Flawed Assumptions


Share on LinkedIn

I have been reading research saying NPS and CSat both correlate to retention.

I find the studies are fundamentally flawed. The studies may be good, but the fundamental assumptions that NPS and CSat correlate to market share are flawed.

1. Ask anyone, when he/she goes to rebuy, whom does he buy from? One company or more. Only one. He is going to buy from the company giving him the most value over competition. NPS when measured is measured for a company not over competition. Improvement in NPS does not mean much? A “retained” customer has no value if he does not buy again.

Comparing yourself to yourself as you do in NPS is flawed. Why? So if your kid gets 80 marks today and 50 tomorrow do you say he has gone downhill? What if you knew the class average was 90 when he got 80 marks and the class average was 40 when he got 50 marks. Which is better?

2. CSat has been proven not to correlate to loyalty, and that was proven first at AT&T when they were getting great CSat scores and yet losing Customers. This led to the discovery of Customer Value and the metrics Customer Value Added which the Vodafone Managing Director said predicted market share a quarter out to one percent accuracy. Customer Value tells you why people buy, and is always measured versus competition. Customer Value takes into account the benefits you get vs the cost of acquiring such benefit. See jeff Gitomer’s book, Customer Satisfaction is Worthless. I do not agree entirely, because there is benefit in understanding satisfaction with transactions. Customer Value measures embedded feelings.

Many of our studies have shown dissatisfied Customers rebuy, or satisfied Customers do not re-buy. Hasn’t this happened to you? I do not need to give you examples.

3. Another important consideration is that the metric must take into account the important reason for buying. Using a piecemeal metric will not work. So trying to predict loyalty through Customer experience or Customer effort is flawed. Why? I can do a study of a company’s billing system and find there is an increased loyalty when the billing system improves, or the customer experience improves. But the majority of the customers are not looking for an improvement in the billing system or the effort. They are looking for an across the board improvement in the value they receive or perceive. Customer effort is only part of the story just as the billing system is only part of the story. Customer experience is part of the story, unless your definition of Customer experience is Customer Value (all the benefits vs all the costs) versus competition’s scores.

So if you miss all of these fundamentals, you are starting with severe flaws, but some still want to prove the flawed systems are adequate through “research”.


Gautam Mahajan
Gautam Mahajan, President of Customer Value Foundation is the leading global leader in Customer Value Management. Mr Mahajan worked for a Fortune 50 company in the USA for 17 years and had hand-on experience in consulting, training of leaders, professionals, managers and CEOs from numerous MNCs and local conglomerates like Tata, Birla and Godrej groups. He is also the author of widely acclaimed books "Customer Value Investment: Formula for Sustained Business Success" and "Total Customer Value Management: Transforming Business Thinking." He is Founder Editor of the Journal of Creating Value (jcv.sagepub.com) and runs the global conference on Creating Value (https://goo.gl/4f56PX).


  1. Agree with the key premises of your post. Both CSAT and NPS, and CES as well, have fairly limited application. It can easily be the case, as you note, for all suppliers in a competitive set to have some level of customer retention. I’d add, as many analysts (including myself) have noted in the past, that causation and correlation are two different constructs or principles. It is entirely possible to identify correlation (through simple regression) between a performance or touchpoint attribute, such as the salesperson’s knowledge, functionality of the product, or billing, and downstream customer behavior. That said, however, none of these attributes may be significantly driving positive, or negative, downstream behavior. .

    Customer-perceived value, derived through emotional registration and memory of the transaction or long-term relationship, is the most rigorous and reliable determinant of future customer behavior.

  2. Your thoughtful post reminds us of the complexity of human emotion used to evaluate an experience. The pursuit for one metric (or even a handful) that predicts customer loyalty expressed in their assistance with the bottom line is like a dating service claiming they have the one ultimate question to ask a prospective mate that is guaranteed to result in many , many years of wedded bliss!

    John Steinbeck’s description of a fishing expedition in his book Sea of Cortez puts an insightful finger on the dilemma today’s leaders face with customer experience metrics. Read the passage below and consider what it communicates about the implication of “metrics without methods.”

    “The Mexican sierra has 17 plus 15 plus nine spines in the dorsal fin. These can easily be counted. But if the sierra strikes hard on the line so that our hands are burned, if the fish sounds and nearly escapes and finally comes in over the rail, his colors pulsing and his tail beating in the air, a whole new relational externality has come into being—an entity which is more than the sum of the fish plus the fisherman.

    The only way to count the spines of the sierra unaffected by this second relational reality is to sit in a laboratory, open an evil-smelling jar, remove a stiff colorless fish from the formalin solution, count the spines and write the truth…There you have recorded a reality which cannot be assailed—probably the least important reality concerning either the fish or yourself.”

    Steinbeck’s prose reminds us that no matter how comprehensive and accurate our modern metrics may be, they will never completely capture the magic and mystery of an engaged and spirited customer relationship. By focusing too heavily on objective data, tidy calculations and sterilized reports, leaders are losing touch with the fact that they are putting precious energy on the “least important reality concerning” the customer or the organization.


Please use comments to add value to the discussion. Maximum one link to an educational blog post or article. We will NOT PUBLISH brief comments like "good post," comments that mainly promote links, or comments with links to companies, products, or services.

Please enter your comment!
Please enter your name here