Case Study Summary from YouTube Video posted July 30, 2012 on company presentation by Jagdish Parihar (OLAM International, LTD) discussing Customer Net Promoter Score (NPS)
Jagdish Parihar, Managing Director & Global Head Natural Fibres, presents the development of NPS in a commodity environment, B2B, where price is the sole consideration of the customer. How it has generated superior outcomes on customer loyalty and profitability.
OLAM (named 22 years ago) is a Hebrew word meaning “the world, transcending boundaries, the universe”.
Jagdish covers OLAM’s growth story, business model (how they created differentiation), journey using NPS, sharing key learnings experienced using NPS, how to overcome challenges and a roadmap of what a company should look at implementing NPS.
Growth Story: OLAM began in 1989 with 2 employees, 4 customers, and 1 commodity in 1 country. In 2011 OLAM has 18,000 + employees, 12,300 customers, and 20 commodities in 65 countries. OLAM has grown over 50% in 20 years moving from a trader to an international supply chain manager involved in the production and processing of commodities. OLAM’s integration gives credibility and security to the final customer. Commodities overall have grown 2-3% per annum; basically the rate of population growth. OLAM’s 50% growth is the result of stealing market share from the competition. In 1995, OLAM relocated to Singapore, timing that coincided with significant growth in Asia. OLAM was able to be closer to the customer, which positioned them better compared to competitors from Europe and the Americas.
These values are critical for insuring a superior customer experience and, in turn, superior outcomes. Because OLAM is a preferred partner they are able to garner higher market share.
High engagement scores are directly related to customer loyalty. OLAM’s score is 83%. The top 20 company’s score 88% and most companies average 60%. Companies with higher scores are more likely to have well satisfied customers and can expect repeat business.
In Phase I OLAM started with cotton commodity using NPS to strategically manage its customers. It was challenging with a fragmented, diverse base. They knew customer loyalty was key in a stagnant market; if you lose customers, you lose market share. If customers become detractors, you are in serious trouble. OLAM continued to work to refine their process. They ‘reinvented’ Phase I and moved ahead with good results. They survey both their agents and their customers.
Staff at OLAM had said surveys were a waste of time, they already knew everything the customers would say. But they found out there were many things they did NOT know. The surveys identified many things customers wanted; information, outcomes and other needs. This drove actions that led to higher customer satisfaction. There were more calls to customers, more interaction. They could advise their customers on market dynamics. It became an affordable customized tool to drive change. Getting customer feedback drove action and this closed the loop. Without taking action, getting the feedback is meaningless. Customers are not likely to give feedback again if you’re not doing anything about what they want.
Parihar said he always wants to hear bad news. He wants to know what his problems are, know what customers are detractors, and where they are losing business so he can figure out what to do about it. He wants staff below him to have daily feedback so they know areas they need to improve to get more customer loyalty, “stickiness” with their customers.
OLAM faced a number of challenges using NPS. The biggest was ‘pushback’ from their team. They saw it as a new management fad, a waste of time, too much paperwork. They were also afraid because getting the information creates ‘transparency’. On the customer end, they had to deal with biases against surveys, ‘survey fatigue’, the idea surveys normally mean nothing. It’s important a survey is designed well and communicated well to gain good outcomes. This is critical. Need to educate customers on survey benefits BEFOREHAND.
NPS can add big value to your business through customer retention. The lifetime value of whether a customer is a promoter or detractor is very significant. NPS is a warning system; it provides alerts and helps get customer data in one place. NPS identifies issues causing detractors, customers at risk. Timely action can help stabilize business so you don’t lose market share and this generates a healthier bottom line. Don’t ‘get lost’ in the score, it’s just a measure. Use the feedback and information from the surveys to drive actions. It’s important to identify and save accounts where you are not performing to the customer’s expectations. Identifying this has to be timely so issues can be resolved the moment you get signals its happening, before it’s too late. A matrix is useful to correlate lower NPS scores with customer size to focus resources where there is the biggest risk. It is also important to look at feedback from different customer levels; buyers may be happy with your service, but not the production people.
In every market there are opinion leaders whose opinion is listened to by others. Just by word of mouth they can spread positive feelings about your business. By activating promoters you can use opinion leaders to influence the entire market. This can be done in a targeted, focus manner. Talk to them, try to influence them and work hard on their issues. More promoters help lower services costs, requiring less time and irritations with calls and other problems. Problems are solved more amicably. More detractors mean more time, more costs. Better NPS translates to more promoters. You get a ‘pass’ to ride over some mistakes without much penalty from the happy customer. Detractors tend to magnify even smaller mistakes.
Management MUST be committed to follow the NPS discipline. The tone is set from the top. It is non-negotiable and not optional. Management must drive NPS and give clear guidelines to the organization. They create alignment in the organization. Where there is alignment there is peak performance. It is critical to influence your team, get consensus; share the vision, share the roadmap.
First phase found they didn’t communicate enough with customers. Take the time to make personal calls to help them understand the NPS program. Need good communication to get good outcomes. This is part of the closed loop process.
What will success look like? How do we rate ourselves? Are we doing a fantastic job and what key behaviors demonstrate that? The DNA of customer efficacy is built into an organization. Your people should be talking about customer satisfaction, your customer-centric culture, and how they can influence customer loyalty.
In that mode, decisions are made through the lens of the customer experience as provided by their feedback. The behavior becomes imbedded and you become a highly learning organization. The closed loop system becomes a part of your organization: FEEDBACKLEARNING- ACTION. This helps achieve superior economics of operation. Market share grows, customers are happy, your company gets more attention, no one is talking bad about you, you get better business terms, your sales team is happy and motivated. The result is you’ve secured a unique competitive advantage for your company that competitors cannot easily replicate. You can build on this advantage and scale up your business. Don’t rest on you past laurels… KEEP looking for feedback, KEEP learning from it, KEEP acting on it.