I came across two posts on LinkedIn recently where two separate business-to-business (B2B) companies – one professional services company and one IT services provider – announced the exact same Net Promoter Score results from their clients: +91. The spokesman for the profession services company was particularly chuffed: “We were delighted with the results of the survey resulting in an NPS of 91.”
“We were delighted with the results of the survey resulting in an NPS of 91”
The calculation for Net Promoter Score is simple: just subtract the percentage of Detractors from the percentage of Promoters. The resulting score will be somewhere in the range from -100 to +100.
Promoters score you 9 or 10. Detractors score you 6 or less. What about the 7s and 8s, I hear you say? Well, they’re called Passives and the sad thing is that they don’t get counted at all.
A NPS result of +91 equates to a combination of Promoters, Passives and Detractors that might look something like:
91% Promoters, 9% Passives, and no Detractors (91 – 0 = 91)
You get the picture. To achieve a Net Promoter Score of +91, almost everybody has to love you. Not just LIKE you, but LOVE you. And I mean REALLY, REALLY love you!
+91 is an astonishingly good score in the B2B world.
A bit more context: In Northern Europe we generally think that a score of 8 out of 10 is pretty good. 9s and 10s are reserved for experiences that are truly special. I’ve written about this before. It’s conditioned into us in school and at university not to give 9s and 10s when we rate somebody or some service that we have received. Think about it. If you have a college education and graduated with a First Class Honours degree, you scored 70% (or maybe a little higher) in your final year exams. That’s 7 out of 10.
If you’re a Premier League footballer and score a couple of goals in a Cup Final, you might be lucky enough to get a player score of 8 from the sports writers commenting on the game. When Liverpool won the Premiership for the first and only time in 2020, they did so with a Net Promoter Score of MINUS 45.
We’re a difficult bunch in Europe. A dour lot. And the further north you go, the harsher we score. Other countries are different.In America (both north and south), you can get 10/10 if you do a good job or provide an excellent service. There are major attitudinal differences from country to country when if comes to scoring – you can read about it here.
An 'average' B2B Net Promoter Score is slightly above zero
So what happens in real life? How many B2B companies score +91 on the NPS metric?
At Deep-Insight, we have been running large NPS programmes for nearly two decades – mainly in Europe – and the reality is that there is a surprisingly wide spread of scores ranging from -50 to +50.
So am I saying that the professional services and IT firms claiming Net Promoter Scores of +91 are lying?
Not necessarily. Theoretically, it is possible to get a NPS result of +100 from your customer experience (CX) programme but in nearly 20 years we have never seen this happen. In fact, we’ve never seen any B2B company get close to +75.
In practical terms, the only way you can get a NPS result of +91 is as follows:
First, you really do have to be excellent at what you do – particularly when it comes to delivering excellent service every time
But that’s not enough. You also need to ‘frig the system’ by selecting a small number of clients who are Ambassadors for you and your service
You also need to select only those individuals in those client organisations who you believe will score you 9/10 or 10/10
You need to carefully deselect any client that is likely to give you a poor score – you can use the excuse: “Now is not the right time to ask them their views” or “We’ll only antagonise them if we approach them now”
Never send a survey to somebody who doesn’t know you really well, even if it’s a senior decision maker that you’d love to have a conversation with – as we’ve seen already, the chances of them giving you 9 or 10 are very slim indeed
Finally, don’t outsource the survey process to a third party who will give the option of confidentiality to the survey participants – confidential surveys are likely to elicit lower scores even if they provide a more realistic and honest view of your product or service
You might think I’m being cynical. Surely B2B companies don’t act in such a manner? Surely the leadership and CX teams will prevent this happening by putting an appropriate governance process in place?
Even if companies aren’t that cynical – and in our experience most are not – subtle biases always creep in to soften any hard messages, inflate the true Net Promoter Scores, and water down the recommended actions. Sometimes these biases are blatant. But they always exist.
What’s worse is that leadership teams often compound the problem by setting inappropriate targets (“We’re expecting a completion rate of 75%”) or by incentivising a completely biased result by paying bonuses if certain NPS targets are reached. We all know that if you give good sales managers a target and an incentive plan, they will do their best to achieve it.
Don’t fall into that trap with your CX programme. Work hard at getting what we refer to as ‘unvarnished truth’ about what your customers really think.
Things that never happened: a NPS of +91
Back to our professional services and IT companies and their +91 NPS results.
I don’t believe they deliberately set out to ‘frig the system’ in order to achieve a score of +91. I also suspect they genuinely do deliver a really good service. But even without knowing the full details behind the surveys, I know in my heart that they were administered to a small sample of hand-picked clients. The individuals administering the survey were probably not even aware that they were ‘frigging the system’. After all, they had to ask to account managers to nominate the people to be contacted as they don’t manage the client relationships themselves. They weren’t to know that the leadership teams had (unwittingly) conveyed to the account teams that a high NPS result would be good to promote their company on LinkedIn and other social media. They didn’t tell the CEO that she needed to put a robust governance process in place.
With a good governance process in place to elicit the ‘unvarnished truth’ from clients, European B2B companies will never achieve Net Promoter Scores of +91. That’s simply a fact. It never happened.
B2B leadership teams shouldn’t be targeting high NPS scores. Instead, they should be trying to identify key areas for improvement, and then implementing changes based on real unbiased feedback from clients. If they are successful, the NPS results will improve slowly and steadily over time.
