Tag Archives: nps

True Value of Net Promoter Score

“Net Promoter Score” sure has its share of detractors these days. But those critiquing the measure are overlooking one of its greatest (if not widely discussed) benefits.

Net Promoter Score (NPS for short) was conceived by Fred Reichheld (a Bain & Co. consultant) and introduced to the world in 2003 via his seminal Harvard Business Review article, “The One Number You Need To Grow.”

NPS was heralded by Reichheld and his colleagues as the quintessential metric for gauging customer loyalty across many industries. It was a simple measure yet demonstrated a strong correlation with repeat purchases and referrals and, consequently, business growth.

In recent years, Net Promoter’s popularity has surged, becoming one of the most widely used customer experience measures, used by small businesses and billion-dollar corporations alike.

The “likelihood to recommend” question that’s at the heart of Net Promoter is a now ubiquitous query in customer surveys, and one with which most all consumers are familiar (even if they’ve never heard of NPS).

Net Promoter’s nomenclature – its “Promoter/Passive/Detractor” shorthand for characterizing customer loyalty levels – has become standard vocabulary in the halls of many organizations, not to mention annual reports and earnings presentations.

With greater adoption, however, has come greater scrutiny of Net Promoter. This was perhaps best illustrated by a decidedly mixed review of the measure in a recent Wall Street Journal article (“The Dubious Management Fad Sweeping Corporate America”).

See also: Is ‘Net Promoter’ Really ‘Not Promoter’?  

No performance metric is perfect, Net Promoter included. Many critiques of the measure, however, target weaknesses that relate less to the metric itself and more to how organizations have chosen to (incorrectly) implement it.

[If you’re interested in Net Promoter implementation, read this post for 10 Tips to help ensure success.]

But what gets lost in the maelstrom of Net Promoter critiques is the business philosophy Reichheld has long cited as the inspiration behind the metric: the idea that excellence in business comes from “enriching the lives we touch,” be it customers, colleagues, employees or any other stakeholder.

The structure of the Net Promoter scale, and the methodology used to calculate the NPS score, perfectly reflect that philosophy. The goal is not to satisfy those with whom you interact (“Passives” in Net Promoter nomenclature). The goal is to impress them – to create a “Promoter” by delivering an interaction so intensely positive that it all but guarantees people will want to come back for more (and tell others about the experience).

How exactly does one do that? How does one foster such a positive reaction that cultivates intense loyalty?

You guessed it – by enriching the lives of the people with whom you interact. By shaping every interaction, inside or outside the workplace, so people feel better after they’ve encountered you, as compared with before.

This is the true value of properly implemented Net Promoter programs (and one that so many critics – and even some adopters – of NPS overlook). It’s the behavioral guidance that the measure provides. It’s the picture it paints of what “right” looks like. It’s the motivation it delivers to go the extra mile.

The sheer power of that aspect of Net Promoter became clear to me years ago, thanks to a personal lesson delivered by none other than Fred Reichheld himself.

It was 2008, and I was preparing to launch what would become Watermark Consulting, the customer experience (CX) advisory firm I lead today. In an effort to better understand the market for CX consulting services (and whether there was a place for a new entrant), I did what any good entrepreneur does – I networked. I reached out to key people in the industry, seeking their advice and counsel, hoping to learn from those who had tread the path before me.

Most of the people I reached out to never responded (giving me a master class in e-Snubbing). Among the few who did reply was the most renowned luminary whom I had the audacity to contact: Fred Reichheld.

I had divined Reichheld’s Bain & Co. e-mail address, as any good sleuth would, and within 24 hours of my sending him a message, up came his response in my in-box. He hadn’t delegated the reply to someone else; it was clear he had personally written it. He appreciated my inquiry and wrote a couple of paragraphs with suggestions for me – advice that was genuinely helpful.

Here was this celebrity in the study of customer loyalty, a man famous around the world for his thought leadership, and yet he took the time to personally and thoughtfully respond to a message from me – a nobody.

