The Value of Net Promoter Scores | National Apartment Association

The Value of Net Promoter Scores

I saw a discussion group regarding the Net Promoter Score (NPS).  Like many in the CRM field, I question the value of Fred Reichheld’s highly disputed NPS Harvard Business Review article “The Only Number You Need to Know.”
CRM thought-leaders voice great concern about focusing on the NPS as it provides no direction on what drove the score or how to grow it; it measures “effect” not “causes.”  It provides no actionable feedback (vs. best practice metrics).  One must focus on what matters most to customers, then watch satisfaction grow, loyalty grow, turnover drop…and the NPS grow as a result.  Monitoring NPS will not impact “loyalty”; “loyalty” is earned by focusing on the best practices that drive satisfaction and retention!’s Neil Davey offers a great perspective in “Net Promoter: Can a magic number really guide your business?”  He quotes Robert Shaw, a “financial performance of marketing” authority.  "’Net Promoter puts word of mouth promotion center stage, but people are so uninterested in the majority of products and services that by and large they never talk to other people about them,’ Shaw suggests. ‘If you read extensive research literature, you will find that it is really only sex, politics and religion that people talk very actively about. But for the majority of mundane products and services, the NPS is ABOUT AS USEFUL AS AN ASHTRAY ON A MOTORCYCLE.’"
In “NPS – Do The Numbers Really Deliver?” by Howard Ploman of InfoQuest: “The foundation of NPS is the claim that it is the only metric a company needs to predict growth. We are struck by the carefully chosen language employed there, noting that the emphasis is on ‘predict’, as opposed to ‘drive’ or ‘cause’.  Being told what customers think, but not why they think it, falls into the same general realm AS A DOCTOR TELLING YOU YOU’RE SICK, BUT FAILING TO PROVIDE A SPECIFIC DIAGNOSIS OR A RECOMMENDED TREATMENT.  With very few exceptions, building a satisfied customer base is the product of a company taking a hard look at itself through the eyes of its customers, and then going out and systematically addressing, and fixing, what it sees. Success is predicated on understanding each of the many dynamics that comprise and contribute to the customer relationship. It is an outcome that is driven, not pulled.  Mr. Reichheld would have us believe that if you concentrate on building a high score to a single metric, everything else will follow. While attractive theory, the reality is it just doesn’t work that way. Tracking change in an organization is one thing. Driving change is another matter entirely.  One needs to explore all of the dynamics and touch points that comprise and contribute to the customer relationship. Customer loyalty and recommendation behavior are products of satisfaction with the total customer relationship.”
In “What's Wrong With the Net Promoter Score”, Augustine Fou of ClickZ/Marketing News & Expert Advice, shares: “If a metric is just an ‘it is what it is’ number, has no predictive power, can't be used alone, and doesn't give you clues about what to do -- throw it out. It's synonymous with useless.”
In NxtERA Marketing Blog, Elana Anderson “Net Promoter Score is Not a Customer Metric” blog shares: “I’ve heard a lot of people talking about Net Promoter as the ‘one metric’ that marketing needs to worry about.   I’m not here to bash NPS, as there are others who are taking that on.  Why do I say NPS is not a customer metric? At an aggregate level, according to the research by Fred Reichheld, a high NPS score correlates to business growth.  Most importantly, it doesn’t give you any insight into your customers’ needs, desires, motivations or help you determine what to do or how to treat individual customers.  Sure, you might think, ‘we need to turn the passives into promoters,’ but how are you actually going to do that when what motivates one passive is completely different from what motivates another?  You need operational metrics to help run the operation, diagnose issues, and improve efficiency.  Pull back the throttle and apply a measure of basic business logic.”