So don’t just chase a NPS number. Listen to your customers instead. Act on their suggestions. Resolve their issues. The NPS result will take care of itself.
If you would like more information on how to run an effective CX programme that delivers real and long-lasting change, do get in touch with us. We’d love to help!
Some weeks ago, I met Nick Lee, Professor of Marketing at Warwick Business School to discuss his views about Net Promoter Score (NPS). I specifically wanted to get Nick’s views on NPS as a measurement tool. Does it work? Is it linked to sales growth? What does Net Promoter Score even measure?
Nick has an impressive background. In fact, The Academy of Marketing has already honored him with Life Membership in recognition of his outstanding lifetime research achievements and contribution to marketing scholarship. He is currently the Editor-in-Chief of the Journal of Personal Selling and Sales Management (JPSSM), which is the premier journal for research in professional selling. He is the first UK academic to hold this position, and only the second ever from outside the US. Nick was also the Editor in Chief of the European Journal of Marketing from 2008-2018.
Nick is more than just an academic. He holds strategic advisor positions for a number of innovative sales and leadership development companies, and he was part of the All Party Parliamentary Group inquiry into professional sales in 2019. His work has been featured in The Times, the Financial Times and Forbes, and he has appeared on BBC Radio 4, BBC Radio 5Live, and BBC Breakfast television.
Over the past two decades, NPS has divided opinions. While it has been embraced enthusiastically by many businesses, it has been shunned by others. The academic world has questioned what Net Promoter Score actually measures.
I think you’ll find Nick’s comments on Net Promoter Score and what it really measures quite fascinating because he doesn’t hold back from his criticism of NPS but also points out that the flaws don’t invalidate its usefulness as a measurement system, as long as it’s used in the right way: tracking changes over time, rather than simply chasing a number.
The Interview
John:
Good morning Nick. To start, could I ask you to tell me a little about your own academic background. What was your first interest in the field of marketing?
Nick:
Well, I began my academic career as a doctoral student in marketing strategy. It seemed to me that the connection between sales and psychology was quite important. And there was a lot of work in management that was related to psychology, but very little of that research had been focused on the sales force.
A lot of sales research is actually about things like incentive structures and territory design. I call that ‘technical management’ but what I was more interested in was not so much the decisions that managers made, but how they implemented those decisions. Sales management is more about psychology than a mathematical or technical thing. More recently, we’ve seen how digital transformation has led to a a merging of the ‘technical’ things with the more psychological things, and that’s really the space I operate in now.
Is NPS a Fundamentally Flawed Metric?
John:
So let’s talk about the psychology of Net Promoter Score. It’s clearly a sales and marketing concept. It’s also a performance metric. When did you start getting involved with Net Promoter Score and is it a good sales and marketing measurement tool?
Nick:
My interest in NPS really came from Sven Bähre and that paper we wrote called The use of Net Promoter Score (NPS) to predict sales growth. Sven drove that project while my role was to use that project to address something that was important to the marketing literature. And I think it is very interesting that academia’s gone down one road with Net Promoter Score, the very simple road which says “NPS is useless and a load of rubbish”.
At the same time, business practice has completely ignored that academic view. Net Promoter Score has become the dominant customer metric in business. It feels like someone has to be right and someone has to be wrong here. But the interesting thing is it turns out that both sides are right. They’re just talking about different things. And that’s what fascinated me.
John:
So tell me about those different things. When I looked at Net Promoter Score many years ago, a guy called Tim Keiningham – one of the people you refer to in your paper – was very critical about NPS as a metric. At the time he worked at Ipsos so I wondered if he was bringing his own biases to the table. But at the same time, he was saying that the data did not show any link between NPS and sales growth.
Nick:
Oh, that’s interesting about Keiningham, I didn’t know that he was at Ipsos then. So there are a couple of issues that lead to this disconnect. One is that we generally don’t like it when a publication like the Harvard Business Review tells us there’s a single number that every company needs to look at. That automatically gets people’s interest and it actually didn’t make sense to me.
The other issue is, and I have every sympathy with this view, is that Net Promoter Score doesn’t really measure what it claims it measures. There are so many potential flaws in the idea that this one number could be a valid measurement of anything real. I spend a lot of time trying to develop measures around attitudes and psychological concepts. And this is a classic example of a metric that doesn’t seem to actually ‘measure’ anything. So on that basis, it is quite flawed.
When you add in the idea that you have to subtract the bottom scores (Detractors) from the top scores (Promoters), you're torturing the measure to within an inch of its life.
What does NPS Actually Measure?
John:
Surely Net Promoter Score is a measure of advocacy, if nothing else?
Nick:
To some extent it taps into advocacy, sure. However, it’s a number in response to a single question that doesn’t take account of all kinds of other factors that might be relevant. And then you have this weird calculation for subtracting ‘Detractors’ from ‘Promoters’. As a mathematical construct, that’s not great. But the real issue is that advocacy is a much more complicated idea and can’t really be accurately captured by a response to a single question.
So there’s no real evidence that that answer to the NPS question is a reliable measure of advocacy. And then when you add in the idea that you have to subtract the bottom scores (Detractors) from the top scores (Promoters), you’re torturing the measure to within an inch of its life. At that point, it ceases to become a measure anymore, even if it was at the beginning. It becomes a number which is divorced from the underlying concept.
John:
I’m with you. But does that invalidate it completely as a measure?
