1/
The NPS is like an AWACS. It gives an early warning when something is wrong/right.

2/
I noticed a strong correlation between NPS and market share “in the trending” for my business.

3/
I always interpret the NPS relative to that of my competitors. The value is in the delta.

4/
It’s not a good idea take up the NPS in the company KPI sheet and let peoples bonus depend on it. Doing so will invoke bad business decisions.

5/
It’s not a good idea to use the Net Promoter Score to manage an operational division that relies on predictability (e.g.. customer care, sales)

6/
Your NPS can look a whole lot different overnight if you are confronted with an unforeseen event. (bad press, crisis)

The NPS works well for people who base judgement partially on intuition. It doesn’t work for people who only rely on factual evidence for their decision making. And that is in essence the problem with this debate: every manager has to understand what works best for him or her. And the same rule applies for financial analysts. Some analysts might conclude that NPS works for them to predict future value of a company in an industry while others might consider it to be just hot air.

Why did 6 sigma do great for some companies while it didn’t for others?
Why was off shoring a success for company A and a disaster for company B?
Why do some mergers or acquisitions work while others fail?
Business is not rocket science because if it were, consultants wouldn’t be making all that money. Nor would hedge funds.

I use the NPS to make judgement calls about my business because it works fine for me. I respect people who say that NPS is not working for them but I get the CREEPS of people who try to convert NPS into a binary yes/no metric.

Here is a trick to proof that NPS is not a good metric for predicting value growth:
If you increase the price for your product or service, your NPS will drop but the value will go up. What happens the next year will be a mystery.

Now as far as The Ultimate Question is concerned, is there a correlation between a good NPS and business growth? Sure there is, but you need to take into account a lot of biasing things such as industry growth, competition, brand awareness, first movers advantage, disruptive technologies, cash position, public relations, pricing, channel power… So far I haven’t seen a scientific study that was cleaned from these biases and I don’t think I will.

Dann Rogge

With regard to the statement regarding research bias in the Journal of Marketing (as I told you earlier) the standards of a scientific journal are at the absolute highest … and the Journal of Marketing is the top scientific journal in all of management and economics (as measured by the citation index). Therefore, 99% certainty is not high enough to conclusively prove research bias on the part of Reichheld. Nonetheless, there is no plausible explanation offered by Reichheld as to why Net Promoter was not superior to the ACSI despite his claims in HBR, The Ultimate Question, and his presentations that their was no linkage between the ACSI and growth (actually stating there was a 0.00 correlation). I am unable to find anyone who can offer a plausible explanation for this.

Also, you are mistaken that our findings found the ACSI and Net Promoter equivalent. We stacked the deck in favor of Net Promoter, using the best case examples presented by Reichheld. What our findings suggest is that even using the best case examples for Net Promoter, NPS is not superior to a metric that was claimed to be examined and found to have a 0.00 correlation to growth.

Again, my issue is not with the use of Net Promoter, it is with the research reported by Reichheld. And I also do not like the findings of our research misrepresented.

– Tim Keiningham

Your readers have done a good job of laying out the debate and we look forward to the discussion next week at WOMMA. Andy says it best “It’s not about whose research is better”, it’s about real companies seeing real results. Many of those can be seen at http://www.netpromoter.com.

As to the claims of research bias or that the subsequent research has proven Net Promoter flawed, this is simply not true. The Journal of Marketing paper clearly states that they have not been able to prove such bias, and it also shows that Net Promoter was at least equivalent to ACSI in correlation to growth. The lastest research in Managing Service Quality found that the recommend question was one of the top correlates to behavior (1,2 or 3) in retention and recommend behavior. Does a correlation of .01 or .02 really matter enough to complicate the measurement system?

You may be interested in Fred’s latest posting on netpromoter.com. http://netpromoter.typepad.com/fred_reichheld/2007/11/are-you-doing-n.html
It’s not about the score, it’s about driving an organizational discipline to create more promoters and reduce detractors.

One has to question, what is all the hoopla about?

I would love to go and listen to that panel… Sounds like the perfect collection of people. I think its excellent that it will be made available afterwards.

On a connected note - what is the WOMMA stance of NPS and its correlation to growth?

And since recommendations to friends, family etc are becoming more and more decisive factors into any “buy or not buy decision”, chances are that the “likeliness to recommend now” , can be a good prelude/prediction to growth in the next quarter or year. Reichheld is probably right.

So NPS is not the measurement of something in isolation. It’s the measurement of how consumers perceive a long and complicated process that lead them to the first moment of truth (buying). Then to the second (using). And finally to the third moment ot truth(recommending – or not) : the final stage.

Should companies rely only on that number alone? Of course not. Like the Net Profit of a company is the result of many factors, the Netpromoterscore too is the result of many factors. When your score is awful of course you’ll have to do additional research at Ipsos or Attentio to know why you’re performing so badly. Like when you have lousy profits (or no profits at all) you’ll also have to do your homework at both the sales and cost side. Net Profit and Net Promoter Score give an indication. They are a prelude. And may have prediction force. NPS is also not related to market capitalization or share price … but to growth of market share in the following period/year. And growth of market share doesn’t mean even profit.

To conclude … we should also NOT confuse loyalty with recommendation. There is a difference between the financial bottomline and the recommendation bottomline. You can be a loyal and profitable client without ever having recommended the brand use. From a future growth of market share you’re useless. If you tell nobody, nobody will know. And when you die, a certain % of market share will be lost. For future growth actively recommending clients are more important than loyal clients who shut up.

PS. We recently did some research in China to measure the recommendation power among internet users. If you’re interested you can read it here.
http://blog.boondoggle.eu/2007/10/the-recommendat.html
http://blog.boondoggle.eu/2007/10/new-i-mergeboon.html

The clear point from everyone’s commentary is that it is NOT about whether companies should measure customer satisfaction or be worried about negative feedback OF COURSE this is important.

Main issue is the proclamation that better NPS correlates with growth (I assume it is discussed on analyst calls because this in turn connects to market value/share price)

To collect together arguments for and against.

TIM - Tim’s joint research shows no signs that NPS is connected to growth, he doesn’t say that understanding customer sentiment is irrelevant but there is just no correlation.

FRED REICHHELD - Fred Reichheld sees the connection between NPS and growth

“The correlations between NPS and growth stand up only when a set of competitors is defined correctly. Home Depot must be compared to Lowe’s, not to Victoria’s Secret. If Lowe’s had a higher NPS than Home Depot, that would be a meaningful piece of information for Home Depot’s decision makers, whereas a higher NPS at Victoria’s Secret would be meaningless.”
http://netpromoter.typepad.com/fred_reichheld/2006/09/nps_does_not_wo.html#more

GENERAL ELECTRIC: GE see a connection between NPS and growth. Annual Report 2005

“GE use this as an important metric see 2005 Annual Report “Lastly, we are using a simple metric called Net Promoter Score (NPS) to measure how customers view GE. NPS creates a view of customer loyalty. The absolute score is less important than the trend. We learn from both promoters and detractors. Most importantly, we have been able to associate NPS improvement with growth. NPS is simple and we can use it across the Company. Our ultimate goal is to use improvements in NPS as a measure in how leaders get compensated.”

Perhaps if there is a data set that shows a link, then it makes sense that this should be independently verified?