Why on earth would he choose to do that (especially considering I was shunned by so many CX experts who were far less eminent than Reichheld)? It’s because he was walking the Net Promoter talk, trying to enrich the lives of everyone with whom he interacted.

From that day on, I became a “Promoter” of Fred Reichheld – a raving fan, if you will. I’ve never met the man, I’ve never communicated with him since. But what stands out in my memory is the simple kindness that he demonstrated in responding to my inquiry and sharing some helpful advice. The interaction was, in a word, enriching.

See also: How Fine Print Ruins Customer Experience  

As Reichheld, the father of NPS, demonstrated so convincingly to me, this is the true value of Net Promoter, and it’s something that gets overshadowed by the endless debates over the accuracy, relevance and predictive power of the measure.

Net Promoter is about orienting an entire organization (and individual behaviors) around the noblest of purposes: to enrich the lives of the people around you.

Who can possibly find fault with that?

You can find this article originally published here.

Is ‘Net Promoter’ Really ‘Not Promoter’?

So, you’ve added the Net Promoter “likely to recommend” question to your customer surveys.  You’re tracking the results and reporting a Net Promoter Score (NPS) on your Executive Dashboard.

Your company is “doing” Net Promoter – right?

Not quite.  What your company is doing is what a lot of companies do when they jump on the Net Promoter bandwagon – they measure NPS.  But if all you’re doing is measuring NPS, then you’re not really “doing” Net Promoter.

What many people don’t realize is that the actual measurement of NPS is arguably the least important component of a true Net Promoter program.  The hallmark of a robust Net Promoter implementation is what happens after the measurement is made.

That’s when – in Net Promoter parlance – there’s a need to “close the loop” on the measurement.

Closing the loop is about acting (not just reporting) on what you’ve learned from the Net Promoter survey.

This needs to be done at an aggregate level — looking at the themes across all survey responses and translating those insights into operational improvements.

But it also needs to be done on an individual level — initiating some type of follow-up contact with customers based on their survey response (for example, calling a customer who expressed dissatisfaction).

See also: Where a Customer-Focused Culture Starts  

Note that closing the loop isn’t just an academic exercise.  As I’ve written about in the past, your customer surveys are part of your customer experience.  The mere act of following up with survey respondents actually helps enhance their impression of your business (because it’s so rare that a company actually takes that step).

As the popularity of Net Promoter has grown, the origin of the measure – and its foundational principles – often get overlooked.

Fred Reichheld, the creator of NPS, drew his inspiration from Enterprise Rent-a-Car’s “Service Quality Index (ESQi).”  Interestingly, the ESQi survey questions and scale are completely different from NPS.

For Reichheld, however, the real defining characteristic of ESQi was how individual Enterprise branches used the survey data to drive specific operational improvements.  There was (and remains) a strong cultural ethic at Enterprise around closing the loop following any survey exercise.  Reichheld made that discipline a cornerstone of his Net Promoter philosophy.

Net Promoter is a great instrument for facilitating customer experience differentiation.  Just be sure to employ it properly – which means using NPS to manage your business, not just measure it.

This article originally appeared on WatermarkRemarks.

Wave of Policyholder Benefits… Not!

Aside from the “not,” wouldn’t that have been a nice headline to see when the U.S. tax reform bill was passed and signed in December?

Unfortunately, it wasn’t.

The days and weeks leading up to the eventual passage and signing of the tax reform bill were exhausting. I actually stopped following too closely because, as with the health discussions, there were too many iterations to keep track of.

Once the tax bill was signed and put into law, though, many people, including me, were eager to find out what the eventual impact would be for our individual and company wallets.

One of the biggest pieces of the tax reform bill was the change of corporate tax from 35% to 21%. This is a huge break for companies and will give them a lot of extra cash to use to better their businesses. This is for all industries, not just Insurance.

A huge tax break should equal more spending by companies. This article takes a look at what announcements were made, how our industry is currently viewed and some tips for insurance carriers when they make their next statement linking back to the tax reform bill (or any statement for that matter).