Nick:
Well, here we get to the bigger question: rather than “is NPS a measure”, we need to ask “is NPS actually useful?” In academia. we’ve said nothing about NPS for the last 20 years apart from “it’s crap”. But when I see a whole bunch of senior executives in large companies saying “well, I’m finding a use in it”, then academia needs to look at that.
What’s my conclusion? I think that is a problem for academia insofar as we tend to talk past each other in a lot of areas. We have to provide some insight into what practitioners are doing in this field. Of course, it’s our sole driving force as a discipline to find out what practice is doing and we study that. But at the same time, it is worth studying if the entire business community is using something that 20 years ago we in academia said was wrong.
John:
Have you come to any conclusions as to why senior leaders use Net Promoter Score, or how they can use it more effectively?
How Should NPS be Used?
Nick:
One reason why it’s used so much is partly a self-fulfilling prophecy. It’s used because everyone uses it and therefore nobody wants to not have that information. That’s an important factor.
But then the other aspect is that it’s used because it’s simple. It’s easy to collect and it’s simple to use. Whether it’s easy to interpret is actually a more challenging question. I don’t think it is that easy to interpret. For starters, what does the NPS number actually mean at any given point in time?
Now when you start tracking NPS over time, those questions fall away because what you’re looking at is trend data. What was it last year? Is it up or is it down? You have to operationalise NPS in the right way – by tracking the change in NPS score from one period to the next, not the absolute score. That’s important.
Net Promoter Score is also influenced by a lot of transient factors. For example, it’s very easy to manipulate and there’s a big selection bias. Who is asked to complete the NPS survey? Also, every surveyor cannot help but lead the customer on towards a higher NPS score. So at any given point in time, the net promoter score doesn’t mean much because of that selection bias. But if you assume that those forces are broadly the same over time, you can extract that little bit of signal from that noise with the time series a little bit more effectively than at a single point in time.
John:
I’m with you. But in our experience, the level of bias can increase over time. So you need to have a governance structure to ensure consistency. Or indeed, you may need to break the system apart and start again if the ‘gaming’ gets too deeply ingrained.
We should track trends, not individual time points. And the more data we have, the better. More bad data isn't better than less good data. But more flawed data is probably better than less flawed data.
Nick:
Yeah, I think you’ve got it right there. It is important not to be naïve that over time there might be an ‘instrument effect’ or a ‘history effect’ where people learn how to better game the system. I think with something like Net Promoter Score, that’s less of a thing because it’s pretty easy to know how to game the system straight away. And the only thing you can do really is try to say to your customers: “this is really important to me, can you please leave me a good score?” And there’s only so convincing you can be there. It’s not like you’re going to get better at doing that after a certain point in time. So I would be less worried about that.
But of course there are always ways to game the system. But the point is we should track trends and not individual time points. And the more data we have the better. Of course more bad data isn’t better than less good data. But more flawed data is probably better than less flawed data. So given we assume the data is flawed all the time, the most important thing is to know how that data is flawed. And while you can never perfectly extract the signal from the noise, the signal is there if you have enough data points gathered over a sufficiently long period of time.
Where Do We Go From Here?
John:
So where do we go from here, and where should academics be focusing their efforts?
Nick:
A few things for us to work on. First is international comparability. Big multinationals use Net Promoter Score across their different national areas. And I would imagine they’re comparing EMEA with America with Australasia. Is NPS really able to support that comparison? That’s a challenge so that’s the first thing I would look at.
Second is to move away from a single question. We really need multiple measures in order to compare them statistically across different cultures. So Net Promoter Score is one item. You would like it to be three or four items. And then you could compare those items across countries.
A third area is to get a wider industry perspective. We looked at NPS in a branded consumer goods context: sportswear. Is it equally useful across all kinds of different industry sectors? Particularly if you look at the service sector and front line services, which are linked to business to business (B2B) personal selling. Is NPS a useful metric for these interpersonal interactions? How well does it work in a B2B setting?
John:
Nick, I really appreciate your time today. I’m looking forward to seeing more research into Net Promoter Score. From a selfish perspective, I’d particularly like to see some B2B research done as there’s very little out there that I can find on the topic. Thanks again, Nick.
A lot of words have been penned on the topic of customer experience (CX) in recent years. But here’s the thing. Most of what’s written relates to CONSUMER experience.
There really is very little out there about CX purely written from a business-to-business (B2B) perspective. That’s really surprising when you consider that B2B commerce is significantly larger than its business-to-consumer (B2C) counterpart.
So let’s try to redress that with this blog. Let’s explore how CX is, and should be, measured in B2B companies.
The answer to the first question is easy. Most large B2B companies use Net Promoter Scorethese days. The second question – how should CX be measured – is harder to answer. There are other measurement systems out there so is NPS really the best metric? Does it even work in a B2B context?
What is Customer Experience anyway?
Before we answer these questions, I need to provide a little bit of context to how we got to where we are today. The reason is that the term ‘Customer Experience’ is actually a very recent term. As the Box below shows, the term was first coined in 1999.
‘Customer Experience’ was called something else for most of the last century. In fact, CX was called a lot of different things over the last 100 years.
The book itself starts with a wonderful example of how the value in a cup of coffee is in the experience, rather than the quality of the underlying commodity (in this case, the humble coffee bean).
This example above is from the consumer, or B2C, world but the concept is equally applicable to the B2B world. Experiences are subjective. They tap into the emotional as well as the rational side of the brain.
