ZXI: A New Way to Measure Service
Some time ago, I spoke at the Inc. 500 Conference in Savannah. The biggest perk was to hear the other presenters, such as former President Clinton. The presentation that had the greatest lasting impact on Zingerman’s was by Scott Cook of Intuit.
Intuit makes Quickbooks, Quicken, TurboTax and other accounting software. Cook talked about the tools Intuit used to get on the path to success. The most important was a service measurement tool that he referred to as the Net Promoter Score (NPS).
We do a lot of work around service and service quality measurement; I’ve even written a book about it. But I had never even heard of the Net Promoter Score.
Cook compared the way that organizations typically measure financial performance vs. the way they do—or more often, don’t—measure success with service. The finance-focused people latch immediately on the impact that any given decision or action will have on “the bottom line,” or “net operating profit.” Yet, as he pointed out, profit levels tell only one small part of a much bigger story. We can raise profits but ruin the business. We can have profits but no cash. We can increase short-term profits at the expense of long-term sustainability.
According to Cook, the non-financial segments of the business—i.e. the service leaders—are more often than not unable to counter these profit-based arguments effectively because they have no single, comparable number around which to quickly coalesce. The Net Promoter Score has become to service what Net Operating Profit is to finance.
Service has never been an afterthought at Zingerman’s. It’s one of our three bottom lines (along with food quality and finance). We’ve been measuring service for more than a decade. We teach it, talk it and reward it regularly, resulting in a culture that supports and lives it. Yet we had never agreed on a single service measure that everyone would use as their primary standard of service success.
When I returned to Michigan, I did research on NPS. I discovered that most of the information was in a book called The Ultimate Question by Fred Reichheld. Although NPS is not a cure-all, it is a helpful approach to measuring service quality.
How NPS Works
The Boston-based Bain and Co. did many years of research on customer loyalty and service quality measurements. Their data showed that the single most meaningful survey question you could ask customers that would indicate long-term loyalty to an organization was: “How likely is it that you would recommend this company to a friend or colleague?”
Bain and Co. recommends eliminating the other questions and asking this one “ultimate question.” They use a scale of 0 (low) to 10 (high) for the answer.
People who give a 9 or a 10 response are loyal to the business; their belief in it and the products and services are so strong that they actively say good things. The book refers to them as “promoters.”
People who respond with a 7 or an 8 are called “neutrals.” Although generally satisfied, they are not in love with the organization. Although they do not put us down, neither are they actively promoting us. These people could move to the competition if an attractive offer came along.
Customers who respond with a score of 6 or below are considered “detractors.” Many of these people are sending negative messages through tone of voice or body language as much as via actual words. And the energy and information that they spread about our business makes it less likely that the people they tell about us are going to become our customers.
The Net Promoter Score measures the difference between the number of promoters and the number of detractors. The goal is to consistently increase the number of promoters, and decrease the number of neutrals and detractors. The higher the score goes, the more likely it is that we are taking great care of our customers and creating what others have referred to as “customers for life.”
The formula to calculate the NPS is simply the number of promoters (P) divided by the total number of people surveyed (X), minus the number of detractors (D) divided by the total number surveyed (X). “Neutrals” get knocked out and hence only show up in the denominator.
In other words : P/X – D/X = NPS
So for example . . . say we surveyed 100 people, and we had responses as per below:
That would give us 45 promoters, 30 neutrals, and 25 detractors. 45/100 (people surveyed) = 45 percent; 25/100 = 25 percent. If you subtract the 25 from the 45 you get an NPS of 20.
Is 20 a good score? According to The Ultimate Question, the top service providers fall into the 50 to 80 range. Some industries (i.e. the airlines) have Net Promoter Scores that fall into negative numbers; they have more detractors than promoters. The key is to get the score to go up over time by providing better customer experiences, increasing the number of promoters and reducing neutrals and detractors.
NPS Becomes ZXI
Here, we’ve chosen to call it the ZXI, or Zingerman’s Experience Indicator. Our version of the question is something along the lines of: “On a scale of 0 to 10—with 0 being “no way” and 10 being “in a heartbeat”—would you recommend Zingerman’s to a friend or colleague?” We have slightly different versions in each of the settings in which we operate (retail, restaurant, wholesale, services, online, etc.)
In the time that we’ve used this approach, I have learned one significant thing: It’s about the experience, not just the service.
Asking “the question” provides a sense of the overall experience guests have. The ZXI score takes into account service, food, packaging, pricing, music, smells, art work on the walls, etc. Having a way to measure the quality of the customer’s experience is a great thing for any business.
Neutrals may be satisfied, but that isn’t enough. The “ultimate question” effectively pushes beyond the normal service queries where customers are asked if they were “satisfied.” The data gathered by Bain affirms what we’ve long believed. While there’s no doubt that “satisfied” customers are better than “dissatisfied” detractors, “satisfied” generally translates into scores of 7 or 8; i.e., neutrals. And those scores are nowhere near enough to create lifetime customers. “Satisfied” customers tend to switch their buying patterns fairly quickly, as soon as someone else offers something more convenient or at lower cost. By contrast, people who give us 9s or 10s are much more than satisfied.
