Ned Hayes [00:00:01] Welcome to SparkPlug, where we talk to smart people working at the intersection of business and technology. Brought to you by snowshoe your smarter loyalty leader.

Ashley Coates [00:00:13] SparkPlug is very happy to welcome Robert Markey to the podcast today. Rob is a partner in Baine & Company New York office and a leader in the firm’s customer strategy and marketing practice. He is an expert in customer experience and loyalty, new product development and customer service strategies. Rob leads the NPS Loyalty Forum, which we can’t wait to chat with him about. He has published numerous articles on customer experience and loyalty and publications such as the Harvard Business Review, and he is the coauthor of The Ultimate Question 2.0 – How Net Promoter companies thrive in a customer driven world. Welcome Rob to the podcast! 

Rob Markey [00:00:51] Thank you so much, Ashley. It’s nice to be here. 

Ashley Coates [00:00:53] We’re thrilled to have you here. Can you start off Rob by giving us your career background? We’d love to hear about your career history up until this point. 

Rob Markey [00:01:02] Well, it’s actually really boring. I’ve been at Bain and Company for like 32 years. 

Ashley Coates [00:01:07] I saw that that was quite impressive and somewhat rare these days. 

Rob Markey [00:01:12] I suppose it is. I didn’t get the memo that I was supposed to quit and change jobs. I love it. I came to Bain out of Business School, in part because I really was interested in the kind of work that Bain was doing at the time. This is back in the late 80s, early 90s around customer loyalty and customer retention because it resonated with my pre business school work experience. And I kind of approached it with this perspective that I always wanted to work in a place where I could number one, make the biggest impact in the world given my skills and experience and so on. So at an early age, being young at a business school, that seemed like a good place to do that. Number two, where I could learn so much that I could add even more value the next year or five years. And number three, where I liked the people that I was working with and trusted them. And I guess every time I’ve thought about leaving and thought about how would that equation work with another place, I always came back to the conclusion that I was in the right spot. 

Ashley Coates [00:02:15] Well, that’s wonderful. Congratulations on such a history there. 

Rob Markey [00:02:18] Thank you. 

Ashley Coates [00:02:19] If I’m correct, you did work in product marketing for LexisNexis and IBM prior to Bain and Company. 

Rob Markey [00:02:25] I did. 

Ashley Coates [00:02:26] I’m curious to learn from from those experiences. 

Rob Markey [00:02:28] Well, I think the IBM experience was interesting, mainly because it was in a technology organization and it was a sales support role. I think it led to the LexisNexis job because the people who had just taken leadership roles at LexisNexis came out of the division of IBM that I had been working in. And so it was one reason that I ended up at LexisNexis is because I was following leaders from my organization. I think the biggest thing I learned well, I’ve learned a lot of things. First job out of college, right? I learned how to behave in a work environment. That’s one thing. Then I’d say the biggest thing that I learned, though, and that kind of carried me through to today is the impact of what you might call satisfactory underperformance. And what I mean by that is we were a pre-internet like internet did not exist. It wasn’t even an idea, really. We were delivering information over telecommunications in digital form at a time when that was a new thing to do. We were growing at 15 or 20% a year and we were owned by a paper company that was growing at two or three% a year. So by any measure of reference to the paper company, we looked really amazing. What the paper company folks didn’t fully understand was that we were losing market share hand hand-over-fist to our competitor. What they further didn’t understand was that we were not in the technology business, but we were in the publishing business. And so a second lesson I took was about business definition, understanding the basis on which you compete and the importance of getting that right. And then the final thing was LexisNexis is again, I’m going back 35 years. It was a subscription business that also had a huge usage component. So customer retention, customer loyalty and share of wallet all were important determinants of the company’s growth and profitability. And that business model, which in various forms is shared with retailers, with publishers, with financial services firms, with software firms. In fact, most service businesses have some shared characteristics with that. It taught me the importance of customer loyalty as a driver of business success, and it was this sort of serendipity of all these things coming together that led me to really be passionate about customer loyalty and business models, built on customer loyalty. 

Ashley Coates [00:05:01] Wow. Well, I’m sure you’re still using lots of that knowledge and the lessons you learned at Bain and Company. Can you tell us about your role as a leader at Bain & Company and what you do and what you love about it? 