A Brief History of CX in the 20th Century
So if CX is a term that only came into common usage at the turn of the 21th century, what was it known as before then? Time for a short history lesson.
A hundred years ago, there were practically no formal customer-related performance measures in existence. That’s not to say manufacturing companies didn’t think about the customer. And it was all manufacturing back then. The services economy didn’t really take off until much later. In fact, it was only after the end of the Second World War that services became the dominant component of western economies. The graphic below shows that in the UK, the services sector hit 50% in 1950. Today, it’s closer to 80%.
Back in the 1950s, it made sense to focus on product quality. By then, management gurus like W. Edwards Deming, Joseph Juran, and Philip Crosby were rolling out a series of techniques and approaches for Total Quality Management, or TQM. That’s what customer experience was all about in those days.
By the 1960s, management theory had become a little more sophisticated. People started thinking not just about the quality of the product being manufactured, but also about whether the customer was satisfied with the product. Did it meet expectations? Did it exceed expectations? This is when Customer Satisfaction, or CSat, measurement started to take off.
It’s strange to think that this was the first time that management gurus started thinking explicitly about the customer.
By the 1980s, most economies in the world were dominated by services rather than by manufacturing. Service Quality became a fashionable, if fuzzy, topic led by American academics like Valerie Zeithaml and Leonard Berry. They proposed measuring concepts like reliability, responsiveness and customer care.
It wasn’t until the 1990s that people like Fred Reichheld (the guy who later came up with the concept of Net Promoter Score) really started thinking about the value of a customer over the lifetime of that person buying from a company, rather than just the value of the individual transaction. Customer Loyalty became the new buzzphrase. Reichheld’s book The Loyalty Effect is still one of the most sought-after management books of the last 30 years.
Also in the 1990s, another couple of American academics Morgan and Hunt came up with their views on the critical role of Trust and Commitment in business relationships. I’ve written about Morgan and Hunt before, in this blog.
Standing on the Shoulders of Giants
While CX is only a little over 20 years old as a concept, it is in fact built on a series of measures going back as far as the 1950s. Here’s the important thing. All of the concepts and measures in the following table are STILL relevant today. Fred Reichheld’s Net Promoter Score may be the most commonly used metric at the moment, but it’s not the only one. It’s not even the best one. But, in its favour, it is a simple concept to understand and equally simple for leadership teams and boards to implement.
ERA
MEASUREMENT
1950s & 1960s
Total Quality Management (TQM)
1970s
Customer Satisfaction (CSat)
1980s
Service Quality
1990s
Customer Loyalty
Trust & Commitment
2000s
Customer Experience (CX)
Customer Experience Management (CEM)
Net Promoter Score (NPS)
When CX met NPS in the early 21st century, it seemed a marriage made in heaven. If the customer experience was excellent, we could measure just how good it was by asking a very simple question: “Would you recommend it?” NPS turned out to be a really straightforward way to measure consumer experience.
But is NPS a good metric to measure B2B customer experience? After all, the business world has had nearly a century of research into product quality, satisfaction, service quality, customer loyalty and business relationships. Should all these metrics be cast aside in favour of NPS?
As Isaac Newton famously said to a letter to Robert Hooke in 1675: “if I have seen further, it is by standing on the shoulders of giants.” CX professionals need to do the same when they consider what metrics to use in the B2B world. By all means, use NPS as a key metric. But also look back to the giants of the 20th century for inspiration.
Measuring B2B Customer Experience – is NPS Enough?
In short, No!
Fred Reichheld’s Net Promoter Score may be a great metric for measuring advocacy and is well suited to consumer environments and brands. Don’t get me wrong – it also has applicability in B2B environments even though I haven’t always been a fan.
The great strength of NPS – its sheer simplicity – also turns out to be its main failing.
Everybody understands intuitively the concepts of ‘Promoters’ and ‘Detractors’. They also grasp the ‘net’ concept. In other words:
NPS = % Promoters minus % Detractors
Boards and leadership team love the fact that it works on all types and sizes of customers. It’s easy to administer as it’s a single question. But therein lies the problem. It’s a single question. It’s very one-dimensional. It ignores all the giants of the 20th century and the work they did to understand what customer experience really involves, and how best to measure it.
NPS tells you whether you have a problem or not. It doesn’t give you the deep insights you need in complex B2B environments about the nature of the underlying problems. Or how to fix them.
Customer Relationship Quality (CRQ)
The answer to the question at the top of this blog – how should you measure B2B customer experience – is to combine the best of all worlds. To stand on the shoulders of the giants of the 20th century. And to do so in a pragmatic way.
The Net Promoter question is worth asking, but in conjunction with a handful of other questions that are built on a foundation of nearly a century of good research. The result is a methodology that we call CRQ – Customer Relationship Quality – which covers six building blocks:
The approach we take at Deep-Insight is to stand on the shoulders of giants such as Deming, Juran and Crosby way back in the 1950s. I’ll come back to this topic again in the near future as I believe one of the most fundamental building blocks on customer experience for any B2B organisation is consistently good service delivery. Our own research shows that service delivery is the most important driver of long-term trusted relationships.
If you’re interested in finding out a bit more about customer experience and how to measure B2B customer experience, download our white paper by clicking on the image below.
Last month, we asked our clients what they thought of us. We do this every year and take our Customer Relationship Quality (CRQ) feedback seriously. We try to follow the advice we give to our own clients: give your customers the opportunity to tell you what they think. Listen to what they say. Then act on their feedback.
