Internet Business Promoter Details
"Net Promoter Score" is a customer loyalty metric developed by (and a registered trademark of) Fred Reichheld, Bain & Company, and Satmetrix. It was introduced by Reichheld in his 2003 Harvard Business Review article "One Number You Need to Grow".[2] NPS can be as low as -100 (everybody is a detractor) or as high as +100 (everybody is a promoter). An NPS that is positive (i.e., higher than zero) is felt to be good, and an NPS of +50 is excellent. Companies are encouraged to follow this question with an open-ended request for elaboration, soliciting the reasons for a customer's rating of that company or product. These reasons can then be provided to front-line employees and management teams for follow-up action.[2] Local office branch managers at Charles Schwab Corporation, for example, call back customers to engage them in a discussion about the feedback they provided through the NPS survey process, solve problems, and learn more so they can coach account representatives.[3]
Proponents of the Net Promoter approach claim the score can be used to motivate an organization to become more focused on improving products and services for customers. They further claim that a company's Net Promoter Score correlates with revenue growth. Discussed at length in The Ultimate Question: Driving Good Profits and True Growth by Fred Reichheld, and "Answering the Ultimate Question" by Richard Owen and Laura Brooks, the Net Promoter approach has been adopted by several companies, including E.ON, Philips, GE,[4] Apple Retail,[5] American Express BearingPoint, and Intuit.[6] It has also emerged as a way to measure loyalty for online applications, as well as social game products.[7]
Criticism of NPS
Despite its popularity among business executives, the Net Promoter concept has attracted some controversy from academic and market research circles. Research by Keiningham, Cooil, Andreassen and Aksoy disputes that the Net Promoter metric is the best predictor of company growth.[8] Furthermore, Hayes (2008) claimed there was no scientific evidence that the "likelihood to recommend" question is a better predictor of business growth compared to other customer-loyalty questions (e.g., overall satisfaction, likelihood to purchase again). Specifically, Hayes stated that the "likelihood to recommend" question, does not measure anything different from other conventional loyalty-related questions.[9]
Environmental factors may exert an influence on customers' response to the "recommend" question—making comparisons across business units or industries difficult in certain cases. Examples include comparing businesses with an associated social stigma (e.g., cigarettes or online dating) and businesses with different levels of service fulfillment (e.g., delivery services as compared to gyms). Moreover, determining when the survey should be delivered may be more obvious in some cases than in others (such as in the case of a gym), where customer attitudes may be likely to change over time.[citation needed]
Daniel Schneider, Jon Krosnick, et al. found that out of four scales tested, the 11-point scale advocated by Reicheld had the lowest predictive validity of the scales tested.[10]
Others have taken issue with the calculation methodology, claiming that by collapsing an 11-point scale to three components (e.g., Promoters, Passives, Detractors), significant information is lost and statistical variability of the result increases.[6] The validity of NPS scale cut-off points across industries and cultures has also been questioned.[11]
Proponents of the Net Promoter approach point out that the statistical analyses presented prove only that the "recommend" question is similar in predictive power to other metrics, but fail to address the practical benefits of the approach, which are at the heart of the argument Reichheld put forth. Proponents of the approach also counter that analyses based on third-party data are inferior to analyses conducted by companies on their own customer sets, and that the practical benefits of the approach (short survey, simple concept to communicate) outweigh any statistical inferiority of the approach
Proponents of the Net Promoter approach claim the score can be used to motivate an organization to become more focused on improving products and services for customers. They further claim that a company's Net Promoter Score correlates with revenue growth. Discussed at length in The Ultimate Question: Driving Good Profits and True Growth by Fred Reichheld, and "Answering the Ultimate Question" by Richard Owen and Laura Brooks, the Net Promoter approach has been adopted by several companies, including E.ON, Philips, GE,[4] Apple Retail,[5] American Express BearingPoint, and Intuit.[6] It has also emerged as a way to measure loyalty for online applications, as well as social game products.[7]
Criticism of NPS
Despite its popularity among business executives, the Net Promoter concept has attracted some controversy from academic and market research circles. Research by Keiningham, Cooil, Andreassen and Aksoy disputes that the Net Promoter metric is the best predictor of company growth.[8] Furthermore, Hayes (2008) claimed there was no scientific evidence that the "likelihood to recommend" question is a better predictor of business growth compared to other customer-loyalty questions (e.g., overall satisfaction, likelihood to purchase again). Specifically, Hayes stated that the "likelihood to recommend" question, does not measure anything different from other conventional loyalty-related questions.[9]
Environmental factors may exert an influence on customers' response to the "recommend" question—making comparisons across business units or industries difficult in certain cases. Examples include comparing businesses with an associated social stigma (e.g., cigarettes or online dating) and businesses with different levels of service fulfillment (e.g., delivery services as compared to gyms). Moreover, determining when the survey should be delivered may be more obvious in some cases than in others (such as in the case of a gym), where customer attitudes may be likely to change over time.[citation needed]
Daniel Schneider, Jon Krosnick, et al. found that out of four scales tested, the 11-point scale advocated by Reicheld had the lowest predictive validity of the scales tested.[10]
Others have taken issue with the calculation methodology, claiming that by collapsing an 11-point scale to three components (e.g., Promoters, Passives, Detractors), significant information is lost and statistical variability of the result increases.[6] The validity of NPS scale cut-off points across industries and cultures has also been questioned.[11]
Proponents of the Net Promoter approach point out that the statistical analyses presented prove only that the "recommend" question is similar in predictive power to other metrics, but fail to address the practical benefits of the approach, which are at the heart of the argument Reichheld put forth. Proponents of the approach also counter that analyses based on third-party data are inferior to analyses conducted by companies on their own customer sets, and that the practical benefits of the approach (short survey, simple concept to communicate) outweigh any statistical inferiority of the approach
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