Net Promoters
In a 2003 Fred Reichheld claimed in the Harvard Business Review that the Net Promoter Score (NPS) was “the single most reliable indicator of a company’s ability to grow”. Since then it’s been used by a whole host of organisations whose executives appreciated the idea that a single number could provide such an accurate assessment of the overall status of their company. And, it’s not difficult to understand why. Busy executives like the simplicity and focus that a single metric can provide as it’s:
• easy to digest
• report on
• provides a direct measure of the effectiveness of company initiatives
Single metrics are also a great antidote for the information and data overload that market research agencies, such as ourselves, have been traditionally been guilty of creating. Busy people want a direct answer to what should be a simple question..”How is my company doing...?”
So, it’s easy to understand why the net promoter score has been so successful but, is it really an accurate reflection of a company’s performance and its ability to grow revenues? Recent research (see article in the appendix) suggests it isn’t but, in all honesty, we Researchers are a bit like Economists - we rarely agree on anything!
Limits of a Single Metric Approach
At the end of the day it’s probably impossible to say who’s right and who’s wrong but, as ever, common sense is a great leveller and the enthusiasm with which Net Promoter has been greeted should be a wakeup call for research agencies.
• Market Research companies need to understand that executives want a single
metric they can use to assess how well the business is performing
(although, it needs to be the right number!)
• In reality the Net Endorser concept is probably overly simplistic for complex
Business to Business (B2B) markets and expecting a single question to accurately
reflect how well a business is performing is asking a lot.
Challenges Associated with Single Metric Data
Single metric analysis can work well for “commodity” driven companies that benefit from
relatively straightforward purchasing models within their target markets, e.g. eBay, Costco, Amazon, Wal-Mart and American Express. However, for organisations primarily associated with B2B markets where:
• Product and service are closely interlinked
• Purchases are made infrequently
• Users can be “locked in” (e.g. software licences or corporate policy)
• Comparisons are hard to make due to lack of experience
Then there is a real danger that single metric analysis will fail to paint the whole picture or worse still lull companies into a false sense of security. It’s also fair to say that a one-dimensional score fails to provide the detail that companies need to identify problem areas and improve performance - the ultimate aim.
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