Department store John Lewis have announced that whilst their rivals may be suffering, they are growing market share. The Nationwide building society has seen a surge of deposits recently, partly the effect of the Northern Rock collapse.

Both businesses are growing market share during a slowdown. What is it that links them? In news links Nationwide talk about the quality of their assets, John Lewis MD Andy Street is not quoted as providing a rationale.

Our research points out some common features. What both businesses have in common in terms of consumer generated conversations is that:

a) positive commentary on them tends to contain specific customer recommendations and endorsements. A customer who is complaining about his ISP takes time to say something postive about Nationwide, an entire thread on MoneySavingExpert is entitled John Lewis are bloody marvelous and backs it up with facts;

b) negative commentary involves isolated problems: someone complains about a silent call from Nationwide’s call centre; a thread that starts John Lewis sucks big time, turns into a plug for their customer service as - just as several posters predict - John Lewis deal successfully with a horrible customer service issue.

This is by no means a common feature. A PR client came to us a few days ago on behalf of a business whose online commentary was positively sulphurous. There were no positive comments whatsoever, and the negative comments included threats of legal action. The company apparently thought that it had a “reputation” issue. Our suggestion was that it had a product issue. This is an ostensibly healthy company, but I would fear for it during a recession.

The common threads linking Nationwide and John Lewis is that they seem to provide great customer service and great customer service drives positive word of mouth. Both companies Net Promoter Indices are comfortably ahead of their sector average. And they are demonstrably growing market share in a chilling market.

When we helped Avis launch their We Try Harder blog - it was a joint venture between customer service and marketing. The point that Xavier Vallée and his colleagues at Avis understood is that customer service issues - correctly handled - are the key to having a great reputation. No one is perfect, but if your service is responsive and prompt, you are forgiven and endorsed. Avis, like Nationwide and John Lewis, are growing their market share.

Since the credit crunch of the summer a recession seems likely. The online retail sector may indeed be booming, but it only represents part of the economy and the other bits of the economy are suffering from a twin dose of cost inflation and asset price deflation.

It seems clear from our work that the news is likely to hit worst the businesses that are doing a bad job. Some trends seems likely to protect businesses:

a) offering a good product with transparent pricing; b) developing a loyal customer base, with strong recommenders; c) offering well informed, responsive customer service; d) having management that understands both the businesses margins and the needs of customers and is responsive to both.

Pricing has to be transparent, because there is no protection from competitors who are one click away (or even on the same price comparison page). Loyal customers are important and recommenders even more so, because shopping decisions are increasingly driven by consumer reviews. Customer service is vital because service is a key driver of recommendations - and a key source of complaint. Service is the most expensive and low-margin part of most businesses, however, so management needs a very good understanding of the business’s costs in order to figure out clever ways of delivering maximum value to both customers and shareholders.

The transparency of information about brands and businesses online is a powerful encouragement for businesses to do a better job. It is like what Adam Smith called the “invisible hand” of the market. It helps consumers (and businesses) make better-informed decisions. It punishes the weak and the opaque.

Companies that will suffer during the recession:

a) businesses selling products who brand appeal is achieved by expensive marketing campaigns, but which have poor reliability and offer poor service; b) service businesses offering unquantifiable benefits around (e.g.) “branding”; c) businesses with high fixed costs in old world distribution models.

The key to prosperity is to use Net Promoters methodology to select stock in businesses with strong word of mouth support, reasonable capitalisation and positioning in areas of the economy where shocks in the value of real estate, fluctuations in the price of raw materials and of labour are less likely to be critical. In fact, I would look for businesses with:

a) low capital requirements; b) the ability to shift costs to lower wage areas; c) the ability to reach a global market with low distribution costs.

(Update Tuesday 4th 12:06)

The fact that Tesco has announced higher profits despite the slowdown bears out some of this thinking. They offer price comparison, have good Net Promoter Score rankings, do a good job of customer service and manage their business with a high understanding of where their costs sit. FULL DISCLOSURE: Tesco are a current client of Market Sentinel.