This article was commissioned and first published by Feed Compounder magazine. Although written for readers in the animal feed trade, I hope it's relevant to others in agribusiness and farming.
The veterinary profession as a whole may not be renowned for setting the pace in managing relationships with customers, but it does have one or two beacons of excellence. A recent conversation with one of these has made me aware for the first time of the Net Promoter Score (NPS) concept.[1] Although a quick Google search finds critics as well as supporters, NPS is genuinely helping drive this practice’s client service towards consistent excellence and may well have uses in the animal feed sector.
As explained by proponent Mike Thorne from FarmVetSolutions in Leicestershire, the concept involves asking customers a single ‘Ultimate Question’ defined by the system’s creator Fred Reichheld: “On a scale of zero to 10, how likely is it that you would recommend [Company X] to a friend or colleague?” where 0 = no chance and 10 = definitely.
Clearly, the question needs asking by someone independent from the company and at least 30 customer responses should be obtained each time it’s done, which is twice yearly in the vet practice’s case. Responses of nines and tens are classified ‘Promoters’; sevens and eights are ‘Passives’; and the remainder, ‘Dectractors’.
Based on the system’s extensive research base rather than hunch, Promoters are loyal customers, enthusiastic even, who will keep buying as long as product/service quality and value for money are maintained, and the need it satisfies endures. They may also pass on positive word-of-mouth endorsement to others. Passives are unenthusiastic, not particularly loyal and therefore vulnerable to better offers from other suppliers. Detractors are unhappy customers who are probably spreading negative word-of-mouth right now and likely to take their business elsewhere soon. Types of business likely to have lots of Detractors are banks and mobile phone firms, who manage to stay in business largely because of the perceived pain to customers of changing. Those with many Promoters would include Apple, Alfa Romeo and Keenan.
However, much more important than how others fare is putting the system to good use in your own firm. I’ve criticised benchmarking here previously and return to the same theme: The best benchmarks to use are your own targets and aspirations for the business. They can be truly useful for trend spotting, staff alignment and promoting internal change-for-the-better.
This is how our vet friend uses it. The practice gets an independent person to contact a random sample of clients every six months until they have 30 responses. To Detractors and Promoters, they also ask one follow up question and transcribe the responses verbatim. This question is, “That’s quite high/low, can I just ask please why you give that score?”
The Net Promoter Score is simply Promoters minus Detractors. Another user in the UK farm arena is Bill’s Fine Feeds, where the latest results were 40% Promoters, 35% Passives and 25% Detractors, giving a NPS of +15. This is down by five since last time and has already prompted re-training for all staff and directors, together with dual-calling by a director with the reps to all Detractors and Passives to attempt, before it’s too late, a break-out from the mediocrity rut in which the feed supply relationship is clearly stuck.
The targets now at Bill’s Fine Feeds are 25 then 35 in six and 12 months’ time respectively. The NPS system was adopted there because Bill felt it was easy for everyone to understand that they were striving simply to create more Promoters and fewer Detractors as a result of consistently high quality products and service, good value for money and caring, supportive relationships with every customer. “These are much more tangible things than any other customer satisfaction indexes I’ve seen,” says Bill.
Where the system perhaps falls down and attracts its own detractors is in making comparisons between different businesses and sectors. It also may be less relevant to washing powder sales than animal feeds and veterinary services. But within a business like Mr Thorne’s or Bill’s, it’s routine use has value.
Crudely, it can keep staff on their toes. More strategically, it can also be used to align everyone’s efforts in the right direction towards healthy profits (when you make money and strengthen loyalty and goodwill) rather than unhealthy profits (exploiting customers at the expense of goodwill and loyalty)…hence the Apple and banking metaphor.
In a survey of 1,256 UK adults and their buying behaviour, the London School of Economics found that word of mouth advocacy (as measured by NPS) and negative word of mouth were statistically significant predictors of sales growth.[2] It suggests achieving the target of a 20-point increase in NPS at Bill’s Feeds could be worth a 3% increase in annual sales growth. Over and above existing growth in BFF’s £12 million turnover, that’s about £360,000/year of additional sales at negligible increase in overheads. Readers know better than me how much additional gross margin from this is likely to find its way to the bottom line.
Moreover, the LSE boffins also suggest that the NPS arising from asking employees whether they would recommend working for the company to friends, and investors on investing likewise, are predictors of productivity and share performance respectively.