The power and value of this word-of-mouth marketing is huge. Promoters are singing our praises of their own volition. Moving people up from 6, 7 or 8 to a 9 or 10 has enormous value. The incremental difference between how a 9 and an 8 talk about us in the marketplace is far greater than the 10 percent gap between the two scores would seem to indicate.
The Work Behind the Score
It’s the work behind the score that counts more than the actual NPS.
The data we put on our “scoreboards” and financial statements are merely a numerical, or visual, representation of a much bigger reality. Improved ZXI scores will show that we’ve done an ever better job of delivering great experiences to our customers. And that happens one experience at a time.
The goal is to:
a) Solidify the positive experience of the 9s and 10s so that they stay promoters for long periods of time.
b) Make improvements to turn the 7s and 8s into promoters too.
c) Find effective ways to work with detractors so that they move up as well. Some examples of how we do that are responding quickly to specific complaints or suggestions (for example, getting T-shirts in the color they want, adding a new flavor of muffins, etc.) We also watch for ways where we might be able to make a change that would eliminate an issue that’s causing stress (fixing the wording on a sign so it’s more easily understood, improving a system to accommodate a special need, etc.)
While we’re committed to making every guest happy, there are some broad issues that come out in responses from detractors that we may choose not to act on beyond pleasing that particular guest. For instance, when we hear from Midwesterners that the Eastern North Carolina barbecue at the Roadhouse is “too vinegary” we will not change that because Eastern North Carolina barbecue is, by definition, made strictly with a vinegar sauce (something most Midwesterners are not familiar with.) We will quickly do something for them—refund money, offer another dining experience—but we would not start introducing non-traditional foods.
Investing in Promoters Pays Off
Investing more and more resources in our existing promoters pays off.
How much should you invest? If we work with the standard service data that customers tell ten people about a bad experience for every one that they tell about a good experience, you can do the math to see how much it’s worth investing in getting someone from the low end of the scoring spectrum up to the promoter level.
With the idea of solidifying the support of the promoters and of moving ‘‘neutrals” into promoterdom, we have started to focus on how to regularly “wow” those who are already in our corner. It’s easy in business to forget to do as much as we should for our best customers.
This emphasis on doing more for our most loyal customers has been great on many levels. It’s much more rewarding to do things to make exceptional Zingerman’s experiences for nice, supportive customers. In the past few weeks, some examples include:
• paying a parking ticket for a regular;
• comping two seats at our next special dinner at the Roadhouse for a couple who pays for seats at most of our special events;
• giving a signed copy of Zingerman’s Guide to Giving Great Service to a guest who complimented me on our service.
Actively doing more for customers who are promoters has already paid dividends. And while it doesn’t mean that we aren’t paying close attention to those who aren’t happy with us, we’re dividing our time in a more appropriate way. Promoters typically come in more often, buy more, and tell a lot more people about what we do. The more we’re around promoters, the more enjoyable the staff’s job experience will be. The culture for customers and staff becomes more positive, all involved are having better experiences, and then even more are spreading the good word-of-mouth.
The “Why?” Behind the Score
Although the name of the book implies that there’s only one question, the “secret” is that there are two questions that make this system work. You know the first question: “On a scale of 0 to 10 would you recommend Zingerman’s to a friend?” The second question is, “What could we do to make your experience even better in the future?” The second question is where we learn ways to change the work to improve our customers’ experiences.
Promoters consistently give much more—and more valuable—feedback on how to improve than detractors do. Customers who are already on our side care a lot about the business, pay close attention to detail, and appreciate the small things that make a difference in food and service quality. Promoters want us to succeed, so they eagerly share thoughts about how we can take what they already like and make it even better.
We do learn from the detractors’ responses too. This is especially helpful when the “detraction” stems from us asking them to tell us only about their most recent experience. That way we can see that, for instance, a momentary slow down on the credit card machine—through no fault of ours—recently earned us a score of 5 (out of 10).
Predictors of Improved Sales
Every improvement that we make, every time we can convert someone from a neutral or a detractor into a promoter, helps to solidify customer loyalty and build an ever more sustainable organization that will be here for years. If we do this work right, our ZXI will go up, our customers’ experiences will get ever better and everyone involved—staff, customers, suppliers, shareholders—will all be better off.
We’re just at the beginning of learning how to use the NPS, or ZXI. In the first six months, it’s helped to clarify our thinking, more effectively invest our energies in improving customer experiences, and build solid relationships with our most loyal customers.
The NPS/ZXI scores are predictors of improved sales. By contrast, financial statements are about the past—they tell us what’s already happened. The data that results from asking the “ultimate question” is based on customers’ experiences to date and are likely to predict what will happen in the future. The better our ZXI numbers get, the more effectively we respond to customer input to make ever higher numbers of promoters, the more likely our sales will increase. And the more we’re working with promoters the more likely it is that our staff is going to enjoy their work, the better our operation runs, and the more likely we are to successfully build the sort of solid, sustainable business model we’re seeking.