Aim high. For decades that creed has inspired Jim Clifton and his sister Jane Clifton Miller, who run Gallup. They and a bevy of relatives are America’s first family of opinion research. Other pollsters may come across as low-paid minions wandering through shopping centres with clipboards. Not the Cliftons. From a small start in Lincoln, Nebraska, they have created a McKinsey-like panache around their work, helping them build a near $1 billion fortune.
Until recently the Cliftons seemed unbeatable. Their best-known product, the Gallup Poll, is a brand-building giveaway that helps open doors for lucrative contracts to analyse an organisation’s customer loyalty, employee attitudes and managerial talent. Its customers included Wells Fargo, the State Department, HCA and Ritz-Carlton.
These days, however, Gallup’s winning formula is in trouble. The privately held firm doesn’t release financials, but multiple sources say revenue skidded at least 10 percent in 2012 to about $275 million. Profit held up only because the sales force was slashed. Big customers are turning stingy; smaller prospects don’t favour Gallup’s pricey services. A once booming government-contract division is in disarray in the wake of a whistle-blower suit alleging contract fraud. “Growth is harder than hell right now,” Jim Clifton confides over coffee in the boardroom of his Washington, DC, headquarters. “I’m trying to get the Gallup fishing boat over fish. I didn’t have to do that until 2008. All the baits were working. Now it’s a different story.”
Gallup’s troubles can be summed up in three words: The innovator’s dilemma. The term, coined by Harvard Business School professor Clayton Christensen, describes the sickness that ensues if you fixate on your high-end customers and ignore the market’s low end. Cheap, new methods seep in, disrupting a whole industry. It happened in steel, retailing and computer storage. It’s happening again in survey research.
The disruptors slipped into Gallup’s world in 2003 when Bain consultant Fred Reichheld came up with the New Promoter Score (NPS), a simple alternative to Gallup’s elaborate questionnaires. Reichheld said companies can ask just one question: “How likely is it that you would recommend us to a friend or colleague?” Today anyone can run an NPS survey on the internet in minutes, free of charge, even though Reichheld and partners have trademarked the Net Promoter name.
“There’s a lot more to a customer relationship than a single number,” fumes Clifton. Gallup spent years developing an 11-step gauge of customers’ feelings. Showcase clients have included the likes of Lexus’ US sales arm, but the luxury car maker has switched to a different vendor, Maritz Research, plus in-house analysts. Gallup still has some non-US Lexus business.
Clifton is also running into similar problems with Gallup’s 12-question survey of employee engagement. A big moneymaker in the past decade, its clients include Wells Fargo, PNC Financial Services and Stryker.
Neither Gallup nor its customers will discuss pricing, but Hazen Witemeyer, who completed a PhD dissertation at Georgia State on employee-engagement surveys, says the full-service approach can cost $23 to $27 per person polled.
At Marriott it now costs less than $10 per employee to get engagement data, through a combination of Aon Hewitt polling and in-house analysis. This new system means Gallup no longer runs employee surveys for Marriott’s Ritz-Carlton unit, but it still polls Ritz-Carlton guests.
Cut-rate newcomers like SurveyMonkey run small surveys for free and big ones for pennies per respondent. “From my perspective I think that’s a mistake,” says John Fleming, one of Gallup’s top data scientists. “Our work is scientifically tested, and I’m not sure theirs is.” Gallup’s fastidiousness is on display in Lincoln, where hundreds of people call America every evening. Unfortunately, phone interviewing is a fading art. Gathering the data costs at least five times more than online polling. Caller ID and answering machines mean many subjects won’t even pick up the phone. On a recent evening in Lincoln interviewer Laurie Chrastil made 130 calls and completed only two interviews. Gallup executives say telephone surveys, the source of one-third of all polling data, could drop within a decade to 10 percent.
Connecting with today’s on-the-go public has been tough for Gallup. Creating iPad apps has been a priority only in the past year; capturing the right mix of cellphone users is a constant challenge. Gallup officials insist they are keeping up. COO Jane Miller calls this the “year of disruptive innovation”. But Gallup’s prestige took a jolt in the 2012 presidential election when stats whiz Nate Silver produced the most accurate estimates of President Obama’s victory. Gallup showed heavier Romney support than almost all other pollsters.
Gallup’s recent rigidity is a stark contrast with the Cliftons’ go-getter ways of old. Don Clifton, a World War II bomber navigator, returned to Nebraska after the war, got a PhD in psychology—and decided to ignore his field’s fascination with abnormal behaviour. “Dad noticed there weren’t any books in the library about how healthy people could get better at what they did,” Jim recalls.