See also: Tax Reform: Effects on Insurance Industry?  

What were the big announcements after the tax bill was signed?

Here is a sample of some of the headlines I have seen:

Companies are rushing to announce special bonuses and pay hikes after the GOP tax plan

This is just the start of companies handing out bonuses, raising wages and increasing spending

Whoa: Over 1 Million Workers Have Received a Bonus Since The Trump Tax Bill Became Law

Visa and Aflac boost 401(k) match after tax overhaul

About 29,000 Nationwide employees to get a $1,000 bonus

How is the insurance industry viewed in the market?

From a consumer standpoint, insurance is not the most-liked industry. Take a look at the chart below, showing average net promoter scores (NPS) within the U.S. insurance industry. This chart was taken from Bain’s Customer Behavior and Loyalty in Insurance: Global Edition 2017. There are also a number of other charts in the report, which are quite alarming.

The chart above points out two things to me:

  1. The average NPS for U.S. insurers is pretty dismal, far worse than I would have thought.
  2. Ecosystems are extremely valuable in engaging customers. (I write about this in my 2018 predictions.)

Many insurtech startups are capitalizing on the unhappiness of customers with their current insurance, even going so far as to make statements that insurance companies are in conflict to even do what they are intended to do, which is pay out a claim when a customer needs it.

The combination of these two facts builds on the negative perception of our industry, which means that insurance incumbents should tread a fine line in exactly what they advertise in the market. Case in point is AXA U.K.’s showcasing of how much in claims they actually pay (see image below).

Perception can often become reality

The perception of the insurance industry from a consumer standpoint can be summarized loosely with the information above.

This perception ends up becoming reality for many consumers when they have more bad experiences with their insurance as well as when they see an insurance company spending money on things other than the actual consumer.

See also: Why Fairness Matters in Federal Reforms  

I was having an e-mail conversation with a friend the other day about investing in the stock market vs. cryptocurrency. While we weren’t talking about the insurance industry specifically, I thought his reply related well to what we do and how customers view us.

‘Maybe it will be a good year for the market, but the real reason I’ve enjoyed cryptocurrency investing is that it’s not these old, rich, greedy, corrupt fat cats who control the market and know more than I do. And for the record, I know nothing about crypto. Even if it’s hackers that are scamming people, I’d rather play with money there than bet on companies. It’s this idea of the old guard that I was talking about, and anytime something new comes that threatens to disrupt and change the way something is done people will always say it’ll never work and try and discredit it.’

Read that again. Replace cryptocurrency/crypto with insurtech startup.


I am fully onboard with rewarding employees if a company has a windfall of cash. This is how you retain and make happier staff.

The same should be done in respect to consumers.

Though it is from the utility industry, look at the headline from Baltimore Gas & Co.:

Baltimore Gas & Electric Co. wants to pass on $82M in tax savings to customers after federal tax reform.

Can you imagine seeing an insurance carrier make an announcement like that?

Being the risk-averse business that we are, perhaps not.

However, for the one that is willing to make an announcement like that, I’d be interested to see the direct impact to their NPS.

This article first appeared on Daily Fintech

Digital Transformation in Billing

The word “digital” is most commonly associated with front-office transformation – client-facing activities, often in the service of acquiring business. This is for good reason, of course. Driven by their experience in other industries such as retail and banking, customers are demanding digital capabilities from their insurers, as well. Customers – individuals and companies both – expect that everything from access to information, to the ability to bind a policy, to initiating and managing a claim, to paying the bill should be easy to do and available digitally. Our consumer and SMB research reinforces this, indicating that net promoter scores (NPS) can swing 60-70 points when the entire journey is easy.

With that in mind, I’m continuing on my promised theme of looking at all of the steps in the value chain to explore digital transformation across the customer journey. This month, I’ll take a look at billing and payments, an area that, at first glance, might not be an obvious choice for digital reinvention. But it is a great way to engage with customers, optimize a process that is often manual and present additional selling opportunities, as well.

