FREEDyourMind

The ACSI Results Are In

For the second year in a row, customer satisfaction with the e-commerce sector has risen, with a year-over-year increase of .5% and an impressive score of 80.0 on the American Customer Satisfaction Index’s (ACSI) 100-point scale. The latest score of 80.0 brings e-commerce within striking distance of its highest aggregate score ever: 80.8 in 2003.The fourth quarter 2006 ACSI E-Commerce Report measures the following industries within the e-commerce sector, chosen because they make the greatest contribution within e-commerce to the U.S. GDP:

• E-retail
• Online auction
• Online brokerage (formerly e-brokerage)
• Online travel companies

(The report on the e-business sector, including portals, search engines, and news and information sites, is released every August). Such a high aggregate score for the e-commerce sector is impressive considering the intensely competitive landscape. E-commerce continues to outpace most other sectors of the economy in terms of satisfying its customers. For example, the overall ACSI e-commerce score (80.0) exceeds the 2006 cross-industry ACSI score (74.9) by 7%. In fact, the ACSI e-commerce
sector score outstrips all the other service sectors measured by the ACSI, often dramatically, including e-business (76.5); offline retail (74.4); accommodation and food services (75.8); healthcare (74.1); information services like cable, satellite, and telephone service (68.6); utilities (72.4) and finance and insurance (76.0). Clearly many of the e-commerce companies measured by the ACSI have figured out how to satisfy customers, even though it is a relatively new sector compared to some others measured by the ACSI. E-retail, the most mature of the industries measured as part of the e-commerce sector, continues to have the highest customer satisfaction score, up 2.5% to an aggregate score of 83. Barnes & Noble (88) and Amazon (87), lead the category.

Online brokerage, which has surged forward this year, had the highest aggregate increase in year-over-year customer satisfaction: 2.6% (from 76 to 78). This increase was driven primarily by large increases in customer satisfaction by two online financial service sites: Charles Schwab and E*TRADE. Charles Schwab continued its upward trend and reported a remarkable 8.1% increase in customer satisfaction (from 74 to 80), while E*TRADE saw its score go up 4.2%, from 71 to 74.

In online auctions, eBay maintains a clear lead (80) while the overall online auction industry remains flat from last year (78). Expedia (76) continues to lead the online travel industry, despite dropping one point in 2006. Faced with increasing competition from supplier sites and lack of differentiation among the aggregators, the online travel sites’ aggregate customer satisfaction score fell 1.3% in 2006.

Congratulations to a couple of the best performers, Barnes&Noble.com and Amazon.

Get the latest results and commentary on the results at the following:

http://www.theacsi.org/index.php?option=com_content&task=view&id=17&Itemid=165

http://www.theacsi.org/index.php?option=com_content&task=view&id=168&Itemid=162

http://www.foreseeresults.com/Form_ACSIFeb2007.html

And the Punch Line Is . . .

A funny thing happened to me on the way to …. answering the phone.

I had rented a car from Enterprise Rental Car a week or so ago. I received a call from someone representing Enterprise that had a few quick questions for me. Hmmmm, sounds like a survey, sure, I’m game. Then I remember, isn’t Enterprise Rental Car one of Reichheld’s biggest case studies in his book on Net Promoter? Sure is.

So, the individual on the phone proceeds to ask me a couple of questions. Now, I read Reichheld’s book, and while there were some interesting things in it, and some things I didn’t agree with, I was excited to experience the “magic” first hand.

Now before I go any further, I had a great experience with Enterprise Rental Car.

So, I wait with baited breath…and here comes the first question.

And the question is (and I will paraphrase - since I don’t have recording equipment on my phone, oh we miss the Nixon days)…”Overall, how satisfied were you? Completely satisfied, somewhat satisfied, ” and so on. Ok, maybe the magic comes in the next question, and here it comes,…”How likely are you to call Enterprise again? …”.

And you can imagine my shock. I answered the questions, hung up the phone, and quickly dug out Riechheld’s book from behind my bookcase. I quickly flipped through the book and yes, my memory was right, Enterprise Rental Car is the dominant case study in his book.
So what gives? Let me summarize the FACTS.

• Reichheld’s books says Satisfaction surveys don’t work.
• Reichheld’s book says the one question you need to know is “Are you likely to recommend…”.
• Reichheld’s book uses Enterprise Rental Car as the big case study to show how his Net Promoter works!
• Enterprise Rental Car does not ask the “recommend” question, but rather asks a satisfaction question and a retention question.

And the punch line is….Reichheld’s book is a fraud.

How can we believe him, when his biggest case study goes against everything he says?

Makes you wonder about the business books of today!