Rob Markey [00:05:12] I mean, I think the main thing that I love is that the work that we do has massive impact on the clients that we work with. Many of the projects and relationships that I’ve had over the course of my career have been turning points for the businesses that I’ve gotten to work with. Companies that were in some cases hated by customers and by the public at large turned into darlings and beloved companies companies that had been beloved and had lost their way. And along the way, you get to do things that both make customers happier, make their lives better and make employees happier and in many cases, create jobs and create value for the economy. So in many ways, it’s very, very rewarding. The other thing that’s really been tremendous about it is that typically in a consulting role, and especially the way that my particular career path introducing new capabilities, changing the way businesses are run, changing the basis of competition. Sometimes the project you’re doing at a moment in time is very small, but the arc of change that you’re driving is actually very big for an industry. And I’ve had the good fortune to be able to introduce new ideas and new ways of doing business to large numbers of companies and influential companies, and that’s been very rewarding. 

Ashley Coates [00:06:37] Great. Well, and I think one of the biggest ways you helped companies change is through using the net promoter system. Can you tell us about this system and how it relates to what many people have probably heard of the Net Promoter score? 

Rob Markey [00:06:51] Yeah. Well, most people have heard about NPS or the Net Promoter Score, and if they haven’t heard of it, they’ve answered a question from a company or many companies. 

Ashley Coates [00:06:59] Right! 

Rob Markey [00:06:59] That is something like how likely would you be to recommend Company X to a friend or a colleague or a relative or whatever? The history of this is that back when I started my career, there really were no agreed upon measures of customer loyalty. And in fact, the concept of customer loyalty was more of a notion than it was anything that anybody could measure or point their finger to. The best that we had was like customer satisfaction scores that came from market research. And the problem with having no agreed upon methodology, no metric, no way of gauging loyalty is that it then makes it difficult to make investment decisions. It makes it difficult to judge success. It makes it difficult to learn and accelerate the path of value creation. So the first problem that we were trying to solve was finding a simple and reliable way to gauge the loyalty of a customer or group of customers. That would be simple enough to be understood by everybody in an organization linked to economic value, such that decision makers would trust it and not place a heavy burden on customers. That’s kind of a, you know, you’re, like threading a needle when you’re putting all this. 

Ashley Coates [00:08:17] Very much so. 

Rob Markey [00:08:19] And it’s actually why Net Promoter is based on the score is based on a single question, because what we figured out was even though you could get much more precise and measurably more predictive value out of a multiple question index, what we found was that it wasn’t enough better than a single question to justify the extra burden on customers and the confusion it created inside of organizations. When you’d have one question answer up and another question answer down and people asking about the weighting of the different factors in a score. So we actually went out and we said like, Well, let’s find the one question that you could ask that would have the most predictive capability across lots of different industries. And it just so happened against our hypothesis is that the likelihood to recommend question was the one that empirically proved the most predictive of customer behavior. Now that in itself didn’t get us to a net promoter score that just got us to likelihood to recommend is a good question. Where we got a net promoter score was when we were trying to look at competitive performance and say, You know, when you aggregate all of these individual customer ratings and then you compare across companies, does the company that has more customers with high likelihood to recommend? Does it perform better than a company with fewer customers with a high likelihood to recommend? And lo and behold, it did. It turned out, though, that when we were doing the regression analysis and trying to explain variations in growth rates relative to likelihood to recommend when we subtracted that what we now call the detractors the low scoring, low likelihood. Recommend people from the highest scoring, the net of those to the net promoter score was significantly more predictive of future company growth. And so that’s where that score came from. Now the system is based on the observation that just having a score doesn’t really do anything. That’s a little bit like stepping on a scale every day, recording your weight and expecting that somehow the weight is going to go down. You have to do other things, and those other things are the parts that make up the system. So it’s things like instead of thinking about the score is the most important thing. Thinking about the feedback you’re getting from an individual customer and delivered to an individual employee of the company as the primary way that people can learn a little bit like the way you learn a sport or the way that you learn any skill and trial by trial. Time by time you get feedback on how you’re doing, and through trial and error, you learn the techniques that, for example, result in a tennis serve going into the court or a penalty kick in soccer going into the upper right hand corner of the net. That’s the same thing with learning how to serve customers. And so core to the net promoter system is individual pieces of feedback delivered immediately to individual employees with all the granularity, all the raw information. So why did you give that score? What could we do better? The follow up with the customer is part of the system. When a customer’s feedback merits follow up, you call them back and say, Explain to me actually why you feel this way. Tell me the story. What happened? Why? What can we learn? What would would be better for you if we tried this? Would that work? Can I share your feedback with somebody in the organization who might learn from it? And then group learning is part of the net promoter system, so groups of employees have gotten feedback from their customers and they talk with each other. How are we doing? What could we be doing better? How can I learn from the things that you are doing that are successful and importantly, what’s getting in the way? Is there a technology barrier is their information that we don’t have to is a policy in the way of serving customers well. And then those things, the things that aren’t under the front lines control but need systemic action, policy process, people pricing product, lots of peace. Those things go into what we call the outer loop of the net promoter system, where they’re assigned to people in the organization to address, track, to resolution and where feedback goes back to the employees who raised the issue or the customers who raised the issue to say, Hey, we heard you were doing something about it or we heard you were not doing something about it, here’s why and demonstrating that we’re actually listening and taking action. All those things come together to make the system a scalable, impactful way of using customer feedback to guide learning and action throughout organization. And I think that’s why it’s been powerful, because it’s not just measuring, it’s doing. It’s improving. 

