Satmetrix Net Promoter - Has anyone used this for analyzing customer survey data?

[MarilynJ6354]

Does anyone have an excel template or other idea for easily calculating customer survey NPS?

[harry]

Since somebody was talking about 'promoters' and 'detractors' in another thread today, I thought I will bump up this old thread which had remained unanswered.

For those interested, NPS stands for Net Promoter Score.

The net promoter score is a management tool that gauges the loyalty of a firm's customer relationships. By asking customers one question (usually, "How likely is it that you would recommend us to a friend or colleague?"), customers can be categorized into three groups: promoters, passives, and detractors. Promoters represent valuable assets that drive profitable growth because of their repeat/increased purchases; detractors are liabilities that destroy profitable growth because of their complaints, reduced purchases/defection and negative word-of-mouth. By calculating their Net Promoter Score (subtracting their %detractors from their %promoters)firms create a bottom-line metric akin to net worth or net profit, thus enabling managers to prioritize and evaluate loyalty-building initiatives. The NPS concept was created by loyalty business model expert Fred Reichheld of Bain & Company and is discussed in his book The Ultimate Question: Driving Good Profits and True Growth. The net promoter metric has been widely adopted by leading firms including GE, Allianz,Apple, P&G, American Express, HSBC and Philips. The body of related frameworks,tools and processes have evolved into a management discipline known as the net promoter system (NPS).

[bobehayes]

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.

Since harry already summarized the basics of the NPS, I'll jump to the meat of this posting. 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. Specifically, they have said:

The NPS is “the best predictor of growth,” (Reichheld, 2003)

The NPS is “the single most reliable indicator of a company’s ability to grow” (Netpromoter.com, 2007)

“Satisfaction lacks a consistently demonstrable connection to… growth” (Reichheld, 2003)

Reichheld support these claims with research displaying the relationship of NPS to revenue growth. In compelling graphs, Reichheld (2006) illustrates that companies with higher Net Promoter Scores show better revenue growth compared to companies with lower Net Promoter Scores. Reichheld sites only one study conducted by Bain & Associates (co-developers of the NPS) showing the relationship between satisfaction and growth to be 0.00.

Researchers, pointing out the NPS claims are only supported by Reichheld and his co-developers, have conducted rigorous scientific research on the NPS with startling results. For example, Keiningham et al. (2007), using the same technique employed by Reichheld to show the relationship between NPS and growth, used survey results from the American Customer Satisfaction Index (ACSI) to create scatterplots to show the relationship between satisfaction and growth. Looking at the personal computer industry, they found that satisfaction is just as good as the NPS at predicting growth. Keiningham et al. (2007) found the same pattern of results in other industries (e.g., insurance, airline, ISP). In all cases, satisfaction and NPS were comparable in predicting growth.

Still, other researchers (Morgan & Rego, 2006) have shown that other conventional loyalty measures (e.g., overall satisfaction, likelihood to repurchase) are comparable to NPS in predicting business performance measures like market share and cash flow.

Contrary to Reichhheld, other researchers, in fact, have found that customer satisfaction is consistently correlated with growth (Anderson, et al., 2004; Fornell, et al., 2006; Gruca & Rego, 2005).

The recent scientific, peer-reviewed studies cast a shadow on the claims put forth by Reichheld and his cohorts. In fact, there is no published empirical supporting the superiority of the NPS over other conventional loyalty metrics.

Keiningham et al. (2007) aptly point out that there may be research bias by the NPS developers. There seems be a lack of full disclosure from the Net Promoter camp with regard to their research. The Net Promoter developers, like any research scientists, need to present their analysis to back up their claims and refute the current scientific research that brings their methodological rigor into question. To date, they have not done so. Instead, the Net Promoter camp only points to the simplicity of this single metric which allows companies to become more customer-centric. That is not a scientific rebuttal. That is marketing.

For the interested reader, I have free white papers on the NPS debate and customer loyalty measurement. Visit businessoverbroadway.com for the free downloads.

Bob E. Hayes, Ph.D.

References

Anderson, E. W., Fornell, C., & Mazvancheryl, S. K. (2004). Customer satisfaction and shareholder value. Journal of Marketing, 68 (October), 72-185.

Fornell, C., Mithas, S., Morgensen, F. V., Krishan, M. S. (2006). Customer satisfaction and stock prices: High returns, low risk. Journal of Marketing, 70 (January), 1-14.

Gruca, T. S., & Rego, L. L. (2005). Customer satisfaction, cash flow, and shareholder value. Journal of Marketing, 69 (July), 115-130.

Hayes, B. E. (1997). Measuring Customer Satisfaction (2nd Ed.). Quaility Press. Milwaukee, WI.

Ironson, G.H., Smith, P.C., Brannick, M.T., Gibson W.M. & Paul, K.B. (1989). Construction of a "Job in General" scale: A comparison of global, composite, and specific measures. Journal of Applied Psychology, 74, 193-200.

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.

Netpromoter.com (2007). Homepage.

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.

Moderator Note:
In a separate communication, Bob E. Hayes has identified himself as the President of businessoverbroadway

[Wes Bucey]

Certainly, the debate itself might be interesting, Bob, but more interesting to me is how you came to the Cove and this particular thread. In your Profile, you say "a friend sent me a link." Are you a self-appointed "truth squad" with a particular vendetta for the NPS folk or is there a hint of profit or glory for demonstrating a one-time darling of business managers actually has feet of clay and begins to disintegrate as soon as the going gets a little wet?

To borrow a phrase from another marketing program - "Inquiring minds want to know!"

[Wes Bucey]

Originally Posted by Wes Bucey

Certainly, the debate itself might be interesting, Bob, but more interesting to me is how you came to the Cove and this particular thread. In your Profile, you say "a friend sent me a link." Are you a self-appointed "truth squad" with a particular vendetta for the NPS folk or is there a hint of profit or glory for demonstrating a one-time darling of business managers actually has feet of clay and begins to disintegrate as soon as the going gets a little wet?

To borrow a phrase from another marketing program - "Inquiring minds want to know!"

Curiosity drove me to Google and I found an identical post of Bob's at http://www.quirks.com/forum/discussi...?cID=33&tID=77
and a similar screed at
http://www.customerthink.com/blog/mo...moter_rhetoric

As a long-time Quality wonk, I certainly have friends and acquaintances on both sides of the Six Sigma debate which continues to rage as some folk decry and others applaud the marketing and self promotion of Dr. Mikel Harry. I wonder if this NPS "debate" is similar - probably akin to trying to separate fly specks from pepper.