Sometimes the world of business can be a hard and unforgiving place. When the pressure is on for results…the bank or investors are breathing down your neck…and you’ve got more problems than there are baubles on the Trafalgar Square Christmas Tree…it’s tempting to think that immediate, drastic action is required.
And maybe it is.
But how do you know you’re taking the right action to protect, and ideally build, your bottom line?
A good place to start is getting really clear where you are. And that’s a lot rarer than you might think.
Someone will look at the monthly KPI report and say something like “we need to boost our margins” or “the rate of staff turnover is too high” or “our NPS score needs fixing”.
The minute you hear anyone say that I’ll give you odds of 10-to-1 that this organisation is about to release a series of well-intended, but fundamentally ill-considered and ultimately self-destructive, actions.
Why is that?
Well, it’s because they’re starting from inside a spreadsheet. They’re not starting with reality.
Jeff and Winston
One of my very favourite business quotes is from Amazon founder Jeff Bezos: “where the anecdote and the data disagree, it’s usually the anecdote that’s right”.
And one of my favourite Winston Churchill quotes is: “The truth is incontrovertible. Malice may attack it, ignorance may deride it, but in the end, there it is.”
Where those two concepts overlap is where businesses looking to make a change often get it badly wrong, resulting in higher costs, not lower costs, and lower profits, not higher profits.
The minute someone in a management meeting says “the problem is X” you’re on a path which is unlikely to lead to a positive outcome. That’s because the “usually right” anecdote is being prioritised over the data on a spreadsheet somewhere.
In those meetings – and believe me, I’ve sat through plenty of them over the years – there is an unspoken assumption that there are no extraneous factors which need to be taken into consideration. Everything you need to know is on the spreadsheet.
This leads you down a very narrow, and ultimately sub-optimal, path.
Let’s imagine someone says the problem that needs fixing is the NPS. Customer satisfaction is falling and the NPS is dropping to concerning levels.
Instantly, people’s brains move into “fixing the NPS” mode.
“Can we ask fewer questions so people don’t get bored and mark us down?”
“Can we reword the questions to make a positive answer more likely?”
“Can we call customers before we send the questionnaire so we can pretend to check they were happy with our service, but really use it as an excuse to remind them ‘if there really wasn’t anything we could have done better, please remember to mark us as a 10 on the satisfaction questionnaire that will be in your email inbox in the next couple of days'” (The dealer where I get my car serviced does this – I’m not making it up.)
What, typically, you end up with is a series of hacks to fix the NPS (or whatever measure you decided the problem was) irrespective of the reality going on around you.
Numbers
This might seem like an odd thing for an accountant to say, but numbers are not reality.
Numbers are an abstraction of reality.
Numbers are “the map, but not the territory” of running an organisation of any size.
And the trouble with numbers is they’re easy to fiddle.
The dealer who services my car is no doubt doing what they do because they worked out the cost of a 60-second phone call is less than the benefits they get from having an NPS of 8 instead of 7 (or however their numbers work out).
But what’s really going on here?
Has it changed my experience in any way? Has it improved the service I received? Is my car magically more reliable after that call than before it?
Of course not. None of those things are true. The 60-second phone call is a crude attempt to fiddle their NPS results, pure and simple.
There are two problems with this:
Firstly, I now know I’m dealing with an organisation which is more concerned with fiddling their NPS than with actually looking after me and my car when it goes in for a service. I immediately suspect that this is unlikely to be the only way in which this dealer prioritises their own interests over mine.
That’s unlikely to encourage me to stay with them for longer and spend more money with them (the theory behind NPS in the first place).
But the bigger problem is that fixing the NPS is not the same as fixing the problem, even if that might look like the same thing on a spreadsheet.
The one-eighth of the problem above the waterline is the NPS result.
The seven-eighths of the problem below the waterline is how the garage carried out the work on my car, how welcoming the service staff are, how difficult it is to book a service appointment at a time that’s convenient for me, and literally dozens of other considerations.
Fiddling the numbers while Rome burns
I get it that all this looks like activity. The boss sees the NPS ticking up. The spreadsheets show a line moving up and to the right.
Everyone is happy.
Everyone except the customer that is.
The inconvenient truth is that until you genuinely engage with customers and solve their issues, no amount of fiddling the numbers is going to help.
Getting your NPS up from 6 to 7 is unlikely to staunch the outflow of customers. Especially if that improvement has been more about fiddling around on spreadsheets than solving real-world customer problems.
Even if you get a short-term bump to the numbers, eventually you run out of road to improve the NPS just by fiddling the numbers. Your incremental RoI on fiddling declines dramatically after the first round of tricks to nudge the numbers on the spreadsheet in the right direction.
That’s when things get really dangerous.
Because typically what organisations with this mindset tend to do is introduce all manner of ideas that they think ought to get customers excited. Even though customers aren’t excited about those things at all, and still haven’t had their original problem fixed.
They are just as unhappy as they were before, albeit with a superficially better result on the NPS.
This sort of thinking has brought us wifi-enabled washing machines, AI-powered toothbrushes, and tech-enabled bins.