And icing with a cherry on top is that NPS is very low cost and easy to get under way. If you’re interested in more details, look up reference 2.
New knowledge transfer paradigm: A whole brain at a time
For any business or sector of business to remain vibrant, innovative and competitive, dead wood needs to be cleared and replaced with vigorous new growth. In the worlds of hairdressing or fast food take-aways, motor repairs or indeed animal feed supplies, this is a fairly simple matter: Those not good enough to be able to pay their bills go out of business; and the barriers to entry are low enough to allow ambitious start-ups to have a go in their place.
One consequence of this is that knowledge transfer, and the improvement it creates, happens automatically and in the most effective way there is…a whole brain at a time. However, the contrast in farming is illustrated on two facing pages of the 19th November Farmers Guardian (FG) and couldn’t be more stark.
On page six is a report that the Princes Rural Action Programme to reduce the number of dairy farmers leaving the industry. Put this another way, it seeks to keep current farmers farming, regardless of whether this is deserved, by benchmarking costs through Dairyco’s Milkbench+ service and working with experts to reduce costs and improve performance. All very laudable too, until you see on the facing page a story from the NFU Tenants’ Conference where, according to FG, president Kendall said that for the industry to change with the times, ‘the best people’ were needed to meet the challenge of producing more and impacting less. Dead wood and new growth indeed.
An arguably realistic conclusion is that, with a handful of notable exceptions, farming is more or less a closed shop. A sitting elite (tenants and owner-occupiers alike) is being helped to preserve their occupancy at the expense of potential new entrants…except that some of those in situ are not very elite at all. Why else would the same issue of FG need to carry an article titled “Simple steps to reduce forage, straw and concentrate wastage” containing advice from the first year of a dairy OND course. Moreover, farmers who do want to improve performance can surely avail themselves of Milkbench+ and experts without the help of a ‘programme’.
In a similar vein, the industry has numerous knowledge transfer teams working diligently to push knowledge upon farmers, regardless of whether they want it or can see its merits. How much easier would it be for the industry to open up genuinely to survival of the fittest (actually, I think Darwin said it was adaptability that really mattered rather than fitness)?
Then, as opportunities open up for new entrants to take the places of those no longer adaptable or fit enough to earn their own survival, knowledge transfer can take place automatically, a whole brain at a time. For those who might feel threatened by such competition for places in the industry, it could be a whole lot worse; just spare a thought for corner shop proprietors with a new Bestco Local opening for business in the next street. Now that would test anyone’s survival skills.
More from Bill’s Fine Feeds: Dirty tricks or legitimate competition?
Meanwhile, there’s actually a bit more to tell about what Bill’s Fine Feeds are up to. In parallel with pulling their own socks up using the NPS system, they’re working on giving rivals some rather tougher competition that they’re used to.
Bill has engaged a specialist agri-trade market research and direct marketing contractor to investigate and define their trading area’s customer base in detail. In addition to establishing livestock types, numbers and production systems by farm location, the project involves finding out who is/are the main feed suppliers. Can you see where this is going yet?
Once this is known, a different contractor is engaged to ask each farm with more than a certain number of livestock the Ultimate Question about their main supplier, then the ‘why?’ follow up. The resulting knowledge means Bill’s sales team is armed to the teeth with a unique insight into their rivals’ customers. They will know which are the Promoters and so can avoid the futility of trying to turn a loyal customer against their preferred supplier, no matter how attractive their 360-cow dairy unit might appear on the surface. Instead, they can target the soft underbelly of their competitors, confident in the knowledge that Detractor customers are not particularly loyal and so should be easier to win over with genuinely high quality and value-for-money products, an excellent service ethic and a supportive and respectful relationship.
Dirty tricks or legitimate competition? Depends on your viewpoint I suspect. Not in doubt is that this may be coming to your region sooner rather than later, if it’s not happening there already.
-ends-
References
[1] Mike Thorne, 5 December 2011. Interview with the author. FarmVetSolutions, Uppingham, Leicestershire. Net Promoter, NPS, and Net Promoter Score are trademarks of Satmetrix Systems, Inc., Bain & Company, and Fred Reichheld.
[2] Dr Paul Marsden et al, September 2005. Advocacy Drives Growth. London School of Economics.
