Posts Tagged ‘groundswell

12
Apr
10

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?

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27
Oct
09

Words of wisdom

cover[1]sn7926[1]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.




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