As we did last year, we cast the net for our 2022 CRQ assessment quite wide. We didn’t just limit the survey to a handful of key decision makers in current clients. We included many operational and administrative contacts. Their views are equally important. We also asked dormant customers what they thought of us.
Last year, you said…
The main message that you gave us last year – actually for the last two years – was that you needed more than just a survey provider. In practice, that meant providing more assistance AFTER your customers gave their feedback. You needed a partner that could help you deliver meaningful change across your whole organisation. You also wanted us to be more flexible and supportive.
We listened, and here are three of the things we did in response to your feedback.
1. Deliver more than just a survey
We have always strived to be more than just a survey company. Our mission is to help companies become truly customer-centric. Getting customer and employee feedback is part of that process, but there’s much more to it than launching a survey. That’s why we completely redesigned the way we work with clients, based on what you said to us.
Today we spend a lot more time with leadership teams and sales or account teams both BEFORE we think about asking our customer’s clients for their views as well as AFTER they give their feedback. The BEFORE piece is critical and must be done properly. If you don’t invest the time up-front, your CX (or EX) programme will not deliver the results that Management and the Board expect from it. More than likely, it will end in failure. It’s as simple as that.
2. Assist with Customer Relationship Quality ‘Healthchecks’
Last year we conducted CRQ ‘Healthchecks’ for clients in the UK and Ireland. The objective of a ‘Healthcheck’ is to benchmark how good a company’s Customer Experience or Customer Satisfaction programme is. That doesn’t just mean assessing if the right questions are being asked of the right people. It’s a more fundamental look at whether all the right components are in place to deliver genuine and meaningful benefits. We do this under four headings:
1. LEADERSHIP. The most important quadrant. Good Customer Excellence (CX) programmes are ALWAYS led from the top
2. STRATEGY. Good CX programmes link customer, product, operational and organisational strategy explicitly to customer needs
3. EXECUTION. Success requires properly resourced teams that are brilliant at executing the Strategy
4. CULTURE. Finally, Customer Excellence must become integral to the DNA of the organisation: “it’s how we do things around here”
All four quadrants are necessary for a successful CX programme. The ‘Hard Side’ quadrants of Strategy and Execution are all about metrics and processes. ‘Hard Side’ activities lend themselves to key performance indicators (KPIs) and while the activities in these two quadrants are important and easily measurable, the quadrants of Leadership and Culture are actually more critical.
In our experience, Leadership is the most important quadrant while Culture is the most challenging. And yet, here’s the strange thing: in most CX programmes the ‘Soft Side’ is often overlooked and almost always under-resourced.
3. Run Customer Centricity ‘Masterclasses’ for managers and leadership teams
One of the key ‘Soft Side’ challenges is making sure your entire organisation is on board with your CX (or CSat or NPS or Customer Relationship Quality) programme. Over the past 12 months, we have partnered with the world-leading HEC Business School in Paris.
That collaboration has helped us develop and deliver a ‘Masterclass’ to educate leadership teams, managers and partners about the importance and benefits of putting the customer at the heart of everything they do. The ‘Masterclass’ also helps employees understand the crucial role they play in making their companies customer-centric.
Already, these ‘Masterclasses’ have been delivered both virtually (for COVID reasons) and face-to-face to clients in Europe, Asia and the Americas.
How did we score this year?
Having made the investments over the past two years, we were very curious to get your reaction. In short, you were very generous in your responses this year.
This is the highest NPS result we have ever achieved to date and the third time we have scored over +50. Our CRQ score is also the highest we have ever achieved and we are honoured to be thought of so highly by you, our valued clients.
Result: new client wins
I honestly believe that it’s because of the trust that our clients place in Deep-Insight that we have been able to announce some great new wins in recent months.
We have a 10+ year relationship with Atos but primarily in the UK & Ireland. Earlier this year, we extended that relationship to Germany and over the next three years we will be partnering with Atos on one of their most important and strategic global accounts.
One of our largest accounts in Australia was the logistics company Toll Group. Last year our key contact at Toll moved to Scotts Refrigerated Logistics and we recently signed a new 3-year contract to help ScottsRL become one of the most customer-centric companies in Australia.
Vreugdenhil Dairy Foods is a Dutch milk powder manufacturer that operates in Barneveld, Scharsterbrug, Gorinchem and Madrid. Its 500 staff process 1.4 billion kilograms of milk each year. Over the next three years, we will be working with the Vreugdenhil leadership team to turn a company that creates great food products into a truly customer-centric organisation.
Agenda for 2022
While we’re really proud of these Customer Relationship Quality (CRQ) and NPS scores, there is more to do.
For starters, we got feedback from 48% of the people we asked to participate. While that’s not bad, we do see some room for improvement. Last year our response rate was 55%. We know that some of our clients achieve rates of 70% or more. We will be working hard to improve on this figure next year.
Second, the main feedback we received this year is that our new consulting services are great BUT not enough. Our clients are looking for Deep-Insight to provide even more support. The two customer quotes below confirm to me that we need to support clients on a year-round basis.
“Would like to see greater insight on how we can really make a difference for our customers. How do we truly address those recurring themes that come up each year? It would be great to get insight on how we can do this better – beyond the data”
“I would question to what degree on a continual basis Deep-Insight provides interaction and insight as a partner to the business. Also, to what extent there are follow-up meetings post results as you as experts help inform our response and strategy.”