Ashley Coates [00:13:09] That’s fascinating. Rob, I’m curious if you have been surprised by the success and the pervasiveness of the Net Promoter score. And do you think there are any major companies or websites that don’t use the Net Promoter score? Do you think there are companies using the score without the system? 

Rob Markey [00:13:30] Those questions answered themselves. So yes, there are companies that don’t use NPS at all. Increasingly, they are in the minority. I think that, you know, Wall Street Journal did one study, and I must say it’s fortune. I think Fortune did another one where they figured out was that something like two thirds or three quarters of the Fortune 500 companies are in some way shape or form, telling people that they’re using NPS as a way of gauging their, unfortunately, the popularity of the metric. And frankly, I take blame for some of this because we named the article that we published on this first way back in 1991. In the books that we published, we probably put too much emphasis on the score, but many, many, many companies measure the score without A) doing it right, measuring it right, and B) without implementing a system around that that drives them to action. And as a result, I think the minority of companies that are really using the full system are doing quite well with it. Others varying degrees of success with net promoter. And unfortunately, because so many more companies just measure maybe a little bit of blowback in terms of misuse of NPS and misunderstanding of what makes it powerful. I feel bad about that. I feel surprised by how popular it’s been, and I feel proud of the impact that we’ve had in those companies that have really fully adopted the system. 

Ashley Coates [00:14:58] Absolutely. Well and so you said you published your first article in the early 90s, 

Rob Markey [00:15:03] Sorry, early 2000s I should have said,. 

Ashley Coates [00:15:05] Oh,

Rob Markey [00:15:05] 2001, I know I misspoke. 

Ashley Coates [00:15:08] So all these years later, after co-inventing this metric, is it still the right metric? Any second thoughts about this formula all these years later?  

Rob Markey [00:15:19] I like to paraphrase Winston Churchill. The Net Promoter is the worst customer loyalty metric ever invented, except for all the others that have been tried. 

Ashley Coates [00:15:29] I was wondering if that’s what you’re going to say. 

