Interesting and thought provoking post here on the value of Net Promoter Score (NPS). This is one of those topics that generates much debate. The general theme in that debate, lies in the value of a relatively simple metric, and the extent that will drive appropriate behaviours, that will translate into improved customer loyalty, and revenue. Detractors might suggest that a simple metric cannot provide detailed actionable ideas.
Laura Brooks, VP Research & Consulting, Satmetrix: Building Value One Customer at a Time
1) Net Promoter is simple but not simplistic.
2) Net Promoter tracks to growth.
3) Net Promoter is actionable.
I would argue in favour of NPS. This example from the HSBC reference on the site, sums it up nicely. The flaw in detailed surveys can lie in the assumptions that a series of detail can deliver. I have seen this, and the sense of all is well, or the sky is falling that derives from customer satisfaction surveys. Invariably what happens next is that the organisation focusses on correction of the individual questions that suffered the most. When there are 100’s of questions, the likelihood that tactic will work is up there with lottery odds.
Satisfaction survey – good measure, but NPS more powerful. Only “delighted” were likely to be promoters. “Satisfied” were more likely to be detractors. This
surprising finding upset some people who thought they were doing a good
job with a 70% satisfaction rating, but their NPS didn’t tie up.
What I like about the NPS is that it shows the numbers of detractors, and forces you to consider why they are detractors, and not advocates. Similarly those who are advocates, is it because they really are, or just that they haven’t experienced a service disruption. Again the HSBC example refers to the high volume of call centre calls emanating from detractors. Speaking from my experience, the outcome of the call centre experience often creates detractors, from previous advocates. Ditto for online banking service.
So, I fall on the side of NPS, because of the introspection it will drive, to achieve the three goals mentioned above.
Relevance to Bankwatch:
For Bankers, I recommend reading HSBC example above. It speaks in language from HSBC personnel that we will understand.
[For Dr Laura, I would like to see more external specifics in the research made available, rather than blog references back into their own site.]
Technorati Tags: NPS, net+promoter+score
Bankwatch 
“I would argue in favour of NPS.”
Saddens me to read that.
With all the documented flaws in the NPS approach and methodology, how you can conclude that large firms should spend hundreds of thousands of dollars (if not millions) to implement the ability to track a potentially meaningless, spurious statistic escapes me.
Ron,
How can you conclude that NPS is “potentially meaningless, spurious statisic”? No one has proven that. In fact, many companies are proving it is exactly what they need to drive a customer centric culture.
In fact, I just got out of a client meeting where we showed them two metrics side by side in a rather large data set. One was driven from 4 questions, your standard loyalty index, the other side of the charts were NPS. It was very clear that NPS tracked almost identical to the more complex metric and within 30 mintues we had a Sr. Executive talking about his Promoters, Detractors and Passives. He had just learned what it was at the beginning of the presentation. NPS is powerful when applied to the business.
Colin,
Thanks for the reference to Dr. Laura Brooks posting and thoughtful commentary. We’ll take your request under consideration.
Deborah Eastman
CMO
Satmetrix
Yes, no one has “proven” that NPS is “meaningless and spurious” which is why I prefaced the comment with “potentially”.
But on the other hand, there has been no credible explanation for WHY firms should spend incredible amounts of money to create a new measurement infrastructure to replace the existing one, other than some research which found a high correlation between the metric and growth.
In my own research (when I was at Forrester), I found a high correlation between customers’ perception that their firm did what was right for the customer (vs. what was best for the firm’s bottom line) and the customers’ future purchase intention and behavior. (Fyi, we called that “customer advocacy”).
Why shouldn’t THAT be the one question to ask? Why shouldn’t THAT be what a firm bases it’s customer measurement program on?
Let me ask you this: Why does a customer say that he or she will refer a company? The cause of referral behavior is what firms should be tracking and measuring.
And I would argue, that in some industries, what causes referral intention is the perception that the firm does right by the client, and not just its own bottom line.
On top of all this, is the argument about the “simplicity” of the question. Hogwash. I’ve documented the weaknesses of this argument (and other issues w/ NPS) on my blog at:
Companies don’t become “customer-centric” simply by measuring NPS.
@Ron .. Re: Spurious …
I base my conclusion on watching Banks’ use Customer Sat results for many years, and the spurious (non-genuine) comment applies there too.