Not coincidentally, we also have a recently published thought leadership paper, The New (Digital) Face of Billing: Defining Multi-Line Insurance Billing Excellence, that takes a deeper look into digital billing.

Thinking Beyond Transactions

In my previous posts, I have talked about the need for a service mentality instead of the siloed, transaction-focused approach insurers have traditionally taken since the automation of business processes 50-plus years ago. To drive value from digital investments, insurers need to expand their thinking beyond transaction processing. Any interaction should be taken as an opportunity to develop and enhance the relationship with the customer, not as simply a means to an end.

In other words, billing is not just about getting the premium paid, although that must be done efficiently and effectively. Billing is one of the rare opportunities insurers have to interact with their customers in a relatively benign situation (as opposed to the stressful, often contentious interactions associated with claims), and it must be embraced as such.

See also: 4 Rules for Digital Transformation  

This does not just mean cross- and up-sell, although that can be an element. Customers will be wary of this, particularly if done in a clunky way, particularly when offering a product that does not match the customer’s unique needs. The overall approach must expand from a basic indemnity mentality to one of service – and the billing approach must evolve beyond simply accepting a customer’s premium. It’s important to keep in mind that the customer engagement mentality is needed across all customer types – from individuals, to businesses, to agents, to third parties and other partners.

The Customer Journey

Digital transformation must always begin with mapping the customer journey. Identifying key touchpoints and “moments of truth” in billing is the first step to mapping interactions and defining the required capabilities. Journey mapping allows you to consider how to roll out capabilities incrementally, giving you the chance to experiment with different services for unique groups and to quickly see what works and what does not.

Understanding your customers and their needs is key. Not every customer will benefit from an in-depth engagement at the time of billing. Some customers may be only interested in a hands-off billing experience, with, for example, a credit card being charged automatically on a monthly basis. Building an automated, paperless process for these customers is likely the right approach, while spending time and effort on building a deeper relationship may not result in a strong ROI. But even these customers can benefit from clear, natural-language explanations of such things as changes in their premium or renewal options.

Other customers may benefit from a deeper interaction. The moment of truth for these users can be providing opportunities for them to lower their premium through product bundling or identification of local risk factors that they may be able to address. Although lowering premium payment may seem at first glance to be a negative, the improvement in customer engagement and satisfaction – with associated Net Promoter Score (NPS) – will more than pay for the difference.

Still others may be interested in an interactive experience that doesn’t require them to speak with a human. AI and chatbots are becoming increasingly sophisticated in providing a human-like experience in a mobile setting, which can be a powerful way to prevent relatively costly calls into the call center as well as provide an engaging way to interact with customers.

But only by taking the time to understand your customers through journey mapping will you be able to make the right investment decisions. And don’t just rely on your own experience – you need an outside-in perspective to do it right.

End-to-End Journey

The customer journey for billing does not end at billing. Billing is an enterprise process – it touches on many different parts of the business. For the advanced capabilities I’m highlighting to work, it may require a wider transformation to take place first. A 360-degree view of the customer – all of the policies, correspondences, claims, etc. – is needed to offer bundling options. Customer analytics will provide cross-sell options. Core system replacement may be needed to offer paperless processing. These are just a few examples.

This is another reason why mapping the customer journey is key – it allows you to see where the process breakdowns and bottlenecks exist that need to be addressed to create an engaging customer experience.

Our research shows that all generations (including the younger “digital natives”) use a variety of touchpoints for questions and service requests when it comes to billing. This is important to map in your customer journeys and important to build into your operating model – the people, processes and technology around billing that make it work. People may still want to pick up the phone and ask why their premium went up (our studies show at least 30% of calls are billing-related). But by providing clear information to customers around the billing process you can prevent a certain amount of those calls from coming through in the first place.

