A pictogram may reflect more accurately feelings than words. We prefer to measure on the Basis of pictograms such as these which avoid any confusion over verbal definitions. See Figure 1.
At the end of 2006 I came across in my search “Net Promoter Score (NPS)” developed by customer loyalty guru Fred Reichheld, and I muttered to myself: “Eureka! This is the greatest thing since sliced bread!”
The NPS is derived from asking “The Ultimate Question”:
“On a scale of 0 to 10 how likely are you to recommend us to friends and colleagues.”
Anyone who gives you an answer 9 or 10 is a Promoter. Those answering 7 or 8 are noted as Passively satisfied. A customer that answer 6 or less is designated a Detractor.
All you have to do is subtract the percentage of Detractors from the percentage of Promoters and you come up with a Net Promoter Score (NPS) which correlates highly with growth and profits.
Put in a formula: NPS = P-D.
That’s all there is to it!
Promoters represent an active sales staff getting others to try out the company.
The Passives refer others at a rate less than half of Promoters and will switch allegiance at the whiff of a better deal.
The detractors are annoyed go around bad-mouthing the company, turning off prospects and demoralizing staff (they are good for 80% of negative referrals). “They suck the life out of a firm” declares Reichheld.
Reichheld used the hours of the Bain and Company consultants to verify the effectiveness of NPS with detailed analyses of growth and profits.
Why does NPS appear to work?
Imagine if you enjoyed 1,000,000 customers of which 60% are shouting “They are great people!!” while 40% were calling out just as loudly “They are no good crooks!!”
It is not a growth scenario.
But Reichheld takes more than 200 pages to tell his complete story, chock full of examples from such customer-oriented corporations as Enterprise Car Rental, Intuit Software, Southwest and Jet Blue Airlines, Dell and other icons.
Reichheld has his critics, of course. This is no surprise, given his harsh critique of customer satisfaction surveys and those who sell them.
For instance, on the website www.walkerinformation.com, vendor of customer satisfaction strategies and research, Riechheld’s book “The Ultimate Question” the Harvard Business School Press, ISBN 1-5319-783-9) was critically reviewed by Doug Grisaffe, Assistant Professor of Marketing at the University of Texas (Arlington) and a Walker Information associate.
He especially has a problem with this Reichheld assertion
“This number is the one number you need to grow. It’s that simple and that profound.”
Giisaffe’s major critique is one I share to a certain extent; namely that Reichheld goes on to show that there is a high correlation between a high NPS and profitable growth, and hence the remedy for slow or unprofitable growth is to improve NPS. Raise the score and the profits roll in, implies Reichheld.
I an NOT a statistician, but I do recall one lesson I retained from Statistics 101—A correlation does not mean cause and effect. For instance research can show a high correlation between kids who eat spinach develop muscles and become stronger than kids who don’t.
But this is not proof that eating spinach gives you muscles and strength—perhaps a propensity to develop strength gives you a hunger for spinach!
What irritated me a bit was Reichheld’s stressing the need to improve your “recommend ability” which will result in profitable growth.
But raising your NPS means simply raising a score—it does not tell you mean you how to love your customers more and better.
What we need is Whole Brain Thinking. A method combines the power of rational Left Brain Thinking with the intuitive strength of Right Brain Thinking.
Thus I suggest we add a “left brain” side to the “right brain” equation of NPS: share of customer data, resulting in a formula for “Customership”. What could be more loyal then voting with your pocketbook and spending the bulk of your food money at Store X, buying the majority of your PC’s at Dell, and drinking only Coors beer.
Thus your “Customership” picture would look something like Figure 2.
And the formula is
Customership = Share of Wallet X NPS
Customership = Share of wallet is 80% X NPS is 8.0
Customership = 6.4
Whole Brain Thinking, thus.
This is the End of a two-part Blog Posting