The Only Question That Matters
Surveys are tedious. Focus groups are fickle. That's why Intuit and GE use a radical new research technique to keep customers happy and revenue growing.
By Damon Darlin

(Business 2.0) – This year 12.5 million people used Intuit's TurboTax software to prepare their tax returns. Next year the company wants the number to be even larger. So what's the best way to make that happen? Easy. Intuit asks customers one simple question: Would you recommend this product to friends and family? "If you ask one question, then all you have to do is understand why they said that," says Rick Jensen, vice president for product management at Intuit's consumer tax division. In 2004 such feedback revealed that TurboTax's onerous rebate process and electronic filing glitches left a bad taste in some consumers' mouths. Intuit improved the filing procedure and got rid of proof-of-purchase seals--resulting in a 6 percent year-over-year rise in the number of people who would recommend TurboTax and 27 percent higher unit sales for the tax season that ended in April.

Intuit is just one of many companies that have started to use so-called net promoter surveys to improve the quality of products and services--and boost revenue along the way. The technique, popularized by Bain consultant Fred Reichheld, is remarkably simple: Rather than asking consumers to complete cumbersome questionnaires, it's more useful to ask just the question about recommending the product. Subtract positive responses from neutral and negative ones, and you get a net promoter score that's a revealing barometer of customer satisfaction.

The idea is catching on; General Electric CEO Jeffrey Immelt encourages his execs to use net promoter scores in all of GE's divisions. To boost circulation at the Wall Street Journal, a project is under way to harness the enthusiasm of loyal readers by offering discounted subscriptions that can be given away as gifts to younger subordinates. And at security software publisher Symantec, net promoter ratings will be used to keep customers happy as the company completes its merger with Veritas.

Measure to Improve

At intuit the drive to utilize net promoter scores has been spearheaded by CEO Steve Bennett. "I'm a big believer in the idea that anything that can be measured can be improved," he says. A former GE executive, Bennett uses Six Sigma process management techniques at Intuit, but the transplant doesn't always take; creative types like software engineers and marketers are sometimes reluctant to embrace the cold, clinical rigor of Six Sigma. The idea of net promoters is easier to grasp, Bennett says, because customer satisfaction is a quality everyone appreciates.

After experimenting with net promoter evaluations for 18 months, Bennett brags that his company's net promoter scores are rising--and with them, market share, revenue, and operating profit. This year Intuit expects net income to grow 20 percent to nearly $545 million, on revenue of $2 billion. In 2004, TurboTax's retail market share rose three points to 82 percent. QuickBooks's also rose three points, to 91 percent.

Over at QuickBooks Online, the subscription-based version of Intuit's popular small-business accounting software, net promoter rankings helped general manager Paul Rosenfeld improve his customer support system, which had guaranteed a response to queries within 30 minutes. "That service level had been the sacred cow," he says.

For customers, however, the right answer was more valuable than a quick answer. Effective problem-solving and good interactions with customer-service reps were what mattered most--even among customers who waited as long as two hours for a response. Rosenfeld says the net promoter process "let us focus on the right thing rather than what we thought was important."

The Enterprise Innovation

The Notion of asking just one question to gauge satisfaction has been loudly trumpeted by Reichheld, who's spent his career searching for the key to customer loyalty. He knew that most surveys were too time-consuming to garner a response from busy (but otherwise desirable) consumers. Making matters worse, if such surveys were of dubious value to marketers, they were practically useless to line managers.

The key was finding the right questions--or question--to ask. At Bain, Reichheld had done a lot of work for Enterprise Rent-a-Car, a place that asked very few questions of customers when they returned cars. The most important one, Reichheld found, was "How likely are you to recommend Enterprise to a friend or colleague?" That simple query enabled the agency to identify its most enthusiastic customers and cater to their preferences. And those customers, in turn, broadcast their endorsement to others.

Reichheld seized on this idea and refined it. After surveying thousands of customers about hundreds of companies, he discovered a near-perfect correlation between high net promoter scores and exceptional revenue growth. Most U.S. airlines, for example, were clustered together with low net promoter scores and low (or negative) revenue growth, except one: Southwest. It had high scores and high growth. "The average net promoter score of American companies is extremely low--usually less than 10 percent," says Reichheld, whose book, The Ultimate Question, will be published by Harvard Business School Press in February. "But most managers think they have 80 percent customer satisfaction rates."

Because the net promoter score is a single number, Reichheld says, it's useful for frontline managers. "It cuts through the noise," says Richard Owen, CEO of Satmetrix, the Foster City, Calif., research company that helped develop Reichheld's scoring system.

Some strategy and marketing experts caution that while the net promoter technique may work for basic consumer purchases, it could be less meaningful when applied to products for which a more complex variety of factors influences purchasing decisions. "Recommending something isn't necessarily a good indication of loyalty," says Itamar Simonson, a professor at Stanford Business School. "I fly United Airlines because they have the most convenient schedules. I don't like their service, and I might not recommend them, but I'm still a loyal customer." Others, such as Mark Weiner, CEO of market research firm Delahaye, point out that like any management metric, net promoter scores can be gamed or manipulated. For example, Weiner says, lowering prices is a reliable way to boost customer satisfaction scores, but "it won't do anything for long-term growth."

To figure out what its customers really want, Intuit uses a service provided by Informative, based in Brisbane, Calif., that engages them in online "adaptive conversations." When customers indicate that they would recommend an Intuit product, they're directed to a website and asked to react to statements such as "Stop this purchase/rebate nonsense." The software tests the strength of these responses against those of other customers, so consumer preferences effectively compete against one another. The customer then ranks several leading responses, further defining priorities.

Recently some customers have been telling Intuit they're unhappy that online prices offered to repeat buyers of TurboTax are higher than the everyday discounted prices at big-box stores. Intuit says the complaint will be addressed quickly to turn those frowns into smiles--and, hopefully, more glowing recommendations.

Question and Answers

These companies are using the net promoter technique to find solutions to their biggest business challenges.