Rob Markey [00:15:31] Yeah, I mean, it’s good and bad. A good thing about it is it’s simple. It’s easy to understand for both customers and employees, and it correlates quite well with the actual loyalty driving behaviors that create value for shareholders and for companies. What’s not so great about it is that it relies on asking customers for feedback, which is imperfect in itself. It’s always just a proxy for what you really want to know, which is buried in someone’s mind and their intentions, and ultimately expresses itself through behavior. And therefore you’re using this proxy, their opinion to predict what will happen. It’s also imperfect because nothing that minimizes the burden on customers and simplifies for employees is quite as predictive as something more rigorous, more involved. And it’s imperfect because its overuse has led to declining response rates and frankly, practices at companies that lead to misinformation and therefore bad decision making on the part of the companies. I think if people guided their use of net promoter by three simple rules, the world would be a better place. Rule 1, Everything you do with the customer should enhance the relationship between the customer and the company, including how you collect feedback from them. So don’t ask for feedback from a customer who has no feedback to share. Alternatively, do ask when they are likely to have something to share. If you ask and they tell you something that requires follow up, actually follow up. So everything you do should enhance the relationship. Number two, accelerate and enhance learning and improvement. So don’t undermine the feedback by making the stakes so high for the score that people challenge it, are tempted to game it, or I like to say defraud. Don’t bury it in statistics so that people can’t learn from the individual events and experiences. And then finally, the third rule is every action you take should grow the value of the customer base in its entirety, meaning you don’t buy scores by just giving back. Customers are over serving them or giving discounts. Don’t undermine the future relationship value by doing something today that pumps up your score or something else. So I think that all three of those rules are common sense rules, and I think business leaders are remarkably remarkably good at rationalizing silly behavior that doesn’t follow simple, common sense rules and justifying it on the basis of the complexity of the business that they’ve created, which usually is delusional in some way, shape or form. 

Ashley Coates [00:18:31] Well so our sponsoring company SnowShoe, creates customer loyalty solutions for brick and mortar businesses. Is there any difference in how physical retail uses NPS vs. online retail? 

Rob Markey [00:18:45] Well, any business where you know your customer and you know every single action they take, so any fully digital business has a bit of an advantage and information advantage over a business where customers can either remain anonymous or can interact with your business in ways that you cannot observe directly and link back to them. So brick and mortar retailers have a challenge because as a customer, when I walk in the door, I’m anonymous. When I browse through the store, I’m anonymous. And alternatively, when I am browsing through an online retailers website, every click, every mouse movement can be, they aren’t always, but can be observed and tracked and correlated with future behavior. So one of the advantages of rewards programs, and you’ll excuse me if they avoid the term “loyalty program” well, I like to reserve loyalty for a particular meaning. But one of the big benefits of rewards programs is that they make a deal with the customer that says if you’re willing to identify yourself to us and share with us certain information about yourself, then we can offer you a better deal we can offer you more relevant information about our products and services, and we can even in some cases offer you higher service level or unique experiences that are not available to other people. And so the rewards end up being a part of the contract, if you will, between the company and the bricks and mortar retail and the customer. It is sort of an exchange of information for everybody’s benefit. And in that way, bricks and mortar retailers get opportunities to have a more comprehensive view of a customer and their behavior than they would otherwise have if a customer walked in the door, paid cash and left. So that’s the primary difference is the availability of data to a digital only player versus a bricks and mortar player. Other than that, I mean, it’s really the same game. And what I believe is our reliance on surveying customers to get feedback from that will decline over time as we get better and better at using signals from customer behavior to gauge customer loyalty and to learn and improve. We’ll always need customers to talk to us and tell us because there’s an emotional and experiential component that you just simply cannot capture through clicks, streams or visits or items browsed on a rack. Having said that, there’s just huge, vast unmined stores of information that companies have at their disposal that they should be using. And today, because of the improvements in computing technology, the reduction in the cost of data storage, the advances we’ve made in analytic capabilities. We’re building predictive models of customer loyalty and behavior. And we’re also creating synthetic NPS feedback for both bricks and mortar and for digital players that supplement their net promoter feedback and allows them to make better decisions for more customers than they could if they were relying only on surveys. 

Ashley Coates [00:22:02] And what is your particular definition of loyalty? 

Rob Markey [00:22:06] For me, loyalty is really the propensity of a customer to buy more. Stay longer to forgive a company when it makes mistakes to advocate on a company’s behalf to others, meaning tell friends. So loyalty is really an emotional connection between a customer and a company built on trust and value that results in the customer, getting more value from the company and in turn becoming more valuable to the company because they’re willing to pay for the value they’re getting. I’m sorry for having a long winded definition, but I think that it’s too easy for people to default to oh, loyalty is repeat purchase, no repeat purchase as a result of other things. And sometimes repeat purchase is a result of having a captive customer, sometimes repeat purchases, a result of a contractual relationship. Sometimes repeat purchase is a result of lack of supply from a competitor. Repeat purchase in itself is not loyalty. It can be a result of loyalty. 

Ashley Coates [00:23:17] Thank you. 

Rob Markey [00:23:18] Preference is an expression of loyalty. 

