Customers Will Advocate for, but Not Recommend, Utilities
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As utilities continue to evaluate customer measurement scores, the most debated one I hear is regarding Net Promoter ScoresSM (NPS®). Promoters of the theory say that if a customer states he or she would recommend a company, then that company would benefit from a loyal customer base and third-party recommendations. For a retail company where customers can select a vendor, this makes perfect sense. Detractors of the measurement doubt NPS’s applicability to a monopoly where there is no choice but to use a utility for service. It is like recommending someone should use electricity.
How Accurate Is NPS in Predicting Actual Promoting Activity of a Utility?
The Utility Trusted Brand & Customer Engagement™: Residential study surveys 130 utilities and asks the NPS recommendation question. From that data you can calculate NPS in the normal manner (% of 9–10 ratings minus % of 0–6 ratings x 100). However, the following graph shows how NPS performance in no way predicts customers making positive comments about the utility.
The promise of high NPS leading to actual promotion by utility customers holds true only 3% of the time. So, high NPS really doesn’t create any value to the utility. Take a look at Utility X—I will refrain from calling out the true name of the utility on the above graph. This utility has a low positive comment to NPS ratio relative to its peers. While it scores respectably on the NPS calculation, they have few customers making positive comments about them. The NPS approach may work well for a retail company where customers have a choice and recommendations make sense, but from a regulated utility perspective, there is not a discernable benefit to setting a goal on an NPS calculation.
A Better Measuring Stick: Net Advocacy
It is clear that “promotion” is not a goal that a utility should target. Customers expect to trust their utility, which can prompt them to advocate on behalf of their utility with positive comments, or at least make fewer negative comments. The difference between positive and negative comments is what we call a Net Advocacy Score. The next chart shows strong correlation between net advocacy and Brand Trust.
Managing and tracking Brand Trust is the key to customer advocacy. In the case of Utility X, it has a slope that correlates with customers expectations and utility performance. In other words, Brand Trust leads to predictable customer actions and is in-line with Utility X’s customers’ expectations. Customers will then begin advocating for their utility, which provides great benefits to the utility.
Another benefit over NPS of tracking Brand Trust is the fact that Brand Trust leads to fewer negative comments being made by customers, and so, fewer utility complaints to manage, as illustrated in the chart below.
Brand Trust—The Most Important Management Performance Measurement
Brand Trust “promotes” advocacy among customers as well as keeps the utility in good standing with their regulators through fewer complaints. Of course, high Brand Trust also relates to increased usage of lower-cost account service options and many other financial and operational benefits, which makes it the most important management metric in the utility industry.
If you want to know about how to create customer advocacy by building and tracking Brand Trust, then click on the link to our Utility Trusted Brand & Customer Engagement: Residential study.