Net Promoter Scores and Customer Insights
This paper will discuss some problematic aspects of NPS, both conceptual and technical.
NPS is a concept and research method promoted by customer loyalty guru Frederick Reichheld in his book, The Ultimate Question: Driving Good Profits and True Growth (2006). The idea is that customer satisfaction and loyalty are strongly linked to revenue growth and profitability. An updated version of the book, to be called The Ultimate Question 2.0 was released in 2011.
In The Ultimate Question, Reichheld argues that most customer surveys do little more than annoy customers. All that businesses critically need to know about how they stand with customers is provided by customers’ answers to the question “How likely is it that you would recommend our company to a friend or colleague?” Respondents score themselves on an eleven-point rating scale that runs from “0” (not at all likely) to “10” (extremely likely).
The “net promoter” score is so called because the measure is computed by subtracting the percentage of detractors from the percentage of promoters. Detractors are defined as respondents rating their likelihood to recommend as 6 or less, with promoters only those who rated their likelihood a 9 or 10 (respondents who selected 7 or 8 are considered neutral). The NPS measure can run from -100% (0% promoters, 100% detractors) to 100% (100% promoters, 0% detractors), with typical results in the 25-40% range.
Although a casual reader might form the impression that Reichheld more or less invented the NPS question, in fact it and variants of it have been used for many decades by market researchers as a standard surrogate measure of customer loyalty. Asking respondents directly about loyalty has been shown to be ineffective whereas someone who is willing to recommend you to others is highly likely to be at least somewhat loyal. (A complete discussion of customer loyalty would take a whole book which is, in fact, how Reichheld earned his guru status.)
One of the positive attributes in the view of Reichheld and others is that NPS allows direct comparisons of scores between and among industries and companies, and also between internal business units in a given company. Among its virtues are its simplicity and its appealing and rather intuitive model of detractors and promoters. Managers find it easy to describe and explain to co-workers, and setting measureable NPS improvement goals is straightforward. Although popular with managers, and seemingly increasingly so, most research professionals have been skeptical at best. A number of analysts and academics have published studies questioning and even refuting Reichheld’s research. Research blogger, Dr. Bob Hayes, surveyed customer feedback professionals in 2008 as to whether they agreed with Reichheld that NPS was a better predictor of growth than other loyalty questions or indices. Eighty-one percent disagreed or were neutral (“Customer Feedback Professionals Do Not Believe the NPS Claims”).
It is worth noting that Reichheld and his associates are very protective of the NPS name and image. Because of its simplicity and the fact that some online survey providers offer the question and its scoring as an optional feature, some companies using NPS on their own have been surprised to receive letters from or on behalf of Reichheld requiring at a minimum that credit be given.
We take issue with the Net Promoter Score methodology for several reasons. Most importantly,