When you need to buy some new clothes, do you go to more than one store or website to find them? How do you decide which stores to go to?
Today’s guest, Tim Keiningham, author of The Wallet Allocation Rule: Winning the Battle for Share, became controversial when he challenged the Net Promoter Score, with the help of some pretty solid research data. Part of his argument was the we don’t consider brands, even those we like, in isolation.
He didn’t manage to knock the score off its pedestal — huge numbers of companies still use the Net Promoter Score as their key measurement of customer satisfaction — but he did make a strong point that it should not be the only thing you rely on.
The Problem With the Net Promoter Score
The problem, he says, is not the metric itself, but a key assumption that underlies it: the belief that if people are our Net Promoters, ours is the only brand in our category that they promote. In fact, people tend to use several brands of most products, and what matters most in terms of your company’s growth potential, says Keiningham, is not the absolute NPS, but the relative rankings of the brands.
What You Should Be Focusing On To Grow Market Share
Once you understand how you rank relative to other brands your customers use, the key is not to keep improving what you are already winning at, but to find a way you can offer something that will be at least close enough to what your competitor offers that it won’t be worth the customer’s time or effort to go to them. Going back to our clothes example, if I shop at Nordstrom for the customer service but also at Petite Collection because I’m only 5 feet tall (yep, that’s my real height!), Nordstrom might get more of my business by stocking more petite clothes. I’d probably start with them, instead of starting with the Petite store. I’d sure be happy if I could find what I was looking for at the first store.
Also In This Interview
- How to measure the rankings effectively but simply.
- Why you should not explicitly ask people to rank order the brands or companies.
- New research that shows that, on social media, positive brand-related comments tend to be posted 3 times more often than negative comments on the same brand. (Unless it really screws up!)
- The need for the marketers and customer experience folks to share their metrics.
- The Zipf Law, which helps explain why rankings are so important. (Here’s a relatively simple explanation of the Zipf law courtesy of http://io9.com/the-mysterious-law-that-governs-the-size-of-your-city-1479244159
- “Back in 1949, the linguist George Zipf noticed something odd about how often people use words in a given language. He found that a small number of words are used all the time, while the vast majority are used very rarely. If he ranked the words in order of popularity, a striking pattern emerged. The number one ranked word was always used twice as often as the second rank word, and three times as often as the third rank. He called this a rank vs. frequency rule, and found that it could also be used to describe income distributions in any given country, with the richest person making twice as much money as the next richest, and so forth.”
The most important thing, says Keiningham, is to look at how you stack up relative to others your customers interact with. “Where am I winning, where am I losing and where am I tied?” Then you need to understand why your customers are choosing the competition in the areas where you aren’t winning.