft APC 2011_Customer Loyalty_FINALMEL

Objectives for today

• Introduce/recap Net Promoter Score

• Link customer advocacy and company economics

• Introduce the Net Promoter System

• Discuss what the Net Promoter System could mean for you and your business



We measure our success by our clients' results

0

5

10

15

Share price index

Mar

94

Mar

95

Mar

96

Mar

97

Mar

98

Mar

99

Mar

00

Mar

01

Mar

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Mar

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Mar

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Mar

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Mar

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Mar

08

Mar

09

Mar

10

Mar

11

Australian client share price performance

Bain & Company Clients (14.9% CAGR)

All Ordinaries (5.4% CAGR)

Note: Dates are at end of monthSource: Datastream; Bloomberg

What makes Bain different?

• Practical answers

• Collaborative way of delivering results

• People passionate about your success



Advocacy has been an important, and evolving, aspect of Bain’s customer strategy practice

CustomerStrategy and

Marketing

PerformanceImprovement

Mergers and Acquisitions

Information Technology

Results Delivery—Change Management

Strategy

Organisation

2004 2006 2011



Loyalty Leaders:Faster revenue growth

0

20

40

60

80

100%

Average Loyalty Leader

Costs

0

100

200

300

400

0 5 10 15 20

Years

Growth ( indexed )

Loyalty Leader

Average

Loyalty Leaders:Faster revenue growth and lower costs

2.2xCAGR

15% Lower



Loyalty transforms economics

http://brandsoftheworld.com/brands/0002/9541/Harley-Davidson.eps



Companies whosecustomers agree

8%

‘Delivery gap’

Everyone believes

20

40

60

80

100%

Percent of companies

Companies that believethey provide a superior

proposition

80%

Source: Bain Customer Led Growth Diagnostic Questionnaire

0

Everyone believes, but few achieve



Tools to manage profits are stronger and far better understood than for loyalty

Effective and well established

Tools to measure and manageProfit

Source: Bain & Company

Ineffective and underdeveloped

• 100+ years track record with strict standards

• Widespread understanding throughout organisation

• Six sigma processes for quality

• Limited track record with no standards

• Qualitative understanding throughout organisation

• Ad hoc, complex survey processes

Tools to measure and manageLoyalty



% Promoters

0-6

7-8

9-10

Net Promoter® Score (NPS)

minus

% Detractors

Extremelylikely

Extremelyunlikely

"On a scale 0-10, how likely is it that you would recommend our company to a friend or colleague?"

Net Promoter® Score (NPS) evolved from Bain's loyalty work as the best simple metric



NPS ties directly to customer behavior and economics at the individual customer level…

0

20

40

60

80%

Detractor

43

Passive

49

Promoter

62

Share of wallet w/

primary bank

0

20

40

60

80

100%

Detractor

100

Passive

63

Promoter

33

Attrition rate

(Indexed to detractor )

-4

-2

0

2

4

0.5

-2.2

1.3

-0.4

3.2

Average number of...

Detractor Passive Promoter

0

Promoters stay longer...1 …buy more...2 …and refer others more3

Above the line = RecommendationsBelow the line = Criticisms

Detractor Passive Promoter

Source: Bain NA Financial Services NPS Survey 2008 (N=3,427)



Net Promoter score

Credit card companies

Net Promoter score Net Promoter score

Supermarkets Retail

-20

-10

0

10

20

30%

-40 -20 0 20%

CAGR

-20

-10

0

10

20%

0 20 40 60 80 100%

CAGR

-10

0

10

20

30%

-50 -30 -10 10 30 50%

CAGR

…and correlates with growth across many industries

Source: Fred Reichheld, The One Number You Need to Grow; Analysis from Bain & Company Boston Sept 2003; Satmetrix Net Promoter Data 2001-Q12004, Nilson Report 2000-2004



NPS scores are relatively dispersed within most sectors of the Australian economy

-20

0

20

40

60

80%

Home

broadband

61

30

-9

International

airlines

52

41

3

Retail

banking

42

29

-2

Mobile

phone

16

6

-7

NPS (2010 )

West

ne

t

TP

G/iiN

et Sin

ga

pore

A

irlin

es

Air

N

ew

Z

eala

nd

ING

D

irect

Be

ndig

o Vir

gin

3

Note: TPG and iiNet tied for #2 position in Home BroadbandSource: Bain Australian NPS Survey (2010)



The basics:“Eliminating

nuisance factors” Product or service meets basic needs

Product or service works as expected

Problems are resolved as expected

Satisfaction

Ordinary services delivered

exceptionally

Exceptional services/features

delivered well

Loyalty/AdvocacyDifferentiators:

“Creating the wow-factor”

Loyalty leaders go beyond delivering “the basics” to design and deliver the “wow-factor”



Serving loyal customers is a lot more fun

Net Promoter Score 24% Net Promoter Score 71%



Will employees who are not advocates create an army of Promoters?

?

Net Promoter Score 24% Net Promoter Score 71%



The Promoter Flywheel

Enthusiasm, creativity

Excellence, trust, value

Growth, opportunity

EmployeeNPS

CustomerNPS

Buy from here!

