Warning – this is a long one with plenty to chew on. Grab a cuppa and a biscuit and settle in….
I mentioned this survey briefly over the weekend. Thanks to Turbin I’ve managed to get hold of the actual report and it makes some very interesting reading.
The subject of this study is the concept of Promoters and Detractors and a performance measure called Net Promoters Score, as recently published by the Melbourne Business School’s Mark Ritson. As he explains, the concept is fairly simple, but it’s become an increasingly important tool in the businessman’s arsenal.
Net Promoter Scores (NPS) are calculated by asking a sample of customers how likely they would be to recommend a brand to others. The proportion of those who think it unlikely they would recommend the brand (Detractors) subtracted from the proportion that are likely to recommend it (Promoters) produces a single number known as a Net
…..This report presents the results of 2000 face to face interviews with a national sample of Australian residents.
It is indeed an exceedingly simple concept. Are your customers throwing you bricks or bouquets?
The report looks at a number of different industry sectors, but of course, the one we’re interested in here is the automotive sector. I wish there was some good news to report, but it’s about as bad as it gets for Saab in Australia.
First though, here’s a bit more background for the report:
Most companies pride themselves on having a “loyal”and “satisfied”customer base. In reality, however, many companies confuse a lack of complaints with a truly happy, loyal customer.
Proud of their loyal customer base – does that sound familiar?
There are some star companies in the USA with very high NPS like Harley Davidson (+81) and Amazon (+73). But the growing database of international NPS research shows that most companies struggle to reach an NPS of +5 meaning they have almost as many Detractors in their customer base as Promoters. In some cases, whole industries fail to produce a single company with a positive NPS –creating a whole market filled with disappointed, unhappy consumers.
Unfortunately, the autotmotive industry is one where it is possible to have a positive NPS. If it weren’t, Saab’s result would be a little more understandable.
The result has a bearing on the company’s ability to grow, which has big implications for a company that needs growth, like Saab.
Net Promoter Scores have been collected in America and in the UK for several years and the scores appear to show a remarkably clear correlation with business growth….. In most of the industries that they examined the company with the highest NPS grows at more than twice the rate of the industry average.
In the UK, a team from the London School of Economics has observed a similar
relationship for banks, mobile networks and car manufacturers. The LSE team discovered that an increase of 7 points in a company’s NPS equated to a 1% increase in business growth over the industry average. Companies in the UK study like HSBC and Honda with a high NPS grew much faster than their competitors. In contrast, companies like T-Mobile and Fiat with a lower NPS grew at much slower rates than their industry average.
As mentioned, this is a relatively new business measurement, but it’s gaining a fair bit of traction in many parts of the business world. Latest fad or genuine crystal ball? Time will tell.
Software developer Intuit, which began measuring Net Promoter Scores two years ago, boasts that the score has helped them drive revenues, market share and profits. Both Business Week and the Harvard Business Review have recently reviewed NPS research and concluded that it represents an important new business metric. It provides a simple, comparable measure of customer satisfaction and future business growth.
Now, I have to stress this right now, in big capital letters:
THIS IS AN AUSTRALIAN SURVEY ONLY
The results will quite likely be very different in Sweden and in the UK. Other markets may be similar to ours, but you can’t draw direct conclusions about other markets from this data.
First, a little about the rating system. This is waaaaay simplified, but should give you an adequate idea.
Respondents were asked to rate products they’d recently purchased or had experience with on a scale of 1 to 10. Those that responded with an answer in the range of 9-10 are considered to be Promoters of the brand. A 7 or 8 means that you’re a ‘neutral’ and unlikely to promote the brand. Score a 0-6 and you’re likely to be a Detractor from the brand. The final score is simply Promoters minus Detractors.
It sounds harsh at first, but if you spend tens of thousands of dollars on an item you want to be more than 80% happy with it – correct?
The authors provide some theories about the results for the automotive sector.
First the success stories:
What can you say about the German motor industry that has not already been said? It does not take a statistician to observe a strong correlation between German parentage and positive customer relationships in the Australian market.
German cars appear to satisfy their owners far more than their Asian or Australian rivals. More than half of the owners of the four leading German marques are Promoters. They will actively encourage others to buy the brand and are more likely to buy their next car or a second car from the same company.
Perhaps even more impressive is the remarkably low number of Detractors that these brands have. More than a third of Holden drivers in the sample were Detractors and they will spread an enormous amount of negative word of mouth about their car. Contrast that with either BMW or VW who have almost no Detractors to speak off. Their whole customer base is either passively content or a Promoter of the brand.
It is important in a category like automotive to recognise the crucial importance of low numbers of Detractors for a brand. Detractors spread more than 80% of the word of mouth on a brand –we are much more likely to tell our friends bad things about our products than the good things. For a major social purchase like a new car, this can have a major impact on sales.
Detractors also take up time and cause enormous friction for employees. Working at one of BMW’s dealerships would probably prove to be significantly more enjoyable and satisfying than working for Saab or Ford where staff have a much higher probability of encountering Detractors on a frequent basis. It’s easy to underestimate the long term effects of Detractors on service staff. In many cases, Detractors will take up a disproportionate amount of service staff time and leave staff feeling tired and unhappy with their role. This leads to high staff turnover which, in turn, results in poorer service from newer, inexperienced replacements. This then creates more Detractors and a brand is trapped in a vicious cycle in which a weakened consumer brand causes a marked deterioration in the employer brand which then harms service.
