It is in tough times, rather than good, that the strongest client relationships are forged.
As you adapt your advisory business to the changing needs of your clients and prospects in the current period of uncertainty, your firm’s approach to its client insight programme is even more crucial than usual.
There is near universal acceptance that regular research into client needs is beneficial for any business. And yet, too many banking and b2b professional businesses fail to establish the right foundations for their client insight programmes. In some cases, research methodologies aren’t providing sufficiently deep insight to drive action or to identify the steps that firms should take to grow relationships.
The result? Some firms have found themselves asking, ‘Is our client insight programme fit for purpose?’
In our consulting work with business banks and professional firms, frequently our starting point is to suggest how businesses can sharpen their client research, which prepares the foundations for subsequent efforts to transform margins and performance through stronger client focus.
A common symptom of poor b2b client research is the overreliance on a few, narrow metrics, many of which were originally designed to assess b2c relationships.
One example is the Net Promotor Score—the NPS.
Applying customer research metrics to the b2b services world? Handle with care.
The research methodologies used in customer insight in retail industries have been developed comprehensively over decades. They are consequently more advanced and have a more established track record than their equivalents in the institutional and b2b services sectors.
The very large customer data sets that are examined in the b2c and products worlds also lend these methods greater robustness than can typically be achieved in the b2b services world—such as by leading commercial banks, asset managers, law firms and business services providers.
But, simply ‘importing’ and deploying b2c methods to b2b institutional relationships may result in patchy and at worst, incorrect, analysis. Why?
- B2b client relationships are often institutional in scope with multiple contact points on both sides. The decision to buy often rests with several client stakeholders, influencers and procurement teams, rather than with a single ‘customer’. Even main decision makers often look to gain widespread support for buying decisions among their peers. This dynamic needs to be understood. B2c insight methods emphasise the importance of individual customers—because, mostly, there is only one buyer. But in b2b firms, one individual’s relationship with another individual does not guarantee purchasing activity or loyalty. B2b firms need to build relationships with a wider group of influencers to achieve this.
- Professional and Financial Services firms commonly have fewer, higher-value clients than Consumer companies. While b2c research emphasises robust quantitative methods—including sentiment and regression analysis—to generate insights into customer relationships, b2b firms often struggle to capture enough data points to make these methods viable. In such cases, b2b firms rightly rely more on open-ended, qualitative methods to understand how to nurture and grow their client relationships.
- B2c research often underplays the importance of the relationship manager or key partner in b2b firms. When b2b clients choose to retain a service, they ‘buy’ both the firm and the individual that leads the relationship. In a b2b context, it’s therefore crucial to explore the relationship a client has with both the firm and the key individual(s) to understand fully key metrics, such as satisfaction, loyalty and advocacy.
Are you a Head of Client Service or a Director of Sales / Business Development in Wealth Management or Commercial Bank or a professional firm who wants to energise your Client Research & Insight programme?
Are you seeing stronger competition in your sector and want to understand how you can differentiate your organisation and grow revenues through stronger clientbase analysis?
If so, start a conversation with Gulland Padfield. To find out more about our ideas and case studies that link Client Insight to organisational transformation and our recommended process to build or sharpen your Client Insight Programme to deepen client relationships, contact William Gault on +44(0) 203 051 2295 or start a conversation at firstname.lastname@example.org
The Net Promotor Score.
The Net Promoter Score revolves around a single question. Clients are asked: ‘How likely is it that you would recommend [firm] to a friend or colleague?’ The scores ranges from 0 to 10, where 0 indicates ‘not at all likely’ and 10 indicates ‘extremely likely’ to recommend.
Respondents are then categorised into three groups: (i) those giving scores of 9 and 10 are labelled ‘Promoters’; (ii) ‘Passives’ score 7 or 8; and (iii) ‘Detractors’ score 6 or below. Finally, the Net Promoter Score is calculated by subtracting the percentage of Detractors from the percentage of Promoters.
Should Net Promoter Score be the keystone of your b2b client insight programme?
It’s intuitively true that clients who actively promote your organisation to their peers should drive enquiries, meetings and pitches, some of which will result in new client relationships. So, exploring the levels of advocacy among your clients isn’t unhelpful. But advocacy is only one aspect of a b2b client relationship—particularly an advisory one. Over-dependence on one metric risks creating a deep misunderstanding of the strength of your relationships with your most valued clients.
While advocacy is a key component of your client relationships, a developing body of research has now raised some doubts about the strength of the NPS methodology, which have particular implications in the assessment of your client relationships. A summary of the weaknesses often leveled at NPS and metrics asking about recommendation include:
- NPS tells you what, but not why: NPS provides a one-dimensional indication of how likely a client is to recommend your organisation to others. It does not provide a diagnostic of why they would (or would not) give that recommendation. On its own, it does not help your teams to take actions to consolidate strengths nor address shortcomings.
