Net Promoter Versus ACSI: It’s the Same Thing

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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.

While 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, other researchers (Keiningham et al, 2007; Morgon & Rego, 2006)
have found that other conventional loyalty measures (e.g., overall satisfaction,
likelihood to repurchase) are comparable to NPS (likelihood to recommend) in
predicting business performance measures. Why?

I’ve examined these conventional loyalty items (e.g., likelihood to recommend,
likelihood to repurchase, overall satisfaction) for several years using standard
psychological measurement principles and have found that they are measuring the
same underlying construct. Specifically, through factor analysis, there is a
clear one-factor solution with all items loading extremely highly on a single
factor. Additionally, reliability estimates (Cronbach’s alpha) of a composite
score using these items show reliability well above .80. It’s no surprise that
these items are related to other measures to the same degree. To argue that one
loyalty item is better than another is not science. It is marketing.

You can download a free copy of my whitepaper on the NPS at
Business Over Broadway.
References
Keiningham, T. L., Cooil, B., Andreassen, T.W., & Aksoy, L. (2007). A
longitudinal examination of net promoter and firm revenue growth. Journal of
Marketing, 71 (July), 39-51.
Morgan, N.A. & Rego, L.L. (2006). The value of different customer satisfaction
and loyalty metrics in predicting business performance. Marketing Science,
25(5), 426-439.
Reichheld, F. F. (2003). The One Number You Need to Grow. Harvard Business
Review, 81 (December), 46-54.
Reichheld, F. F. (2006). The ultimate question: driving good profits and true
growth. Harvard Business School Press. Boston.
 

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