Third, the feedback process is not finished yet. We need to ‘close the loop’ with all clients and discuss their specific feedback. We will be in touch shortly and will be looking specifically for more insights into any additional support needs they may have.
I need to finish off by thanking Fiona Lynch for planning, organising and running this year’s client assessment. Fiona joined us earlier this year from Atos where she was part of a global service delivery team. It’s great to have her on board.
So, well done Fiona, and thank you to all of our clients. We really do value your feedback.
This blog is a shortened version of The CX Factor which originally appeared in the October 2021 edition of Modern Lawyer. Modern Lawyer is published by Globe Law and Business.
There’s a lot of talk at law firms about client relationships. For many clients these can still seem hollow words based on one-way relationships.
Robert Millard and John O’Connor explore how firms that are trying to embrace true client centricity are setting themselves apart.
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The CX Factor
Much has been written over the years about how difficult it is for clients to differentiate between one law firm and the next. From a client perspective, law firms all look remarkably similar. Trust, reputation and brand generally play an unusually important role in buying professional services.
Appearing in directories such as Chambers & Partners, Legal 500 and International Financial Law Review are also important as are word-of-mouth recommendations. These are recognised to be among the most compelling means of winning new clients.
But what keeps clients loyal? What drives client relationship longevity? Except for the most complex or unique of matters, a range of firms exist from which clients can choose. Those firms are all staffed by highly competent, capable lawyers.
Making the Transition from Client Listening to Customer-Centricity
Within ranges, all charge roughly similar fees for similar matters. All are highly attentive to service quality. Most engage in at least some form of client listening. They claim to mould their services and service delivery channels around the needs of clients. But have they?
In our opinion, few have transitioned from client listening to becoming truly customer-centric.
This article is aimed at helping law firms to make that transition. The content is based on client- centricity work that John O’Connor has done with many large corporates and financial institutions, including DWF Group plc. It is also based on Robert Millard’s unparalleled understanding of modern law firms.
It was informed by interviews with Baker McKenzie LLP (Ana-Maria Norbury and Deanna Gilbert), DWF Group plc (Zelinda Bennett), Shoosmiths LLP (Peter Duff and Gaius Powell) and Travers Smith LLP (Julie Stott and Charlie Rogers) about their CX journeys. All of these were exceedingly generous with their time and insights. We thank them most sincerely.
Clients’ Demands are Shifting
Across many industry sectors and geographies, customers are shifting the ways in which they choose suppliers and service providers. Current research in the United States shows that the percentage of clients recommending law firms is at an all-time high of 69%. That’s up from 49% in 2020 and from 47% in 2019.
This increase is remarkable. But those results are not from superb skill in solving legal problems alone – the focus on service quality has given way to one of client experience (CX). For all but the most complex and difficult of services, service quality is no longer a source of sustained competitive advantage. It is a prerequisite to be even considered.
Clients now demand that their experience with the firm advising them be hassle free, transparent and even emotionally uplifting. They also expect law firms to look further than the legal advice. They expect them to help solve business problems.
Law firms are changing their business models in line with these shifting client requirements. But too slowly, in our view. The time has come to accelerate. Bluntly, modern law firms must move from client listening to more detailed conversations, and act decisively on what they discover.
No UK law firm has what a leading corporate or financial service client would acknowledge to be a world-class CX programme, or true customer-centricity. Pockets of excellence do exist though, and some of these can be seen in the case studies at the end of this article.
CX is Different to Service Quality
The concept of ‘quality’ emerged from the total quality management (TQM) movement of the 1950s. In the early days, the focus was on product quality. The emphasis moved in the 70s and 80s to service quality as economies in the western world became more services-based economies. ‘Client satisfaction’ became a prominent metric.
Client experience (CX) is different. It means that a firm’s core focus is on its entire relationship with its clients – not just on satisfaction. Contemporary research shows that CX is generated through a long process of interaction between a firm and its clients, across multiple channels and through generating both functional and emotional effects.
To achieve this requires ‘client-centricity’ which, in simple terms, means putting clients at the very heart of the firm. This transcends quality, to mean all the firm’s lawyers and business services professionals viewing every aspect of the firm from the client perspective. In this article, we use the terms ‘client centricity’ and ‘CX’ interchangeably.
For clients, quality assurance is difficult in legal and other professional services. Lawyers and other professionals frequently have more knowledge of the topic in hand than do their clients. This creates a ‘power asymmetry’. Work product is frequently co-created with clients, or at least based heavily on client inputs. Consistently poor performance leads inevitably to reputational damage, sanctions for professional negligence and, ultimately, failure.
The Intangibilty of CX in the Legal World
That much is clear. How, though, does a client assess whether services rendered in a specific matter were merely ‘good’, or ‘excellent’?
It turns out that it is far easier for clients to assess how they feel about the services and about their experience, than the objective quality of the service received. Clients must trust the professionals that they instruct to be technically competent and diligent. Such trust is not necessary to assess their reaction to their experience – their ‘gut-reaction’ – to dealing with the firm and the way in which the firm deals with them.
At an event held at White & Case’s offices in London some time ago, the former chairman of Allen & Overy (A&O), David Morley spoke of a very complex, challenging transaction where A&O was pitching for the legal advisory work against the usual range of premium London law firms. A&O won the engagement and, he said, he was later told by the client’s general counsel that the reason for that was that they felt that when, late at night in the midst of the deal when pressures were immense, they believed that A&O’s lawyers would be the easiest to deal with.