  Comments

1.    
         The ONE Question To Ask Customers « Marketing ROI: Whims from Ron Shevlin      
          
         February 15th, 2007      |       5:50 pm      
      

   […] in marketing, marketing ROI, banking, marketing strategy, customer loyalty, marketing measurement. trackback Larry Freed really tees off on Fred Reichheld and the Net Promoter Score concept on his blog,calling the book a fraud. I think Larry is too harsh — but I would assert that “likelihood to refer” is not the ONE question to ask. […]

        
2.    
         Sarah      
          
         February 16th, 2007      |       1:37 pm      
      

   Oh, that’s too funny. So the Enterprise RentACar survey is not one question, and it is not “how likely are you to recommend?” So do they still use NPS? Or do they think that is NPS?

        
3.    
         Glenn (Customer Service Experience) Ross      
          
         February 19th, 2007      |       12:22 am      
      

   Okay, you’ve got your copy handy, and I don’t, but I thought Fred mentioned that Enterprise didn’t follow Fred’s method. Didn’t he say that Enterprise’s survey was home grown and had evolved over time?

   Regards,

   Glenn

        
4.    
         Larry Freed      
          
         February 19th, 2007      |       2:03 am      
      

   Reichheld makes the “assumption” that if they were completely satisfied they would be a promoter. Now, we all know what assumptions can lead to. But why would you base your biggest case study in the book on an assumption? Why would you take shots at satisfaction programs and then base your biggest case study on a company that asked a satisfaction question?
   -Larry

        
5.    
         Raghu      
          
         February 21st, 2007      |       7:29 am      
      

   Well, I agree with you Larry that those Enterprise C-SAT questions sound contrary to what you would expect after knowing Reichheld’s reference to them in his book.

   However, I still do think the most important customer facing question is - “would they refer the company / product / service to friends, family etc”.

   After running the world-wide customer service network & organization for a leading direct to consumer company that you often quote as an ACSI winner and now running the global operations (including CS) of another B2C venture, it is the same question that we have always focused on over the years, maybe with different connotations.

   Focusing on just the satisfaction aspect in surveys and compiling the positive response rates with number of people who were happy with service (ex: 80%, 85% etc like ACSI) etc only gives you so much. It can only make you feel happy in a myopic way with where you are today, and is hardly actionable…..

   What is clearly more important is the number of people out of all responses “who were actually neutral or even dis-satisfied” which I consider to be the inverse correlation (and hopefully less than 10%) of the positives. Driving that expressed neutrality or customer dissatisfaction rates to zero using a six sigma customer centric process is probably more meaningful….

   So in essence, if you truly want to have your customers be “Evangelical” and not just merely satisfied with your service, every company will have to focus on the customer enthusiasm to actually be a referral for them.

   I guess that is what Reichheld was trying to highlight in a roundabout way using NPS etc etc….where clearly Enterprise might have let him down -:)

   Raghu

        
6.    
         Larry Freed      
          
         February 23rd, 2007      |       4:39 am      
      

   Raghu, Excellent comments.
   Word of mouth is an important metric. A decent proxy for positive word of mouth is likelihood to recommend. NPS takes a decent question and pollutes it by the scheme of promoters and detractors. It introduces a very high margin of error.

   The other important point is that recommend only monitors positive word of mouth. It is a dangerous assumption to think that those that don’t recommend are “bad profits”. They are not a positive word of mouth, but that doesn’t mean they are a negative word of mouth. That requires a different set of questions.

   Our solution to measuring satisfaction is a model of satisfaction that includes drivers of satisfaction (product, price, etc.), overall satisfaction and future behaviors (recommend, return, purchase intent, etc.). You need this model to really have a handle on your customers.

   Satisfaction will drive recommendations, loyalty, purchase intent. So, recommendations are an outcome of satisfaction. The complete model of satisfaction (drivers, satisfaction and future intent) provides the depth to make the results actionable.

   Word of mouth is a great marketing tool, but not a proxy for satisfaction or loyalty.

        

 

 

Making User Reviews Work For You, Not Against You

I had the opportunity to be at the Shop.org conference in Orlando last week and listen in on an interesting presentation on User Reviews moderated by Patti Freeman Evans and presentations by Lorna Borenstein of Yahoo, Jacob Hawkins of Overstock.com, Brett Hurt of Bazzarvoice and Sarah Fay of Isobar.

The point was made by Lorna about the strong impact of advocates. She used a great analogy, a drop of water and how it creates a wave much larger than the original drop. The question was posed, “How do you get advocates to promote you?”

Now, user reviews, community sites, blogs, etc., are great ways to enable that advocate promotion. But, word of mouth, while a potentially powerful accelerant, is only an accelerant when it is positive. So, while it is great to enable your advocates, don’t lose focus on the prize.

The prize is satisfied customers. Our research consistently shows that customer satisfaction drives positive word of mouth. Also make sure that when you are measuring word of mouth, you not only measure positive word of mouth, but also negative word of mouth. Simply looking to see if people will recommend doesn’t not measure negative word of mouth. You cannot assume because someone doesn’t recommend that they are a negative. There are many reasons (the product, the person, etc.) why people won’t recommend, but will still be great, loyal customers.

So, enable your advocates, but also make sure you make your visitors and customers word of mouth a positive influence on your business, not a negative influence. It all starts with satisfying your visitors and customers.