Net Promoter Score… So What?

Sandeep Giri had a close encounter with the Net Promoter Score (NPS) during a conversation with a client. Try as I may, I cannot think of a compelling reason to devote resources to tracking a measure that DOES NOT:

• add tangible value to customers
• translate directly to improved operations
• is uncorrelated with enterprise value or growth

It seems that the effort required to deploy and maintain a net promoter score process could be better spent… improving customer satisfaction!

Fred Reichheld has a long-winded explanation at to why NPS matters. Yet, he mentions that:

• NPS is not correlated with growth and even if it were, correlation does not imply causation
• NPS is based on survey scores and the subsequent behavior of those surveyed, i.e. the survey scores are highly correlated with behavior

But according to this logic shouldn’t customer behavior lead to growth? So no matter how we look at it, it doesn’t seem that tracking NPS leads to growth.

Instead of following one more fad du jour, companies would do better allocating resources to continuously increasing the value they add to customers: better products, more timely delivery and processing, ability to customize, provide assistance, follow up on purchases, maximize convenience, optimize pricing, etc. And when it comes to measuring progress, track metrics that correlate directly with growth: same store sales, unit sales, margin growth, repeat purchases, increased purchase frequency, etc.

Sandeep is right: if you want to increase the value you deliver to your customers, first get to know your customers.

Comments

[Sandeep Giri]

Hi Adelino:

Thanks for picking up on the thread.

NPS is basically yet another measure of customer satisfaction. The problem with the prospect with whom I had the NPS conversation was that NPS was the *only* measure they were looking at. Somehow there seems to be a line of thinking that if you could only have one measure of your marketing effectiveness, NPS would be it -- like it's the ultimate question that measures customer loyalty. And of course, since we all want something quick and easy, NPS becomes the express way to get your success metrics fast, never mind the accuracy.

On the other hand, we do have some clients who use NPS as one of the many measures to measure marketing success. Of course, I have yet to see NPS itself drive any particular marketing action yet -- but it can be somewhat helpful to measure how customer satisfaction is impacted by new marketing initiatives (or not).

Bottom line -- as you have pointed out, marketing can be only effective if some of the basics are taken care of first -- relevant/useful product and services, and a sound knowledge of your market performance based on behavioral metrics. And NPS only measures a piece of this aspect, hence you can't accept it for the complete truth.

Sandeep