Do It Right

Billing is an opportunity to engage customers, but an occasional one at best. It is of primary importance to know how customers want to be billed and how they want to pay (electronically, with a paper check, via bank transfer, etc.) and how they will want to interact if they have a question or concern (self-service, call center, etc.). But the most fundamental need is to make sure the bills themselves are accurate. Cross-sell or risk management exposed through the billing process will not have much effect if the client is double-billed or if the payment was not correctly recorded. As Novarica sums up succinctly in a recent report The New Normal for P/C Insurers: 100 Data, Digital, and Core Capabilities, “errors can be costly.” And those errors are not only costly in the sense of having more people call into your call center, but also making it far less likely that those customers will become advocates.

See also: 5 Cs of Transformation in Insurance  

Mind the Gap

In our thought leadership from earlier this year, Insurance in the Digital Age: Transforming from the Outside In, we mentioned the growing gap between customer expectation for digital services and the ability of insurers to provide them. Billing is a moment of truth for customers and a real engagement opportunity for insurers. While this makes it an excellent place to get started with your overall digital transformation, it is important to remember that you need to look at the end-to-end process as billing flows through many systems and data stores. This should not dissuade you from tackling billing, but don’t be surprised if there are some basic things that need to be done with the underlying technology (including considering retirement of old, inflexible core billing systems) and processes.

It may seem intimidating, but the benefits in terms of longer-term cost savings, efficiency and customer engagement will be worth the effort … while bringing billing into the digital age.

What Small Firms Want to Buy

American entrepreneurship is alive and well and growing! There are countless rags-to-riches stories of how people with a good idea, boundless energy and infectious optimism have made it big, or simply made a rewarding livelihood and legacy for themselves and their families. Today’s fintech and insurtech movements are testament to this in spades! And while most national news stories focus on big business, and national cultural events like Black Friday tend to overshadow small businesses, there’s a growing movement embracing these vital contributors to our communities and economy.

Insurance and other services are vital components for the vitality, risk protection and longevity of small businesses, and suppliers that are easy to do business with can capture a larger percentage of the market. Unfortunately, new research by Majesco, The Rise of the Small-Medium Business Insurance Customer: Shifting Views and Expectations…Is Your Business Ready for Them?, reveals that the insurance industry (as compared with other industries with which small businesses work) is “not easy to do business with.” The problem creates an opening for insurance startups.

The Rise of Small Businesses and the Shop Small Movement

On Nov. 26, 2016, the 7th annual Small Business Saturday event sponsored by American Express and the National Federation of Independent Businesses (NFIB) was held to encourage shopping and patronage of local small business merchants – in the wake of the preceding day’s big box store Black Friday shopping hysteria.  According to research done by these organizations after last year’s Small Business Saturday, more than 95 million consumers shopped at small retailer businesses, spending $16.2 billion, up 8% from 2014. Interestingly, the event garnered support from many corporate sponsors – many of which count small businesses as their customers.

Millennials show strong support for local small businesses, indicating they want to be “connected” to the products and businesses they buy from. A study by Edelman Digital showed that 40% of millennials preferred to buy goods and services from local small business retailers, even if doing so cost more.

See also: Why Start-Ups Win on Small Business  

While Small Business Saturday and Buy Local have a decidedly retail focus to them, the importance of all types of small businesses cannot be overlooked. U.S. Census Bureau figures from 2014 showed that businesses with fewer than 10 employees make up nearly 80% of all firms in the U.S. This is a huge market with enormous needs for products and services, including insurance to keep them running, protected and competitive.

Where’s the Love?

The Rise of the Small-Medium Business Customer research sought to understand small-medium business decision makers’ perceptions and views of those who support and supply them, including insurance. Four hundred business owners were surveyed using the Census Bureau’s definitions of very small to medium-sized businesses (SMBs), which we grouped into three segments (1-9 employees, 10-99 employees and 100-499 employees). The survey provided insights to evaluate perceptions on SMB customer views of insurance as compared with other businesses

The results were enlightening. Interestingly, fair price was more important than lowest price across all of the business segments. However, the ability to create a custom product from a range of options is more important than both lowest price and the ability to pick from a set of “pre-packaged” options. This finding reflects the increasing demand for personalization rather than price-driven mass production of insurance products.