Come work here!

Profitable, sustainable

organic growth



Positive team member behavior and attitude leads to customer promoters

Root causes

of detraction

Drivers

of promotion

Behaviour

and

attitude

Knowledge

and

expertise

Availability

Customer Responses

Most important levers

DISGUISED CLIENT DATA

• Friendliness • Clear explanations• Honest/manages expectations• Empathy

• Thinking with the customer• Right resources and systems• Subject knowledge

• Clear number • Waiting time (service level) • Transferring to other desks



Approach: Create real change via burning platform and frontline pull for customer focus

• Burning platform via-NPS competitive rankings

-NPS economics analysis

• Universal customer loyalty language: NPS

• Prioritisation of product, process and system improvements

Front-line employees, supervisors

Functional managers and process leaders

Snr. leaders • Process

improvement

• Closed feedback loops at critical touchpoints

-Measurement-Individual customer dialog

• Frontline employee empowerment and NPS mindset



Approach: Listen, learn and act

Listen

Learn

Who

How

What

UnderstandPrioritise

Design

TrackA

ct Deliver

Drive to action with

improvements to customer experience

Capture feedback – what’s great,

what’s not

Prioritise actions



Listen

Learn

Who

How

What

UnderstandPrioritise

Design

TrackA

ct Deliver

• Identify most important interactions, e.g.

- Plan preparation- Annual review

• Call customers and capture feedback (by third party)

• Ask for permission tocall back

• At the front line: Build feedback into daily routines

- Account planning - Relationship management

- Coaching

• At the centre: Improve end-to-end customer experiences

- Fix processes and systems

- Improve support and tools for the frontline

Approach: Build customer focus into the way you do business

• Pass feedback to frontline

• Follow-up with customers (by frontline)

- Capture in-depth feedback- Understand key issues- Resolve problems- Ask for referrals

• Develop personal and team action plans



Companies that have benefited from NPS focus include a host of familiar names

• Lego tied employee bonus to NPS improvement and achieved 20% increase in NPS over a 2-year period

• By focusing on customers, additional 10% of its business has attained leadership/co-leadership positions in NPS in 2-year time frame. Accounts where NPS improved grew revenue by 69% within a year

• After launching NPS programs in 2007, achieved 16% increase in relative NPS, 23% increase in operational NPS and record low churn of 1.2% (20% reduction) in one-year time span

• Focus on closed-loop feedback system with its policyholders, potential customers, claimants, and agents has led to 8.5% increase in loyalty NPS and 15% in claims NPS over a 2-year period



“It [NPS] is the first thing I look at when I get to my office every morning.”

Walt Bettinger President and CEO

NPS has become central to management metrics and activities at Charles Schwab



Schwab was experiencing a serious decline in customer acquisition and revenue

0.0

0.2

0.4

0.6

0.8

1.0

2002 2003 2004

Total Revenue (Indexed )

Source: OneSource; Bain Experience

•Experiencing a serious decline in revenue and new customer acquisition, and increased attrition

•NPS well behind its key competitors

•Primary objective was to drive revenue growth by dramatically improving the customer experience



Schwab discovered promoters were six times more valuable than detractors

0

200

400

600

Client NPV ( Indexed )

NPV

of

detractor

100

Lower

Attrition

50

SOW

Gain

150

Cross

Sell

50

Eliminate

Negative

Word of

Mouth

50

Referrals

200

NPV

of

promoter

600



Schwab built NPS into the way they do business

Weekly coaching ‘huddles’

NPSas keybranchmetric

Executive Leadership

Cross-functional teams to

drive priorities

Proven value of loyalty

Closed-loop feedback

HR: Hiring, training, job descriptions

etc.

Client feedback

communities

Touchpoint priorities

Case for change

Feedback loops

Business processes



“It’s really helpful for the branch manager to come back to the team and say, “Let’s brainstorm as a group on how to improve our score.””

Financial Consultant

“We’ve identified technological improvements to the website… the whole front-line feedback process has been really helpful.”

VP, Client Loyalty

“You really need to be committed. It’s not something you can just look at part-time or occasionally.”

VP, Branch Manager

“Those are probably the best conversations I have at Schwab. To call a client in the first 24 hours after they’ve filled out a survey, has a tremendous impact, even if they are unhappy.”

VP, Branch Manager

Closed loop feedback in action



Focusing on the customer experience at Schwab has driven significant value

-10

0

10

20%

-3.6%

17.5%

2003-2005 2005-2007

Retail NPS Revenue

-40

-20

0

20

40

NPS

-35

23

2004 2007



Don’t ask for feedback unless you’re prepared to listen, learn and act

“I’m sorry, dear. I wasn’t listening. Could you repeat what you’ve said since we’ve been

married?”



What it means for you

• Know your clients: Segment by value and advocacy – know advocacy economics

• Learn directly from customers and close the loop with them – listen and act

• Build feedback disciplines into your weekly routine – the system, not just the metric

• Share best practices and ideas with others – inside and outside

• Leverage the power of referrals – build active promoters

Documents

CREATING A CULTURE OF CUSTOMER ADVOCACY SESSION: AP068