So You Know Your Net Promoter Score . . . Now What?

Hi – It’s Christine Overby here, and I’m currently working on research about Net Promoter. I got the idea after participating in a Forrester leadership board session where everyone in the room seemed to be using Net Promoter. One client asked a great question: “Is Net Promoter the only real metric that matters?”

My first reaction was: No!

Don’t get me wrong. Net Promoter is a great tool. It’s straightforward, easy-to-implement, and Fred Reichheld and team have oodles of data showing the correlation between a firm’s Net Promoter Score (NPS) and its growth. But I wonder: If we focus on NPS exclusively, do we miss the nuances and other indicators of growth and profitability?

For example, what if Best Buy’s “demon” customers were the lionshare of its promoters? If this were true, then a singular focus on Net Promoter might drive growth, but profits would go down the tube.

Also, isn’t a promoter with great influence (a “connector” in Malcolm Gladwell’s world) more valuable than one who, for whatever reason, isn’t always taken so seriously?

A final food for thought: if your NPS is nearly identical to that of your direct competitor’s, then are you truly on par? My colleague Chloe Stromberg just pointed out that Facebook and MySpace have Net Promoter Scores of 37% and 36%, respectively, with teens who are active “social shoppers”. Facebook has a higher percent of passive customers – 26% compared to MySpace’s 16%; whereas MySpace has a higher percentage of both detractors and promoters. This additional color seems critical when taking action.

It strikes me that in order for companies to unlock growth and profits, marketers must look at NPS alongside other metrics like growth by customer segment and lifetime value.

We’ve only just begun this research, so I’d be curious to get your thoughts. Is Net Promoter the only real metric that matters? Is it, to borrow Fred Reichheld’s phrase, “The Ultimate Question”? What else, if anything, must marketers measure to drive strong financial performance?

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Comments

re: So You Know Your Net Promoter Score . . . Now What?

Hi Christine,I've spent much of my 20+ years in marketing creating word-of-mouth brand advocacy (evangelism) for Apple, Sony, and many others as a former partner at Regis McKenna Inc., the high tech marketing and PR firm.That's why NPS is a revelation for me. It is the first metric that correlates of brand advocacy levels with growth and profits. So, for the first time, we now have empirical evidence of what I personally witnessed at Apple: creating a community of advocates drives revenues and growth.While I agree that NPS should not be the the sole metric that marketers should track, it is powerful because it focuses on the true "litmus test": whether you are willing to recommend the brand to friends and colleagues.Also, you are absolutely correct that promoters with great influence are more valuable than those with less influence. The challenge/opportunity for companies is to identify and mobilize these specific promoters.Along with a few colleagues, I'm founding a firm (currently in stealth mode)that identifies, mobilizes, and grows communities of unpaid "brand advocates."We've created a brand advocacy methodology and set of WOM programs/services for boosting advocacy. (I could tell you more about the methodology, but I'd have to kill you.) We will be utilizing NPS as our cornerstone metric for measuring and tracking the impact of our brand advocacy efforts.

re: So You Know Your Net Promoter Score . . . Now What?

In recent months, I've seen several articles written about NPS as a customer metric. This is great; it means companies are thinking about the experiences that they deliver to their customers. But, Christine is right: measuring NPS isn’t enough. Without additional information behind the measurement and organizational commitment to use the information, companies won’t realize the promised benefits.I just wrote about this in my company's newsletter [http://www.responsetek.com/newsletter/20061114-3.asp ]. I'll give you a synopsis here:On its own, NPS cannot reveal who a company’s advocates or opponents are, or why they fall into either category. Early adopters, who have been successful in aligning their companies around the metric, are beginning to ask “What next?” They have their scores, but are missing the detail behind them to assign accountability within their organizations for improving the customer experience. To leverage the momentum that comes with implementing NPS, companies need to adopt an approach that incorporates the information into tangible improvement of their day-to-day processes.What organizations are missing—and need to incorporate into their strategies—is bottom-up improvement. This means focusing on improving the customer experience on a tactical level, one customer at-a-time. Rather than executives dictating what to improve, front-line employees have the real-time, customer-driven information that they need to make the behavioral changes necessary to improve the customer experience.Approaching change from the top-down and bottom-up leads organizations towards improving the delivered customer experience overall, and for each customer. As a result, companies that demonstrate a commitment to this approach see continuous performance improvement as employees understand how their behavior affects customers.

re: So You Know Your Net Promoter Score . . . Now What?

