New weapon transforming retail battlefield

Robert Gottliebsen
JANUARY 15, 2016
THE AUSTRALIAN
One simple technology has been a huge contributor to both the enormous damage Uber has done to the traditional taxi industry around the world and the way Airbnb has revolutionised the global accommodation industry.
In Australia, outside of casinos, very few big hotels are being built. Unless they watch out, hotels will be hit like taxis.
But the revolution that has driven Uber and Airbnb is also set to change telecommunications (including Telstra), and many forms of retailing. From there it will spread through the business community because it’s available to all.
The essence of the technology is measuring customer satisfaction because when a customer sees that others are satisfied, it gives them confidence to transact. That confidence has been a boon to booking taxis and apartments and has been a big boost for Amazon.
Having a customer rating that consumers can trust is going to be very important to many industries. The customer rating measurement that is gaining momentum is the so-called “Net Promoter Score” (NPS), which uses one basic question to measure customer loyalty: “How likely is it that you would recommend our organisation to a friend or colleague?”
The customer must give a mark out of 10 as to whether they would recommend the business. If they score 1-6, they are considered detractors; if they score 7 or 8 they are considered passives and ignored; only scores of 9 or 10 are rated as promoters.
The difference between the percentage of detractors and promoters is expressed as an NPS score of between minus 100 and plus 100. Among the Australian companies that are finding that NPS works is David Tudehope’s Macquarie Telecom. Macquarie says it was introduced to NPS as a result groundbreaking research presented in the Harvard Business Review.
Like most companies, Macquarie Telecom had been doing annual customer surveys for a long time and the ultimate question “how likely is it that you would recommend our company?” just became the 51st question in what was already “too long an annual survey”.
Later, Macquarie decided to embrace NPS completely and put the measurements live on its website.
“We started by measuring the NPS at all the significant customer touch points in a customer’s experience cycle with us. This is critical as it brings out how important all staff contact with the customer is to the customer experience. For example, we now do an NPS measure on how well we handle billing inquiries.
“We focused on achieving a high 40 to 50 per cent customer response rate to our survey invitations to ensure we can provide real-time feedback to the individual so they can identify how they could improve themselves. Our experience is that nearly everyone wants to do their best and this real time feedback allows the individual to make their own changes.
“We also decided to be completely transparent in communicating in real time. The NPS results were placed on screens throughout the office so that staff could see how they performed relative to other team members; teams could compare how they performed compared to other teams, and departments with other departments.
“This harnesses the power of teams in motivating and helping their own underperforming members. Literally, you can’t go to the bathroom without being reminded about NPS as you walk past one of the screens on the floor!
“Celebrating individuals and teams with high NPS scores and great customer stories has been key to our success. We haven’t commented to any poorly performing teams, instead pride and team pressure has done all the work for us.
“We have changed staff hiring criteria to ensure they have a real aptitude for delivering customer service in technical area,” Macquarie Telecom says.
The best companies in the world score in the 70s (online clothing and shoe group Zappos achieves scores in this range). Macquarie Telecom has risen from the 30s to the mid-50s and boasts on its website that Telstra’s and Optus’ NPS scores are much lower.
In time, consumers will require as a matter of course that every company they deal with has a measure of customer satisfaction that they trust. And that measure must be updated on its website on a daily or at least a weekly basis. If NPS becomes the measure that is universally accepted, there will be an enormous change in the way companies are organised and those with low ratings will lose market share — just ask the taxis.
Footnote: While customer ratings were important for Uber, the ability to track the progress of a taxi you booked via an app has been an even greater force in delivering market share to the company. As soon as Uber started to do this, conventional taxis had to respond. They didn’t.