The net promoters era

What are net promoters? Consumers who rate products on the internet?  Mommy Bloggers? People who Tweets about brands on Twitter? Fans on Facebook? Hold that thought.

For students of relationship marketing and CRM, net promoters are the driving force of Fred Reichheld’s book, The Ultimate Question. Fred studied and surveyed the customers of 100′s of companies and came to a singular conclusion: The most admired and profitable companies are the ones with the greatest percentage of net promoters – people who enthusiastically answer in the affirmative the question, ”How likely is it that you would recommend this company to a friend or colleague?”

Fred developed the Net Promoter Score (NPS).  The NPS is the percentage of people who are “promoters” of a company minus the   “passives” and “detractors” (NPS = P – D).  Reichheld’s work is known for its statistical significance and high correlation with business success.  In 2006, the companies with the highest NPS were:

• USAA (82%)
• HomeBanc (81%)
• Harley-Davidson (81%)
• Costco (79%)
• Amazon.com (73%)
• Chick-fil-A (72%)
• eBay (71%)

By 2008, Charlene Li and Josh Bernoff, in Groundswell, delivered research showing 80% of people rate and review products favorably on the internet and their social networks. If companies with an NPS of 80% rank among the highest in Reichheld’s work, Li and Bernoff’s research is particularly good news for businesses and brands.

It means companies that use interactive ratings are reviews are likely to have a higher NPS, be more admired and have greater profitability. Li and Bernoff’s research also showed:

• 76% of customers use online reviews to make purchases
• 96% of sites that have them say they are an effective merchandising tactic
• Only 25% of e-commerce sites have them now

So, from Reichheld’s, Li’s and Bernoff’s viewpoints, we’re in the “net promoters era.”  If your company isn’t taking advantage of it, shouldn’t it be?

Knowing when to quit or stick

Six months after starting BarnRaisers, a friend offered some sage advice.  He said,   “you’ve made it to the middle of a rope bridge, too far to look back and you definitely don’t want to look down.”

The next day my business partner gave me The Dip, by Seth Godin, a quick 80 page read that would take most people less than an hour.  I read and reread it many times.  Remembering the rope bridge, I knew we were in the middle of the dip.

The Dip is about your talents, your goals and being the best, especially when your efforts are at their maximum and results are at a minimum (see the graph above).

According to Seth’s law that you decide the life you want to lead, when you’re giving much more than you’re getting, conditions are ideal for producing the best results.  That’s because expectations are highest you’ll quit.  So, since less people continue, those who stick deserve greater rewards.

The alternative to going through the dip is to find yourself circling in a cul-de-sac.  Regardless of the path you choose, you still have to decide whether to quit or stick.

There are great quotes to help with the dip.  Dale Carnegie said, “Most of the important things in the world have been accomplished by people who kept on trying when there seemed to be no hope at all.”  Winston Churchill said, “Success is the ability to go from one failure to another with no loss of enthusiasm.”

These are great motivations.  So are the writings in The Dip.  And, because The Dip is about a journey and progress, you look toward the periphery, instead of down.

We are here to belong

Let me say at the outset this is a nondenominational blog.  I’ve been reading Rick Warren’s The Purpose Driven Life which might sound like a self-help book, but it’s not.

Whereas self-help books tell you purpose, essential change or course correction in life comes from within, the point of view here is you’re not here by accident.  Your purpose in life has already been individually thought out and finding it happens, not by looking within, but surrendering to something larger than yourself.

It’s also deals with community as good as any book I’ve read.  One reason, as the book devotes a chapter, is we are here to belong.  Because, through belonging, we learn and put in practice the seven characteristics of fellowship which are to:

• Share our true feeling (authenticity)
• Encourage one other (mutuality)
• Support each other (sympathy)
• Forgive each other (mercy)
• Speak the truth in love (honesty)
• Admit our weaknesses (humility)
• Make group a priority (frequency)

Although it could be read faster, the book is meant to be read and considered a chapter a day for 40 days  because 40 days is considered a time spiritually significant for  transformation.

There have been 133,000,000 blogs indexed by Technorati since 2002.  They have been read by 346,000,000 people since 2008.  There are 900,000 blog posts within any given 24 hour period.  Positive perceptions of a company increase by 36% if they have a blog on their web site.

With numbers so large, it may seem no individual blog really matters.  I believe just the opposite.  It’s significant proof of our need to belong and commitment to fellowship.  So, if you blog or you read blogs, keep it up and keep the seven characteristics in mind.

Words of wisdom

Two of my favorite business books are Blue Ocean Strategy and Groundswell. The first is my recommendation for best book on opening up new markets and the second is the definitive primer on how social media and online communities work to build business.

Taken together, they are a roadmap for brand vitality where the highway is a well crafted business strategy.

In Blue Ocean Strategy, W. Chan Kim and Renee Mauborgne advise companies to stop competing in the bloody, market share stealing ”red ocean” and find uncontested market space in the “blue ocean.”  Like Cirque du Soleil.  They eliminated  costly to maintain circus animals, marque names and expensive arena rentals and created their own portable show; one that was fun, family entertainment in the consideration set with dinner and a movie or a night out; instead of a once a year major event.

Recently, I gave a friend a copy to help him rise above his red ocean.  He owned a bike store in town.  For over 20 years, his shop was known for superior service and customer involvement.  This year bike sales slowed, competitors cut prices and his landlord raised his rent forcing him to close up shop.

He saw uncontested space going direct to customers with two well-branded vans.  This took advantage of the reputation he built for personal service.  He generated more awareness from referrals and vans travelling around towns than a stationery store and his operating cost dropped.  Now, he’s back in the black with a reinvented business.

Groundswell by Forrester analysts Charlene Li and Josh Bernoff explains the effectiveness of everything social from wikis, blogs, social networks to brand communities.  They present compelling case studies; all beginning with a company’s unmet business need, social media tactics that meet the business objective and return on investment is well detailed.

Take Blendtec blenders.  They’ve sold exclusively to the commercial market since 1978.  Starbucks uses them.  In 2007, they decided to sell to consumers directly with videos from owner, Tom Dickson.  With an investment of less than $1,000 for videos that ran on YouTube, company sales increased +500%…plus the cost of an iPhone.