Ashley Coates [00:23:21] Absolutely. Well so today you lead the NPS Loyalty Forum, which is a group of about 35 senior executives from loyalty leading companies around the world. So will you tell us more about the mission of this group? And maybe you can share with us some other companies that are involved? 

Rob Markey [00:23:37] We formed the NPS Loyalty Forum in the early days of Net Promoter because our clients wanted to share experience with each other. Really, what happened is people who are new to net promoter wanted to gather experience from people who had been doing it for a little while and the folks who are the pioneers, the early adopters. Back then it was G.E., American Express, Allyance, Charles Schwab. I’m probably forgetting one company. Anyway, they got together and said, Look, we can keep hosting all of these other companies that want to learn from us, but we’d kind of like to learn too. And it would be a lot more convenient for us if we could group up all of these other companies that want to learn from us and kind of do it many, too many instead of one to one. And so at their request, we formed this experience sharing group and we said, Look, we’re going to run this for your benefit. We’re going to make it so that you’re paying fees to cover the cost of running it, but no more than that. And the benefit we’re going to get out of it is we’re going to be along for the ride. We’re going to get to learn with you and will contribute our own learning and knowledge. But this is really your deal. Your group. And originally we had like an outside moderator who wasn’t an expert in NPS and turned out they liked me moderating better than they liked the other guy, which I, was not intentional. Anyway, it’s been now 18 years. I mean, it was crazy long time. Some of the original members left their original companies, went to other companies and brought us with rejoined from their new company. In fact, we have one member who is now on his fourth company. And his original company is still a member. You know his successor. So it’s this very tight group of people who under non-disclosure agreements share very openly the things that they struggle with, the things that they’re doing well and not just with the relationship to net promoter itself, but the spirit the earning of customer loyalty and employee loyalty, understanding customer economics, decision making and culture change in large organizations. So it’s kind of been this amazing learning experience for me because it’s clients and non clients, former clients who I wouldn’t probably be hearing from in as much detail. And so get to learn about what worked and didn’t work about the recommendations that we’ve made over the years and how enduring or not they are. And as a result, they have generated a lot of the innovation and change in the net promoter system since it was first introduced Huddles. Huddles in the Net Promoter System Group learning were actually a result of a few things that happened in the forum one was an electronics retailer sharing process that they do every day. Actually, we’ve written about this so I can talk about it was Apple, you know, saying we do this daily download every day and we talk about our customer feedback and our experience and what we can do better. It was a result of one of the hospital systems that was an early adopter talking about how they were doing something similar. And then we looked at ourselves, Bain and Company, and we said, Boy, you know what? We do the same thing. We just call it something else. Just one of many, many examples of innovations in the system that really came out of that group and their regular open and honest discussion of what’s working and not working. 

Ashley Coates [00:27:07] Wow. That kind of open dialog and sharing is pretty impressive. 

Rob Markey [00:27:11] I’ve gone to thousands of conferences, not thousands, but hundreds of conferences and most of the kind of things that you go to summits and conferences, they really are people in sort of guarded ways, beating their chests and telling you about their successes. And there’s a PR part of that that they have to do like, we’re often many of the people who are in the audience or who are participating are also customers in that company. The forum is different because these are people who get to know each other over time, who are operating under a non-disclosure agreement and therefore can speak openly with confidence that what they say is not going to be shared in a way that might be embarrassing or upsetting. And they’ve created a culture. The members have done this. They’ve created a culture where it’s just expected that you’re going to be really open about the things that aren’t working, the things that you’re struggling with, and get advice from other people who are struggling with the same things and maybe solved it or maybe didn’t.

Ashley Coates [00:28:12] Over these 18 years at the Forum. Have you sensed an evolution of these large companies, their approach to the customer and that customer experience and their relationship? 