This is an excellent example of how intangible CX can be.
Professional Services are Different
Professional services have always been recognised as being distinct from products, and from other types of services. More than two decades ago, professional services were defined as:
highly knowledge intensive, delivered by highly educated people, frequently linked to cutting-edge knowledge;
involving a high degree of customisation;
involving a high degree of discretionary effort and personal judgement on the part of the professional creating and delivering the service;
requiring substantial interaction with the client; and
being delivered within constraints of professional norms of conduct, including setting client needs above profit and respecting the limits of professional expertise.
For much of the past century, this has been an accurate description of the services delivered to clients by lawyers. Ask any lawyer if they are concerned about their clients, and the quality of services that they deliver to them, and the answer will almost always be: “of course I do!” And that response would be sincere and truthful – to the extent even that the question might be regarded as facile.
Commoditisation
Yet the statistics for clients defecting to rival firms in recent years have been alarming. Legal services are also changing. On the one hand, the complexity of legal issues increases continually and exponentially.
On the other, it is becoming difficult to justify including the more process-driven ‘commoditised’ services under the umbrella of professional services. This does not mean that law firms need to discard these services. They form an important part of the business of many law firms.
The term for services that are not ‘professional’ is not ‘unprofessional’. It’s ‘technical’. The fact is that clients view technical legal services through a different lens, and the profit drivers of these services are different to those of professional services. The firm’s business model needs to be more granular if the tensions between these client expectations and profit drivers are to be managed.
As the ‘4th Industrial Revolution’ unfolds, more of the services now delivered by people will be better delivered by technology. Some lawyers will focus on using ever-more complex technological tools to advise clients on meeting their own increasingly difficult, complex needs. The business of law is also being disrupted by emerging digital technologies and the geo-economic impacts that they spawn. Some firms will build highly profitable legal service platforms (LegalZoom being a good current example) to focus on more mainstream legal needs. Best CX practice will evolve differently for each.
These tensions can and must be managed. CX has proved a valuable tool for banks, retail organisations, airlines and others to improve levels of customer satisfaction. It is now gaining rapid traction with law firms and might even be a new frontier on which law firms are competing. Many firms, however, appear to be struggling to separate the concept from similar ones such as ‘service quality’ and ‘client relationships’ and ‘client listening’.
What to Measure?
Metrics are obviously crucial. One of the best-known CX metrics is Net Promoter Score (NPS), created by Fred Reichheld based on his work at the consulting company Bain & Co. In his book The Loyalty Effect, Reichheld stated that clients should be valued according to the net present value (NPV) of the future revenues to be earned from them. This has given rise to the notion of client lifetime value (CLV).
NPS is based on the proven premise that client relationship longevity can be predicted by a client’s response to a single question: “how likely would you be to recommend our firm to a friend or colleague?”
Reichheld’s research showed that surprisingly high NPS scores are required to indicate long-term client loyalty. The NPS of a firm overall is calculated by subtracting the percentage of clients who allocated a score of 6 or less (Detractors) from the percentage who allocated a score of 9 or 10 (Promoters).
But is NPS the best metric for law firms? We mentioned earlier how A&O won an engagement based on the general counsel’s level of Trust in the firm’s ability to deliver when the going got tough. Few companies measure trust explicitly – yet it is the fundamental building block of any client relationship.
Customer Relationship Quality (CRQ)
An alternative to NPS is to view the client relationship more holistically. Client relationship quality can be visualised as a pyramid comprised of three different levels (see Figure 1).
Figure 1. The Customer Relationship Quality (CRQ) model
Three levels of Customer Relationship Quality
The first and most fundamental is the Relationship level. Do your clients trust you, are they committed to a long-term relationship with you, and are they satisfied with that relationship?
The second is the Uniqueness level. Do your clients view the experience of working with you, and the solutions you offer, as truly differentiated and unique?
At the top of the pyramid is the Service level. Are you seen as reliable, responsive and caring?
If law firms score well on all six elements of customer relationship quality (CRQ), their clients will act as ambassadors, generating a high NPS.
NPS and CRQ scores are highly correlated. Law firms should track their NPS but in order to understand what that is really telling you – and what you have to do to improve that score – law firms also need to measure and understand all six elements of the CRQ model.
Turning ‘Client Listening’ into an Effective CX Programme
Client listening is obviously more than just the score and the verbatim feedback that is captured. A fully-fledged CX programme is also far more than a client listening survey. It includes what we refer to as ‘hard side’ and ‘soft side’ activities (see Figure 2).
Figure 2. Deep-Insight CX framework
The four quadrants are:
LEADERSHIP. The most important quadrant. Good customer excellence (CX) programmes are always led from the top.
STRATEGY. Good CX programmes link customer, product, operational and organisational strategy explicitly to customer needs.
EXECUTION. Success requires properly resourced teams that are brilliant at executing the strategy.
CULTURE. Finally, customer excellence must become integral to the DNA of the organisation: “it’s how we do things around here”.
The hard side activities of Strategy and Execution are important. These include setting up the CX programme, determining what to measure, executing the survey process, and using the client feedback to update company strategy. However, one of the key lessons from interviews with corporate leaders is that successful CX programmes require heavy investment in ‘soft side’ activities if they are to generate real long-lasting results. This means spending significant amounts of time with law partners and client teams planning for success.
