The Net Promoter Score (NPS) is used by many of today’s top businesses to monitor and manage customer relationships. Fred Reichheld and his co-developers of the NPS say that a single survey question, “How likely are you to recommend Company Name to a friend or colleague?”, on which the NPS is based, is the only loyalty metric companies need to grow their company. Despite its widespread adoption by such companies as General Electric, Intuit, T-Mobile, Charles Schwab, and Enterprise, the NPS is now at the center of a debate regarding its merits.
Fred Reichheld, the co-developer of the NPS (along with Satmetrix and Bain & Company) has made very strong claims about the advantage of the NPS over other loyalty metrics. Specifically, they have said:
1. The NPS is “the best predictor of growth,” (Reichheld, 2003)
2. The NPS is “the single most reliable indicator of a company’s ability to grow” (Netpromoter.com, 2007)
3. “Satisfaction lacks a consistently demonstrable connection to… growth” (Reichheld, 2003)
There is considerable evidence disputing the findings of the NPS camp (see Net Promoter and ACSI Smackdown, and Net Promoter Versus ACSI: It’s the Same Thing). In addition to these findings, it appears that customer feedback professionals are also suspect of the merits of the NPS. I recently conducted a Customer Feedback Best Practices study in which customer feedback professionals (e.g., Senior Executives of Customer Feedback Programs (CFPs), Directors of CFPs, Managers of CFPs and Individual Contributors of CFPs) were asked to indicate the degree to which they agree or disagree with the following two statements:
1. The Net Promoter Score (e.g., recommend intentions) is a better predictor of growth compared to other loyalty questions (e.g., satisfaction, repurchase intentions)
2. The Net Promoter Score (e.g., recommend intentions) is a better predictor of growth compared to other loyalty indices (aggregate of recommend, satisfaction, repurchase intentions)
Thirty-seven of the respondents answered these two questions related to the Net Promoter Score. When asked to compare the NPS with other loyalty questions/items, only 19% of the customer feedback professionals agreed that the NPS is a better predictor of growth compared to other loyalty questions. When asked to compare the NPS with other loyalty indices, again, only 19% of the customer feedback professionals agreed that the NPS is a better predictor of growth compared to other loyalty indices. The remaining 81% of the customer feedback professionals either disagreed with (~40%) or remained neutral toward (~40%) the statements regarding the merits of the NPS.
Yes, the NPS is a simple metric, but that is not the issue here. Just because a solution is simple does not make it the right solution. More importantly, the simplicity of the NPS does not minimize the problems (e.g., research bias) of the NPS research as well as their misleading claims regarding the superiority of the NPS over other loyalty metrics. Customer feedback professionals seem to be aware of the limits of the NPS. They need to share their concerns (along with the recent research on the NPS) with their CEOs and CMOs.