Net Promoter Score – Accurate or a Con?ByRaymond D. Matkowsky
The “Net Promoter Score or NPS” is a so-called measure of customer satisfaction. I doubt that anybody with a serious statistical background would not question its application to many of the areas it has been applied to.
“NPS” was introduced by a Mr. Fred Reichheld in a 2003 Harvard Business Review article. He has since said that he is astonished “how people are messing with the score and bending it, to make it serve their selfish objectives.” The score by itself was never intended to be a criteria for some of the applications as executive compensation, predictor of customer behavior, revenue growth, etc. This is “completely bogus” according to Mr. Reichheld. In my opinion, it is a fad such as “Total Quality Management” (TQM) and “Business Reengineering Process” (BRP) restructuring. Both have faded from the scene. I believe the same will happen to “NPS.”
Scoring Methodology
The system works as follows. Respondents are asked only one question. Sometimes there is a follow-up open-ended question asking them to explain the initial response. Many times there is no follow-up question. The question is asked at checkout, email or a web popup.
Customers are divided into three group, “promoters”, “passives”, or “detractors.” After answering how they would rate the product or service on a scale of 0 to 10. “Promoters” have a score of 9 or 10. “Passives” have a score of 7 or 8. “Detractors” score between 0 to 6. “Passive” scores are disregarded. The final score is obtained by subtracting the percentage of “detractors” scores from the percentage of “promoters” total and expressing it on a scale of -100 to 100 (no percentage sign in score). The average business has a score of +5. A top line business may have a score of +50. This would be a highly unusual circumstance though.
Drawbacks
The first pitfall of the system is that “passive” opinions are discarded in the calculation. There is a big difference between someone that rates your product or service as a 0 versus a 6. There is probably more information to be gained by analyzing those responses as opposed to a “promoter’s” response.
The system can be gamed! Many times the customer is casually informed that management determines compensation from the answers. People answer accordingly, thinking that they are helping. Also, it has long been known by pollsters that the way a question is phrased can affect the answer.
It is also well known that the response to email requests is poor and uncontrollable. Popups can be refused or blocked. Many people that do respond have a bias for or against a product/service in doing so.
“Cultural bias” can enter into the answer. This is not accounted for and does affect the answer. Nothing says that “promoters” will recommend a product or if the receiver will take the recommendation seriously.
I receive this type of request several times a month. When asked how I would rate the product, I may answer with a 10 but always a 0 if I would recommend it. This confuses customer service representatives. After one such an episode, I received a call from a representative wanting to know why I rate their product highly but yet not recommend it? My answer was simple. I do not make personal recommendations. If asked, I will state that I have used the product/service and will or will not use it again under the same circumstances. I am sure that I am not alone. There is a rule of thumb in customer service that says for each person that complained, there are probably 12 others that did not and each of those 12 have 12 others. If that can be applied to my behavior, there are probably millions of people like myself.
An absolute number by itself is meaningless. You have to take that number and compare it to a similar number to receive any value from it. This is what most companies do. However, you are taking one estimate and comparing it to another. By doing this you are increasing the potential error and noise level. If the average company has a rating of +5, how am I to know that it is really +5 and not within the error level?
Conclusions
Is NPS a con? No! Is it accurate? Maybe! Is it misused? Definitely! NPS along with TQM and BRP is a tool that just renames a good business practice that has been used for hundreds of years. It has value when analyzed with other factors and in large data sets. Do not apply NPS to areas that it was never intended to relate to and in areas that you have limited data.
If you have any further suggestions, do not keep it to yourself. Help your fellow readers!
If you have any questions, comments or suggestions drop me a line at rdm@datastats.com.
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