Hi Christine,Very interesting blog entry-- you definitely capture some of the key issues around acting upon, and ultimately deriving value from the NPS.As Principal Methodologist at Satmetrix, I spend a lot of my time looking at both research and practical operational issues associated with the use of Net Promoter. It’s fair to say that the metric and its applications have evolved a bit since we co-developed the Net Promoter concept with Fred Reichheld a few years ago. Today, we tend to frame Net Promoter as a discipline-- the focus is not on the number per se, but on building the infrastructure and business processes that support taking action on what it reveals.The first component to taking action involves interpreting the score itself, and what it implies (and here I think your observations about the implications of competitive positioning, mix of promoters/passives/contents, etc. are important ones). Devoting energy to how this is best achieved seems more constructive than the debates I’ve seen regarding whether NPS is the “only number you need.” Even Fred advocates collecting additional data-- in the form of open-ended comments-- to get at the “why” behind the number that can help to guide retention, recovery, and growth initiatives.On that topic, we often advise our clients to collect likelihood to recommend (the basis for the NPS), as well as some indicators of satisfaction along key customer touch points (e.g., brand, sales, product, services and support). While NPS has thus far proved to be a reliable indicator of growth, each organization has to confront the question of how to move customers to promoter status, and how that goal can be met efficiently. Understanding the relationship between the NPS and performance in other areas helps to create effective strategies for driving change.I interpreted your comments about using other types of information as part of this interpretive framework-- but also as an important set of parameters for designing a strategy to improve the NPS. Remember, the metric itself was created in the service of finding a feedback mechanism that could be linked to larger financial outcomes like growth. A company’s customer segmentation and calculations regarding the lifetime value of their customers are usually critical considerations in formulating a profitable growth strategy. For that reason, we ought to expect that a company’s strategy for collecting NP data (e.g., targeting the customers who are critical to long term success), and how they identify, prioritize, and follow-through on customer needs will be influenced by this overall strategy. The benefits associated with an NPS measurement and management program increase when the program itself is integrated with the company’s strategy and customer-facing business processes.I also found Syed’s response to you interesting. While more clearly focused on the issue of follow-up, it speaks as well to the issue of interpretation-- understanding who is responding, and how they are driving the NPS. I wholeheartedly agree with his insight that bottom-up improvement is key. Even in B2C businesses-- where personalized follow-up is more difficult, and ownership is one-to-many-- customer experience programs ought to be arming client-facing employees with feedback that will enable them to improve their performance in customer interactions. I don’t believe there is anything about NPS measurement per se which is incompatible with this goal-- it’s all a matter of how the measurement program, but more importantly, the business processes supporting it, are designed and deployed.I hope that you and the practitioners among your readership will continue to push the thought leadership, practice, and scholarship associated with NPS forward. I’d like to think that the basic goals associated with NPS-- improving customer experience and loyalty-- are still in their infancy, and I know that there is a wealth of insight available in the field that’s waiting to be shared. To that end, I would like to invite you and others to check out the forums at www.netpromoter.com, where conversations (some spirited) like this are happening every day. It’s an interesting place to learn, as well as to teach.Looking forward to future installments!

re: So You Know Your Net Promoter Score . . . Now What?

Measuring Net Promoter Scores is a waste of time and money for most companies. Why? Because: 1) It doesn't address the question WHY -- why would a firm's customers be inclined to recommend the firm; and 2) There are inherent differences in consumers' likelihood to recommend firms to their friends and family in the first place.The answers, Christine, lie in some of Forrester's own research, which found that, among financial services customers, the perception that a financial firm is doing what's best for the customer and not just its own bottom line is the best predictor of loyalty and future purchase intention. In other words, its NOT the customer's advocacy a firm should be measuring, but its OWN advocacy.In addition, if you dig into Forrester's Consumer Technographics research, you will find that younger consumers are more likely to tell their friends and family about the products and services they like than older consumers. Implication: A firm's NPS may be influenced by the underlying demographic composition of its customer base, and NOT its performance.

re: So You Know Your Net Promoter Score . . . Now What?

Christine:Please contact me if you have the chance. I understand the potential limitations of the Net Promoter concept; however, my team uses the tool at various pipeline stages to measure whether we're making progress towards acquiring customers. I like the trends we're seeing so far.I believe the biggest mistakes companies make is using the metric in a vacuum. You need to benchmark with your peers and also look at the industry as a whole before you get an understanding of how the concept works.