All things nobody asked for, needed, or wanted. But all probably unveiled by organisations with NPS results under pressure who thought their customers would be as excited about their wifi-enabled washing machine as the person at Head Office whose idea it was is.
Bear in mind this is the industry which displays a “12 minutes left” indicator on the front of their washing machines to represent an ever-changing timescale which can mean the wash cycle actually ending anywhere between the next 3 minutes and an hour-and-a-half later.
Think about it: the people who can’t tell the time in their washing machine accurately think the thing we need most if to add wifi to our washing machines.
I assure you, a million times more people would be excited about that clock giving an accurate count-down time than they ever would be by the thrill of checking how their spin cycle is going from the queue at Starbucks.
Work in the real world
If you’re serious about improving your NPS (or anything else in your business, for that matter) you need to work in the real world. Not the abstracted world of board reports and KPI dashboards.
But, using the NPS just by way of example, check first of all if that’s the problem you’re really trying to solve.
I’d venture to suggest it isn’t.
The problem that most businesses are really trying to solve is probably the fact that their customer churn is much higher than the level of churn their business model is predicated on.
Most businesses don’t want to improve their NPS at all. What they want is plug the black hole on their bottom line that’s sucking all the cash out their business because too many customers buy once or twice and never come back again.
That’s the reality they are trying to do something about.
But someone in the boardroom who had heard of the NPS just proposed that as a solution and people put all their efforts into managing the abstraction of the NPS instead of fixing the reasons why customers buy once and don’t come back.
The fastest, cheapest, and easiest way to solve that problem is to ignore the NPS completely and go and talk to a dozen or so customers who bought once and never came back again.
Bribe them if you have to – give them £20 in cash or a gift voucher of their choice.
But talk to your actual customers.
Ask them what the biggest single reason why they don’t buy from you any more is. Anything that three or more of those customers say is the problem is your biggest issue. Whatever that is, go and fix it.
And fix it for good – don’t botch a solution or patch something together and hope nobody notices. They all will. And then they’ll trust you even less than they do now, so you’ll just make your job of getting repeat purchases and boosting customer lifetime value even harder.
Once you’ve done that, find a different group of a dozen or so former customers and ask them the same question.
Do the same thing if three or more people in the second group give the same reason.
Then keep going.
After a while you’ll find that nothing will be mentioned more than once or twice by any given group of a dozen customers. That’s when you need to bump up your sample size, to probably 20 or 25, and do the same thing. Fix anything that group says three or more times.
After a little bit longer, you’ll be back to getting issues in 1s and 2s again from each group. That’s when you bump up your selection to 50 customers and, again, fix anything mentioned three times or more.
Do that diligently and when each group of 50 customers is only mentioning issues in 1s and 2s, you’ve probably solved 95%+ of all the problems your customers experience.
Then by all means go back and fix the 1s and 2s you’ve collected during this cycle. That’ll get you up to 99% of all the problems in your business.
Now check your NPS again. You’ll find that, despite doing absolutely no work at all on the NPS, your score will have shot up.
That’s the power of working with reality rather than fiddling the numbers on a spreadsheet.
You’ll make lasting improvements faster, cheaper, and more effectively when you start with reality.
Know when to stop
Once you’ve done all that, and had a few days to pat yourself on the back for the increase in NPS scores, there’s one really important thing you need to do.
Touch nothing.
Don’t be tempted to come back and fiddle with this recipe. Don’t switch suppliers of a key component. Don’t bring in a new production line. Don’t make your product wifi-enabled for no very reason, even if that’s what all the cool kids are doing.
For goodness’ sake, leave it alone.
Yes, you should continue to monitor the situation. You should continue to ask your customers what you can do better. If you hear the same issue mentioned more than occasionally, do something about it.
But in the same way as a Michelin-starred chef is not going to throw all sorts of random ingredients into their signature dish just to see what happens, you should not be messing with the successful recipe for running your business that your customers have just helped you establish.
Now and again, you might experiment with a new dish. Perhaps offer it for free to a couple of longstanding clients to see what they think about it. Put a little bite of it on a tasting menu to get some feedback. Maybe cook it for a chef friend and see what they think.
All of that is perfectly sensible. I’m not suggesting that you let your business atrophy and the cobwebs start to form.
But I am suggesting that, in the absence of a clearly better approach, backed by a lot of enthusiastic customer feedback, don’t mess with things that work perfectly well.
No Michelin-starred chef decides on a whim to throw a Pot Noodle into their signature bechamel sauce one night and serve it as a main course.
Yet, in a lot of organisations, that’s pretty much what they do with what had been a successful recipe up to that point. They feel the need to wifi-enable their washing machines.
Then they wonder why their NPS results are in the toilet again and the business is leaking cash like there’s no tomorrow.
Get a successful recipe, then leave it alone.
Not only will this make your customers happy, it will save you the cost of an army of NPS “experts” who will happily charge you $1,000 an hour to show you how to fiddle your NPS results to enable you to pretend you don’t have a customer satisfaction issue, even though the bottom line of your P&L will be suggesting the exact opposite.
To build your bottom line, don’t start with the numbers. Start with reality.
Fix your customers’ reality, and your numbers will look after themselves.