All four quadrants are necessary for a successful CX programme. Many law firms start at the execution quadrant and are often disappointed when their client-listening programme produces no meaningful result or change. In our experience, the soft side is often overlooked and almost always under-resourced. Leadership is the most important quadrant while culture is the most challenging.
Step 1. Drive change from the leadership level
Client relationship longevity is a crucial building block of the firm’s client value proposition (CVP). It deserves the attention of the firm’s most senior leaders. Without active and highly visible senior leadership support, a firm is unlikely to achieve the CX results that they need to build sustained competitive advantage. It is crucial that the firm’s leaders themselves be truly client-centric. The must:
Be genuinely passionate advocates for the firm’s clients and their interests;
Take personal ownership of enhancing client- centricity in the firm;
Have an intuitive understanding that client satisfaction drives financial success;
Use client-centricity as a lever to effect organisational change; and
Be relentless about execution.
This list might appear daunting, but it is crucial. Too often, a firm’s CX initiatives founder because the task is delegated to mid-level teams who have no more than lukewarm support from senior leadership. The result? They are unable to drive the degree of change that can really make a difference. The need for active and visible senior leadership support is evident in the comments of Peter Duff, chairperson of Shoosmiths, in Case Study 1.
Step 2. Link Strategy Explicitly to Actual Client Needs
Once the leadership for the CX programme has been secured, the law firm must use the voice of the customer to drive all aspects of the firm’s strategy. This can, and often will, involve major organisational and operational change. It will also require changes to the firm’s business model (CVPs, resources and profit model). O’Connor and Whitelaw devote an entire chapter of their book Customer at the Heart to the strategy of client-centricity.
In Case Study 2, Zelinda Bennett speaks of some of the major strategic changes that DWF Group have made in order to serve their global clients more effectively. Reorganising the business into global divisions and acquiring an alternative legal services provider (ALSP) were bold and decisive actions taken precisely because DWF wanted to become more client-centric.
Strategy must involve all aspects of the law firm’s business. It includes HR (hiring, training and promoting the most client-centric lawyers) as well as finance (investing only in initiatives that will have a demonstrable impact on clients). It must pervade the entire organisation. Every department in the law firm must see its role through the lens of the client.
Step 3. Build a CX Execution Capability
Besides strong leadership, a successful CX initiative also requires an ‘execution’ capability to ensure that the voice of the client is both captured correctly and acted upon. Execution is more than setting up a client listening post. It involves turning the outputs from those client conversations and collaborative explorations into tangible actions that solve real client problems.
In today’s world, the client personnel involved in buying and consuming legal services extend far beyond the legal department. The client’s voice needs to extend beyond just the GC and her or his legal team. Law firms must think about the ‘influencers’ who are telling those decision makers that “We have to work with Firm X” or “Firm Y really aren’t delivering value for money – we should be looking elsewhere”.
One of the better examples of a good execution capability is Baker McKenzie’s Reinvent programme (Case Study 3). Reinvent started by using client listening to map existing client interactions with the law firm – ‘journey mapping’ as it’s often referred to – but then moved to the next logical level. Baker McKenzie started working with clients to re-engineer processes and even co-creating new services and solutions. The Reinvent programme was developed to establish the governance, skills and infrastructure required to support better client outcomes. This programme focuses both on re-engineering specific processes and services with clients, as well as a way to develop teams across the firm – empowering execution at a grassroots level. Such an approach is a highly effective way to build engagement with the CX process and commitment to its success.
Step 4. Embed Client-Centricity into the DNA of the Organisation
Lawyers are consummate professionals. But are they truly client-centric? Most legal professionals entered the legal industry to practise law. They wanted to advise clients and to mitigate risk. They didn’t join to help CFOs and procurement professionals to cut costs. However, that’s what partners in law firms are being asked to do these days.
Embedding behaviour changes and aligning the firm’s culture with the ‘voice of the client’ takes patience, persistence and continuous effort over a long time. Engagement with clients must be ongoing. Building and sustaining the momentum required to be true client-centric needs a constant stream of input from clients. It also requires constant conversations within the firm about what that input means, and how clients can be better served.
In Case Study 4, we look at Travers Smith’s ability to embed the culture of client-centricity into the DNA of the firm. Silos have been broken down. Close collaboration between lawyers and business services has been achieved. International clients are serviced almost seamlessly. The firm’s senior leadership takes a very active lead in this.
The reason why most law firms are lagging behind might be not that they are inattentive to clients (that is usually patently not the case). It is more likely to be that they simply do not have the systems and processes in place that are required to get input of the quality and detail that can drive continuous improvement. A properly designed CX programme delivers that. Over time, measurable results emerge both in terms of client loyalty (NPS and CRQ scores) and also, more importantly, economic performance.
Conclusion
Earlier, we said that many companies start with Execution. We strongly believe that the first step in a successful CX programme is gaining the right Leadership commitment to putting the client at the heart of everything a law firm does.
Once that leadership is in place, it becomes easier to get the law firm’s strategy aligned to what clients actually need and the CX execution tasks become much easier. With leadership, strategy and execution in place, culture change automatically follows.
As David Morley’s earlier anecdote reveals, the primary impactors of CX emerge when things go wrong. Clients report four major areas where the law firms that advise them are inconsistent, namely: keeping them informed; dealing with unexpected changes; handling problems; and meeting scope. Feel free to work on these immediately, of course.
But if you want to achieve a step change, that starts at the top.