Even more revealing were the results among the smallest (1-9 employees) businesses. The survey highlights that the traditional insurance business model has not been built with the capability to adequately meet the unique needs and expectations of SMBs. The industry has, instead, pursued a “one size fits all” approach. The consequences are that this segment of smallest SMBs (though with the largest number of such businesses) is uninterested in insurance, sees little value in insurance and considers insurance a necessary commodity or “necessary evil” required for their businesses.

All three segments of SMBs, regardless of size, did not rate insurance as being particularly easy to do business with, in terms of researching, buying and servicing products, compared with the other types of businesses we asked about in the survey. Among the 1-9-employee segment, P&C, life and employee benefits ranked in the bottom half on all three of these aspects.

Much more telling, however, this segment gave the lowest Net Promoter Scores (NPS) to insurance, showing a gap of as much as 60 points between insurance and the top business. (Net Promoter Scores measure the likelihood that a customer will make a recommendation to a prospective customer.)

Adding fuel to the fire, these small businesses were the least likely to say insurance was responsive, innovative, had easy to understand products and provided good value for the money. This is not a pretty picture for traditional insurance — but a great opportunity for innovative “greenfields” and startups.

Going Small Requires Big Thinking

Increasingly, small business customers are demanding a personalized and digital experience, representing the shift from mass standardiza­tion of insurance to the micro-personalization of insurance, requiring broader data and sophisticated analytics to truly understand and respond to small businesses as well as a digital experience via a multi-channel approach.

The rapid emergence of digital direct-to-SMB insurers and MGAs such as Assurestart (now part of Homesite/American Family), Cover Your Business.Com (a Berkshire Hathaway company), Hiscox, Insureon, Bolt, Slice and others are leveraging these ideas to reach the small business market. They are providing innovative products, streamlined and simple processes and digitally engaging capabilities that are extending the direct business model to SMB customers. In addition, aggregators, comparison sites or new distribution channels like Ask Kodiak help small businesses find the insurance products they need more easily.

Our research identified gaps between many industry-held perceptions and customer-defined realities, which expose an insurance industry steeped in tradition — its business models, business processes, channels and products that are difficult to find, buy and service — and opens the door to new competitors. We have seen this play out before with personal lines over the last 10 to 15 years. The difference is that the pace of change and adoption of a digital play is unfolding more rapidly this time in commercial insurance, demanding that insurers respond, because the window of opportunity is smaller.

Each company serving the SMB market must itself strategic questions, such as: “How do we bridge between the past, today and the future? How do we keep current customers loyal and engaged as we redefine our business to meet the needs of the vastly underserved and growing small business market? How do we get on par with other digital businesses that are setting new expectations for the SMB market?” If traditional insurers don’t ask these questions and respond, others will – taking current and future market share.

See also: Secret Sauce for New Business Models?  

Small businesses today are at the forefront of building new, technology-enabled, digitally first, innovative businesses that operate in a multi-channel world … like what we are seeing in insurtech. These businesses are increasingly led by millennials who have “grown up” digital and, as a result, seek fresh alternatives to age-old formulas … especially for insurance needs and offerings, helping them effectively meet their unique needs and expectations.  It’s time for the insurance industry to translate the good will from the Buy Local and Shop Small movements into big thinking and innovative solutions.

A new generation of small business insurance buyers with new needs and expectations create both a challenge and an opportunity. There is no clear path or destination. The time for plans, preparation, and execution is now — recognizing that the SMB customer is in control. Those who recognize and rapidly respond to this shift will thrive in an increasingly competitive industry to become the new leaders of a re-imagined insurance business that aligns to a rapidly growing, millennial-owned, innovative SMB marketplace.  Insurance companies must stop talking about the opportunities and being digital, and start doing something about it by using the disruption and change as a catalyst for “real change.”