Small business guru Gadi Shamia has written about Net Promoter scores as a key metric for small businesses.
Net Promoter is certainly very popular. Every web survey I have seen in the last year has included the Net Promoter question - "How likely would you be to recommend (x) to a friend (or colleague)?"
Gadi explains how to measure Net Promoter very well, so I won't repeat him, but in brief, you designate one set of customers "promoters", and another set "detractors". Subtract the percent of detractors from the percent of promoters, and the result is your Net Promoter score. A third set of customers are considered "passively satisfied" and are not included in the score. "Promoters" are those who answered 9 or 10 on a 0-10 scale; "detractors" answered 0 to 6.
If you think about it, Net Promoter does three things.
- It focuses on the customers who are very pleased with your products.
- It magnifies the effect of those who are displeased.
- It ignores people who are wishy-washy.
All of these are good things. Only customers who are very pleased are likely to become loyal. Any time a customer is displeased, it is a problem. And wishy-washy customers - 7 or 8 satisfaction on a scale of 0-10 - should be ignored. Too often, they are used by the inexperienced or the biased to inflate satisfaction scores and promote complacency.
But Net Promoter is controversial in the market research community, largely because of the way its creator, former Bain consultant Fred Reicheld, has promoted it. Reicheld calls Net Promoter "the one number you need to grow". He claims it is a superior predictor of growth, and he and his acolytes seem to claim that it can [replace] virtually all customer satisfaction research.
Are you ready for a shock? There is no such thing as "the one number you need to grow". It's not enough to know how well you are doing; you also need to know why. Which parts of your operation are performing well, and which are doing poorly? What improvements would bring the lagging components up to snuff, and how can you make the best parts of your operation even better? How well are your competitors doing? Which companies in your industry are the best, and what are they doing that makes their customers happy?
Small business owners tend to understand this sort of thing instinctively, but it can get lost in the world of big-picture executives and hired-gun strategists.
There is no real theoretical or intellectual justification for thinking that a Net Promoter score might actually mean anything. Does one detractor really cancel out exactly one promoter? How? Do "promoters" really promote? When, and how often?
Reicheld's primary claims for Net Promoter have been effectively debunked. Timothy L. Keiningham and his colleagues recreated the data Reicheld uses to justify his claims, and compared Net Promoter as a predictor of revenue growth to other customer satisfaction metrics. To save you from having to wade through many pages, here is the conclusion:
We find no support for the claim that Net Promoter is the “single most reliable indicator of a company’s ability to grow” .
Digging into Keiningham's data, it seems that Net Promoter is a good measure of customer satisfaction. Good, but no better than other common metrics like a top two box satisfaction score. There's nothing magic about asking whether someone would recommend your product. In fact, in some cases the question may seem jarring and dissonant. How likely are you to recommend your toilet paper or power company to a friend?
So is Net Promoter worthwhile? I think it can be, despite all the criticism. More on that later.
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