Behaviors Versus Intentions

A colleague forwarded me two emails he recently received — one from Marriott, the other from Capital One. The common thread: Both firms asked (and incented) him to refer his friends and family to those firms.

Seems common and simple enough, no? Yet, when you think about it, both firms are bucking the trend.

While there are (seemingly) throngs of Net Promoter Syndrome sufferers out there spending buckets of money to collect, analyze, and disseminate data about their customers’ intentions, along come two smart marketers trying to influence (and presumably measure) actual customer behavior.

What makes this approach so much superior to the NPS methodology? It:

  1. Is simple (“how many referred us?) — not like a 10-point scale
  2. Can be measured in real-time — or, at least, more often than surveys
  3. Can impact all customers — not just a sample
  4. Drives (and measures) behavior — not intentions

    and the absolutely best reason….

  5. Directly impacts the bottom line — not indirectly, through correlation

Measuring NPS is a huge waste of money. Why ask customers about their likelihood to refer, when you could be asking them to refer?

And I’d like to thank my colleague, who knew I’d find this blogworthy. Unless, of course, he was hoping that I’d apply for another credit card.

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9 thoughts on “Behaviors Versus Intentions

  1. For the longest time I have always said that the most important measurable in business was referrals. Its the true measure of Love for your Brand. I think when executives focus on referrals it causes them to look at what’s really important and it also takes a lot of effort.

    My only concern with referrals is that Americans social circles are shrinking as are the size of their immediate families. SO while referrals are the ultimate in Kudos, there may be fewer of them to get.

    I think as companies begin to realize this, they need to do more even based marketing around a lifestyle component to get people more connected with each other. Then build referral networks from there. Unless the social issue is addressed first the referral problem might remain at a trickle.

    Still with all of this being said, the most effective thing I am seeing out there with referrals is between college age kids and their parents. Its amazing at the recommender position these kids have and for the most part its going un-tapped.

  2. Speaking of Behaviors vs Intentions, look not further than PFM adoption for yet another example. The numbers bear it out: roughly 25 million copies of PFM software have been sold while only 1 million people actually use it. (OK, these numbers are educated guesses and based on actual data the sources of which I cannot remember. Still, they’re likely not far off.)

    What does this mean? Lots of people recognize the need to organize their finances but very few actually follow through. That is, they have the *intent* to organize but not the *behavior* to do so.

    Various factors may contribute to this, one of which is product usability and availability — two factors being addresses by the recent slew of online PFM providers (i.e., Mint, Wesabe, Yodlee, etc.) Having quick and easy access (internet) with more automation (data aggregation) will no doubt attract more users to the PFM camps. Whether this is enough to really move the needle on mainstream adoption is the question. I have my doubts.

  3. Hill: Whether your numbers are right or not, it wouldn’t surprise to find that the ratio of owners to users of PFM software is 25:1. And I agree with you that “whether [this] is enough to move the needle” remains to be seen.

    But “mainstream” adoption may not be the goal of the PFM providers, nor may it be needed for them to succeed. Mainstream, to me, implies a majority, or close to it. It may simply take a “critical mass” — a relatively small percentage of the market, say 10-20%, but very active segment.

  4. Ron, you’re right to raise the question of “how much (adoption) is enough” for PFM to be considered a success. I’d say it depends on the business model.

    The new (dare I say Web 2.0) consumer internet sites seem to be angling towards more of a media/lead generation business model. Media is a tonnage game — you need tons of volume, be it in the form of clicks or impressions, to generate enough revenue to create meaningful profits. Not that this is the wrong business model — I certainly don’t think consumers would pay for web PFM — but it does raise doubt in my mind that enough consumers will adopt in order to make the media model a success. Anyway, it will be fun to watch.

    Love the blog. Keep up the great work!

  5. Ron,

    I am sitting in a Marriott room as I read your latest NPS bashing blog entry. I am a Marriott Gold member. That means I stay at least 50 nights a year with them. I am loyal.

    Since I became Gold I have experienced all manner of love from M. Room upgrades, gifts, shnacks, you name it. I don’t have to be BRIBED to recommend them (or as you call it – incented).

    NPS has the power to transform an organization into a customer-centric organization. By asking how likely I am to recommend (rather than paying me to) and listening to WHY I do or don’t recommend is key. I recommend Marriott because of their consistency, cleanliness, thoughtful amenties (geared to the business traveler) and variety of accomodations.

    If you get people to recommend for 25 bucks or a George Foreman grill (or whatever the incentive is) you haven’t created a service culture, you’ve just given away cash and prizes.

    I mean really – what type of person responds to that? Hey, Denise, I’ll give you $25 if you refer someone to Marriott. Yuk. Feels icky.

  6. Ron,

    Do you remember the old Smith Barney ad tagline, “We make money the old-fashioned way. We earn it”? The implication is there are [less noble] ways to make money by not “earning” it.

    The same is true of loyalty. Incenting people to refer might make commercial sense but it doesn’t earn loyalty; it buys it. This is the formula behind all rewards-based loyalty programs. The result is an arms race among competitors: who can build the best rewards system to keep customers locked in (and get more)? Case in point: airlines have been perfecting frequent flyer programs for decades, but customer service in the industry is generally deplorable.

    Intentions are measures that, when connected to underlying predictive experiences and attitudes, offer a powerful system for understanding how to earn loyalty. And, whether people want to accept or not, the fact is that when intentions are measured correctly, they are generally predictive of future behavior in the aggregate.

    So, you can either join the rewards arms race, or you can create true customer loyalty the old-fashioned way: you can earn it.

  7. Brian — Thanks for commenting. Actually, I couldn’t agree with you more. To me, there are two types of (or maybe paths to) loyalty — emotional loyalty and economic loyalty. The SB “earning it” notion leads to the emotional type. And I agree that emotional loyalty is a far stronger bond that economic loyalty.

    However — you don’t build or create emotional loyalty by asking customers if they’ll refer you. It’s simply correlated to growth (or so say the proponents — others have been unable to replicate those results).

    My contention is that BEING a customer advocate (e..g, being perceived as doing what’s right for the customer and not just your bottom line at the expense of the customer) is a better measure of emotional loyalty than asking “will you refer us” (which, apparently, a number of firms, or people within firms are paying customers to say).

    Denise’s comment that Marriott has “earned” her loyalty just goes to show that if a firm focuses on BOTH types of (or paths to) loyalty, that they can generate superior profits.

    Focusing time, money, and effort on calculating NPS is a potential waste of those resources.

  8. Heck, my loyalty CAN be bought 🙂

    Case in point–I’m a member of a wine club. Each quarter I receive a case of wine. I love it when UPS comes with that case. I was asked to refer friends/family to the club, and I filled out the card, knowing that a few of my friends would be interested in a wine club that offered pretty good wine at great prices. Lucky for me, someone responded to the offer and joined the club.

    The next quarters’ shipment was FREE. A whole case of wine, for free! You can bet that I’ve referred just about everyone in my Rolodex, in the hopes that someone else will join and I’ll get another free case.

    This is a great example of how to incent referrals. The pay-off to the referree is significant. And, even without that incentive, I’ll always have a soft spot in my heart for that company that gave me a free case of wine.

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