- NPS only tells you about attitudes, not actions: NPS measures the current state-of-mind of clients but not their behaviors, i.e. whether clients have actually recommended, or will recommend the organisation in future.
- Creating a net score hides your Promoter/Detractor mix: The method of producing a net score—namely subtracting the percentage of Detractors from Promoters—obscures the underlying client responses. A net promoter score of +30 is a rough benchmark for b2b services firms. But this NPS can be achieved through many different combinations of responses, with (i) 30% Promoters, 0% Detractors and 70% Passives at one extreme and (ii) 65% Promoters, 35% Detractors and 0% Passives at the other. Clearly these two extreme situations would have profoundly different implications for the firm in question.
- NPS leads firms to ignore their Passive clients: This same process of producing the net score often tempts firms to focus solely on Promoters and Detractors. But your Passive clients often present the most fertile ground to grow and deepen relationships. These clients are often far easier to convert into active advocates than are your detractors. Efforts to woo Passive clients usually yield a greater overall return on investment than for Detractors.
- NPS is not a superior indicator of growth: NPS was originally described as ‘the one number you need to grow’ and the single most reliable indicator of firm growth compared with other loyalty metrics, such as customer satisfaction and retention. These assertions were based on proprietary analysis, which has been re-examined and refuted by subsequent studies. In one such review, which explored several years of data across multiple industry sectors, the link between NPS and growth was shown to be no stronger than other client service metrics*.
- Net Promoter Scores are much less reliable than average scores: Each time you measure an average score among a sample of your clients, you also produce an error figure, which describes the reliability of that score. To calculate NPS, you measure the percentage of clients’ responses that fall into each of three categories. This means that you produce three error figures, which add together to form the overall error for your Net Promoter Score. The result is that the total error for a NPS is often far higher than for the simple average of your advocacy scores. In practical terms, this makes NPS scores more unreliable than average scores. Moreover, this means that it is more difficult to tell whether changes in NPS are due to real changes in client views, and not just sampling errors.
*Timothy L. Keiningham, Bruce Cooil, Tor Wallin Andreassen, and Lerzan Aksoy (2007) A Longitudinal Examination of Net Promoter and Firm Revenue Growth. Journal of Marketing: July 2007, Vol. 71, No. 3, pp. 39-51
You need a Swiss Army knife, not a ‘silver bullet’.
It takes more than one number for Professional and Financial Services organisations to truly understand how to deepen client relationships and grow revenues as a result.
There is no ‘silver bullet’ metric in how you should assess your b2b client relationships.
Instead, we recommend that the most successful client insight programmes rely on the ‘Swiss Army knife’ approach: namely a series of tools to address each facet of their complex client relationships. When a few key relationships comprise a high proportion of revenues—as is the case with many Financial and Professional services firms—investing to build a refined view of these client relationships pays dividends.
At a high level, the most impactful client insight programmes:
- Focus on a suite of KPIs or metrics that assess the strength of client relationships from multiple angles, including Service Performance, Lifecycle assessment, Loyalty, Advocacy and Depth of relationship.
- Evaluate institutional client loyalty, i.e. clients’ ‘stickiness’ to both the individual(s) they work with and the organisation as a whole.
- Map the client journey and evaluate the moments that matter, i.e. the key touch-points where an organisation’s performance determines the overall strength and depth of the client relationship.
- Ask follow-up questions to understand why clients rate the organisation strongly or poorly and how the organisation can cement its strengths and address its shortcomings.
- Focus on linking client insights directly to the behaviours of client-facing and support teams. Knowing what drives clients to give high or low scores allows teams to maintain, improve or introduce the right behaviours that deepen client relationships.
- Gather insights into clients’ upcoming business decisions and future needs, allowing client-facing teams to be in the right place at the right time when clients need their support.
About Gulland Padfield
Over the last 15 years, Gulland Padfield’s teams have advised many leading international organisations on their client and customer strategy. As part of this, we have designed and implemented client insight programmes for many leading Financial and Professional firms.
Drawing on our access to a database of 250,000 in-depth interviews with buyers of professional and financial services, we regularly assess the client insights that are most helpful to senior management teams and help them to drive material change in their organsiations.
If you would like to find out more about our ideas and case studies that link Client Insight to organisational transformation, and our recommended process to build or sharpen your Client Insight Programme to deepen client relationships, contact William Gault on +44(0) 203 051 2295 or start a conversation at email@example.com.