The problem as I see it, is that Banks take the surveys, and with no academic analysis, aim to improve the low ranking questions. But customers are not that academic in their complaining, and fixing question #38 merely bides time till #39 becomes a problem.
My impression with NPS in the relatively short time I worked with it, is that it brings the entire organisation (in my case 18,000 front line staff) behind something that never occurred in 20 years of customer sat analysis.
Its then incumbent on the HQ and vendor folks to internally analyse what is driving the detractors, to feel that way, and prioritise long lasting solutions.
Colin, you are 100% correct. 100%. But the “problem” is not “satisfaction” as a measure, but how firms use it.
NPS is not impervious to the same mis-use.
In fact, a firm can improve its NPS score from one period to the next — and, of course, tout its accomplishments and reward management for the “success” — and still see a large percentage of customers shift their ratings from 7s and 8s to 1s and 2s. Is that success? Is that driving growth?
I would tell you what I call it, but I know you’re trying to run a family-friendly site here.
Mis-use of the satisfaction metric does not mean you throw the baby out with the bathwater.
As for “getting the entire org behind something”, well I HAVE seen that a number of times in the past 20 years. Namely: reengineering, knowledge management, Dot Com, six sigma, etc.
All of these “things” have brought a ton of value to firms — when implemented correctly. None were panaceas. And all have become a part of how some firms manage. Management fads come and go, good ones become part of the fabric of how good managers manage. But only a part.
Good luck, Deborah. Ride the wave while you’ve got it. It won’t last forever. Or very long for that matter.
Ron,
I am really quite surprised at your reactions. I have to say I just don’t get it, I’m not sure what you are arguing for.
I echo Colin’s comments. I deployed both a loyalty index and NPS at a large consulting firm. There was a huge difference in the understanding and action taken in the two. NPS won. I saw that again today in the client meeting I mentioned earlier.
If your issues is the 2 question approach, let me say I do not subscribe two questions in all cases and agree you need to understand drivers for referral and repurchase behavior. We do that in most of our client relationships programs we deploy for B2B organizations.
What I have observed in companies investing in Net Promoter programs from Satmetrix is not just Net Promoter, but a system integration, process integration and cultural transformation to get information to the frontline employees in time to do something about it. NPS provides a measurement system, but what they really want is to integrate customer feedback into all parts of their business and enable employees to change the results.
As for the “wave”, if we can offer organization as much value as the Internet or Six Sigma I will feel good about the value delivered to my clients. That is what’s interesting to me.
I tend to agree with Ron. I don’t think NPS is a bad measure, but it won’t reveal any shocking insights or fundamental truths. It’s an adequate measure, one more in a long line of adequate measures that the consulting industry seizes on because it’s easier to sell a new brand or elevator pitch than it is to sell mathematical analysis. And I suspect *that’s* what gets under Ron’s skin more than any particular flaw in NPS itself. 🙂
@Dan/ @Ron … I totally agree that it is “one in a long line of inadequate measures”, but I think that makes my point. Why spend gazillions on complicated and annoying (to customers) measures on customer sat, when they provide to inherent greater value than NPS.
If NPS can simply and cheaply tell you what you need to know (our service sucks) why not divert expensive surveying money into analysing and addressing the problems.
Ron,
As usual you are not focusing on the real issue.
Your comment about companies paying gazillions on NPS is so way out there. I work with credit unions and the beauty of NPS is that it is so simple, any size CU can do it themselves. That’s why you research types hate it!! We don’t need your charts and graphs!!
And no one in this post, in my opinion, is focusing on the best part of the survey. The open-ended part. Question number two. Why did you score us the way you did?
My experience with the results of this fabulous ongoing focus group question is this:
1. You finally get data that is actionable. Most satisfaction surveys leave you with this feeling of, “Oh, we don’t really suck, do we?”
2. You aren’t leading the respondents down a path with a bunch of options. You get honest feedback and, in my experience, 90% of the surveys come back with actual responses to the why. That’s huge!
One of my clients has an overall score of 61% (not bad in financial services) but when we surveyed only new accounts it was dangerously low (21%). Guess what we have to work on?
A satisfaction survey or customer advocacy survey would not point you to that as directly as NPS does.
Ron, your use of the word spurious (even with potentially) is so pugnacious. Is that out of fear or fun?