Why NPS (No Problems Score) is the metric for CDOs to make their customers happy

May 10, 2016 by Jennifer Kyriakakis

About 25% of mobile service providers have hired a Chief Digital Officer (CDO) in the last three years. Spanning the more recognized roles of CTO and CIO, Digital Officers have a lot of work on their hands, because instead of just focusing on either network or IT overhauls, they’re in charge of re-energizing the entire business.

It’s a lot to ask. The majority of CDOs come from outside of the telecom industry and so their learning curve can be steep and the nuances of telecom can seem institutionalized. But they’re expected to drive sweeping technical, organizational and cultural changes in companies that have historically been slow to move, mired by red tape and legacy, regulation-based processes.

Perhaps most intimidating of all, their performance is being judged by their ability to move the perception of customers in a positive direction. The KPI is one we’ve all become familiar with - Net Promoter Score (NPS). NPS is a sliding scale, ranking the likelihood of a customer recommending the service provider to one of their social group, with increasingly positive scores showing a greater propensity to recommend. Negative scores reflect the likelihood of churn.

Similar to the old TV presenter adage of ‘never work with animals or children,’ CDOs could be forgiven for worrying that they’re relying on their customers – a fickle bunch - to keep them in a job. But, actually that’s their advantage.

They’ve been energized by their ability to ‘push and pull’ changes to organizations that have a different mind-set to the telecoms sector. It might seem when these people join the sector that they’ve been parachuted in to cause as much disruption as possible, and in a way, they have; they have a short amount of time to refocus their organizations from concern for network usage to worrying about what customers who use it are actually experiencing.

In many cases, it seems they’re being asked to drink from a poisoned chalice. That’s because the telecoms sector has an average NPS of just +5 (out of a possible total of +100, this is among the lower NPS scores alongside healthcare and utilities), but newer Digital players (like Amazon, Uber or Netflix) score an average of +50 (this we can term a ‘No Problems Score,’ because customers are already recommending these organizations to their friends).

The sweet spot (or in this case, the Magic Number) for telecom appears to be about +26. But some telecom service providers are adrift. About 10 mobile service providers hit the 50 mark, but the majority are in single digits and some are in negative territory. To improve those scores, we need to explore the possibilities that Digital transformation offers, since it’s directly related to customer experience.

The reason some service providers are in the hole when it comes to the perception of their customer experience is that customers are expecting a whole lot more than service providers are able to offer. These customers (largely Millennials, but really anyone with a touchscreen mobile device) have largely grown up with the fixed Internet, and all that ‘instant gratification’ has taught them to expect the same from their mobile experience.

And that, right there, is what Digital transformation is all about. Although we can summarize that customers expect real-time, instant interactions with their service provider, it’s how these interactions make people feel that’s important. Remember how compelled you are to explore a recommendation a friend will make for music, a movie or a book, and it’s easy to grasp the impact that service providers are trying to make – at the emotional level. And, it’s the CDOs from other vertical industries that are entering telecoms to pilot this type of transformation.

As Apple’s first decline in revenue in years showed, Smartphone markets are saturating. Since the Smartphone is the interface to customer experience, people working in the digital transformation business are right to be concerned about what it might mean for their businesses.

The good news for them is that a rising NPS is a sign of growth in a saturated market. Think of it this way: the only way to grow in a saturated market is to gain customers from competitors, convert them over without dropping price and eroding margins, and then build a relationship that boosts ARPU from these customers. The service providers with the highest NPS will attract the most customers - and it goes without saying - the most revenue where markets have peaked or are plateauing.

The challenges to the CDO when setting the landscape to do this are many. As this diagram, courtesy of Analysys Mason shows, there are many processes and systems that need to move from being static and batch-based (left column) to dynamic and real-time.

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CDOs know that a new service isn’t worth much to a customer unless it demonstrates true value for money, is provided at the moment the customer desires, and is accounted for immediately in a transparent, easy-to-access way direct from the device. In other words, what they’re looking for is a beaming smile on their customers’ faces. Because that’s what makes their customers happy, improves their NPS, and ultimately that’s where the future of their business lies.