Rob Markey [00:28:23] Well I mean, back at the beginning, these were pioneers. These were companies that were early adopters of net promoter, and the people who were doing it were in some way poking around in the dark, saying, Let’s try this and figure out what works. Today, net promoter is a well-established methodology. It’s something that is known to work. It’s something that has well-developed mechanisms and procedures and processes. So there’s a little bit less of that kind of exploration. On the other hand, lots of other things have changed in that time period. The state of the art of customer analytics has changed pretty significantly. Our ability to build predictive models that supplement net promoter feedback from customers in the form of surveys, the understanding and knowledge about employee net promoter or employee engagement, and its role in creating the kind of enthusiastic, energetic, creative workforce that delivers great value for customers. All that has evolved over time. And so the topics that we’re discussing these days back in the early days are very technical, lots of details about how to collect feedback and all that stuff. We don’t talk about that hardly at all how you calculate the score. We don’t really talk about how to drive action, how to get sustained investment, how to create culture change, how to navigate the challenges of converting a customer base from human to human to self-service in digital channels. That’s the kind of stuff we spend a lot of time. 

Ashley Coates [00:29:57] Mm-Hmm. So you. The book The Ultimate Question 2.0 with Fred Reichheld, I’m curious what big updates have been made since the first edition? 

Rob Markey [00:30:08] Well, it’s funny that you ask it that way because it’s now 11 years since since the publication of the Ultimate Question 2.0. The big innovation at that time was the introduction of the system and it’s like the earlier version of its current state. I think what’s changed since then is a real acceleration in digital adoption. The importance of self-service channels and digital engagement. And from my perspective, the thing that I’ve been most passionate about over the last five or seven years, the understanding that fundamental business systems need to change in order for companies to truly be customer centric. What I mean by that is there’s a new book that I am not the coauthor of, but I’ve contributed to, it’s called Winning on Purpose, and it was just published by three of my colleagues. I deeply, deeply believe the accounting systems that we have almost stopped examining, you know, they’re so fundamental to the way we view our businesses and the functional silos that we’ve created for developing expertize and for executing efficiently across lots of different skills and capabilities in your organization. Those two things combined to undermine customer relationships when you have the folks running contact center responsible for reducing the cost of the contact center as a percent of sales year over year. That’s a good thing until it’s not. The issue is that the cost the budget is the one thing you can really easily see. What you can’t see is how, for example, understaffing, the contact center and letting average speed of answer drift up during peaks during short periods of the day. But for meaningful numbers of customers or driving average handling time down, which reduces costs a good thing on some level, but ticks off a bunch of customer like those things have downstream impacts that are not borne by the head of the contact center, they’re borne by the head of sales, they’re borne by the product owners, and they don’t hit this quarter, they hit next quarter or the quarter after or three quarters from now. Those things we are blind to because of our organization structure and because of our accounting system. And so what I think is most important that we’ve been working on lately is new ways of measuring and managing the financials and the decision making process. The operating models of companies that allow you to balance cost and budget with customer value, which is ultimately what creates shareholder value. We bring those into alignment.

Ashley Coates [00:32:57] Right. Well, that’s so wonderful. Thank you so much, Rob. I do have one last question for you, which is what do you hope will be your legacy? What would you like to be remembered for? 

Rob Markey [00:33:06] I am very clear on this. If nothing else, I mean, and that’s a big thing to want. I would like to see leaders of businesses, shareholders, employees and customers measure the success of businesses based on the value they create for customers and the resulting value of the customer base, rather than through the lens of product PNLs, functional budgets and stock price. I think the world would be a better place. I think customers would come out better. I think employees would enjoy their jobs more. I think there would be more innovation. And I honestly believe businesses would be more socially conscious if they were gauging their success based on the value they create for customers and therefore the value of their customer base. And I want to actually drive that change. I want to see that happen in my career, which is not that many years left. So I’m very, very ambitious about that. 

Ashley Coates [00:34:10] Well, I think you’ve done a lot for that mission so far, and we have a lot of retailers who listen to this podcast. So I know they’re really going to enjoy all the knowledge you shared, and we really appreciate you joining us today. 

Rob Markey [00:34:21] Well, I hope that I have some minor influence on some of it. And if they ever if anybody ever wants to talk about this and how they can make that happen in their company, I would absolutely be thrilled to have that conversation. 

Ashley Coates [00:34:33] Wonderful. How should they reach you? 

Rob Markey [00:34:35] They can find me at Bain.com or I even have a little website, robmarkey.com. Heck, they can google my name. 

Ashley Coates [00:34:44] That’s wonderful. Thank you so much for joining us today, Rob. So great to chat with you. 

Rob Markey [00:34:49] Thank you. Actually, it was really a pleasure. 

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