In the case of BMW or Audi, it is the exact opposite. Better products beget more and more Promoters in the customer base. These Promoters are easier to serve. The service staff can therefore focus on exceeding rather then just coping with customer expectations and the circle continues. Great products, happy customers, great service.
VorsprungdurchTechnik – Progress through technology
There’s so much in there that relates to Saab here in Australia that I don’t know where to start – and this is just commentary on the winners! We haven’t got to the commentary on the disappointments yet.
I’ll cover that now as it ties the Saab story together nicely.
For Australia’s traditional motor manufacturers the news is not good. Both Ford and Holden are struggling to compete with foreign imports from Asia and Germany when it comes to NPS. Holden, to be fair, had a slightly higher proportion of Promoters in its sample than Ford and as a result its NPS and prospects are slightly better. But this is cold comfort for a vital Australian brand that is much lower than at least eleven major competitors that have significantly higher NPS……
……Saab is, however, dead last in terms of NPS in Australia. There are many potential explanations for this position. One possible reason is that Saab’s operations in Australia are handled by Holden –a company that struggles to generate positive NPS for its own brand and which is probably too busy and too strategically distracted with this mission to manage the additional challenges of Saab.
Some blame should also be placed at the door of General Motors, the parent company of both Holden and Saab. The problems facing the world’s biggest car manufacturer are enormous. There are multibillion-dollar issues associated with labourcosts, overheads, supplier problems, dwindling market share, plummeting share price and competition from the Far East. But GM also suffers from one of the most prevalent barriers to customer orientation that a company can face: it has too many brands.
Aside from Holden and Saab, GM owns and markets ten other brands. It is difficult enough for senior managers to build a strong culture of customer orientation in a company with a single brand and a single target market. But GM’s matrix of multiple brands, across multiple markets through multiple channels makes customer leadership all but impossible.
GM’s marketing supremo Mark LaNeve recently told Business Week: ‘(Do) I think we
have too many brands? No, but we have to manage them a lot better.’ But therein lies
GM, Holden and Saab’s problem. Too many brands invariably leads to bad brand management, poorer products, bad service and eventually very low NPS. In GM’s case, the equation could not be simpler. Too many brands equals lower sales, satisfaction, profits and NPS.
I think the author has summarised the situation for Saab in Australia pretty succinctly. I’ll leave the situation about brand numbers alone as it’s not necessarily an issue here in Australia where GM promote Holden and Saab only. Hummer will come shortly.
One of the most relevant points about Saab is made in the discussion about the winners. The service experience with Saab has declined markedly since admin for servicing and spare parts was taken over by Holden a few years ago.
I know of some people that had spare parts orders in the computer system at this time. These orders were lost – gone completely. And worst of all, there were no records whatsoever, so customers couldn’t be notified about delays etc. It was a case where customers would find out about the problem when they called to see where their part was.
One thing that the authors fail to mention is the slice of blame that should fall on dealerships. Many Saab dealers in Australia are Holden dealers that have had Saab thrust upon them. They don’t necessarily see it as important and the customer experience for many recent Saab buyers has been pretty similar to the experience of a customer purchasing a $15,000 Holden Barina. I don’t want to sound snobby here, but there is a vast difference between the two customers and Holden’s folks haven’t recognised this yet.
Just the potential for developing brand-loyalty should be enough to convince them.
Fnally, vehicle servicing. Many of you would have read comments from a guy here named Saabologist, who I nickname ‘the fudgepacker’. I call him that because he left his job as a Saab Master Technician to buy into a fudge making business with his Mrs (nicknamed “The Pants”).
He left out of frustration at being unable to service his Saab clients properly and the continuing pressure from the dealership’s management to cut service times. Put simply – he was treating Saab customers as special and management were content to see them as cattle.
Let me reproduce this section again:
In many cases, Detractors will take up a disproportionate amount of service staff time and leave staff feeling tired and unhappy with their role. This leads to high staff turnover which, in turn, results in poorer service from newer, inexperienced replacements.
This is a familiar story. I heard a similar tale in Sydney a month or so ago.
This is why independant Saab repairers do so well. They’re generally master techs that have had it with the dealerships that don’t allow them to make their customers happy.
If there’s a sillier situation going ’round I don’t know what it is. Selling a car is just one part of the experience. Dealerships make as much, if not more, on ongoing service. Why you’d cut into that revenue stream and thereby threaten your own ability to keep it going for the future is beyond rational thinking.
There was a retirement at GM Australia around 12 months ago. I can’t remember the guy’s name but he was as close to the top as they get. In an unguarded moment he let slip with a comment that was picked up by a journalist nearby. The comment was to the effect of “Saab? That’s the brand with more models than customers”. This is the uphill battle that Saab have had to fight in Australia – the kind of support they’ve received.
Thankfully, Saab have been able to defy the negative NPS and lift Australian sales in 2007. Saab Australia are working very hard to make lemonade out of the lemons they’re dealt by GM here. But as this study shows there’s still a hell of a lot of work to be done and some of it is out of Saab Australia’s control.
Here’s hoping that the hard yards are indeed being done and that with better quality cars coming out and better customer experience, Saab can pick up some more Promoters.
How would you rate your Saab experience from 1 to 10. Are you a brand promoter, a detractor, or a neutral?