„If growth is what you´re after, you won´t learn much from complex measurements of customer satisfaction or retention. You simply need to know what your customers tell their friends about you.“ This basic idea, Frederick Reichheld (Ex-Bain & Company-Consultant) came up within an article in December 2003 issue of the Harvard Business Review, was the cornerstone of the Net Promoter Score (NPS). The NPS as „one number you need to grow“ is a term Reichheld coined later on as he published the homonymous book in 2006. Well, the point of origin for carrying out the NPS is to ask the population of your customers just one question:

“How likely is it that you would recommend our company to your friends or colleagues?”

Furthermore you ask them to evaluate this likelihood on a multilevel scale (0 to 10).

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The distinction whether a customer is scaled as a promoter, a passive or a detractor is made up like shown in the graph above. To plot a firm´s NPS you simply need to assess the percentage of promoters minus the percentage of detractors. In an example where you come up with 70 % promoters, 10 % passives and 20 % detractors, you are left with a NPS of 50. According to Reichheld, this is the minimum you have to achieve out of the possible NPS-range from -100 up to 100.

To sum it up, the NPS of course has a certain charm, as there is a variety of advantages being washed up while using this figure. By substituting a single question for the usually complex black box of the typical customer satisfaction survey you are accompanied by a simple to survey and easy to assess figure. Furthermore there is proven empirical relevance of recommendations, as they are important for sustainable growth. Last but not least, the NPS can be seen as a loyalty- and growth-indicator as well as an easy to use word of mouth-index.

Tempting as it may sound the Net Promoter Score has a couple of drawbacks according to market research institutes. A few of those will be briefly outlined on the following paragraphs.

The NPS itself only represents an index and is not really content relevant. It gives a simple number without really telling what needs to be done to achieve this score. It’s like talking about Celsius or Fahrenheit in the global earth warming debate. All the number tells you is: it’s getting warmer or colder, but it gives no suggestions what to do against climate change. The NPS doesn’t look behind the scenes of customer satisfaction and customer loyalty, it doesn’t really show what is causing the result.

Another issue is the scale of the NPS Fred Reicheld came up with. With 20 % Promoters and 60 % Detractors 20% of the people (passives) who are in the upper range (8 and 7) are left out and these pepole still likely to promote the brand or product. The scale issue leads to another problem. The NPS is simply not comparable on an international level. People’s rating habits vary between different countries and therefore the results for the ultimate question: “How likely is it that you would recommend our company to friends or colleagues”? Research shows that people in Norway are rarely give scores above 8 on such a scale, whereas Russians tend to give overall better scores on the same scale. As a result there will always be a very bad NPS in Norway because there are simply no Promoters and on the other end a rather good score in Russia. The NPS lacks here a serious amount of validity in the international context, because it simply does not include the components of social and cultural background.

Last but not least, the NPS is not equally applicable on various branches. Simply because the relevance for word of mouth marketing, which is the actual answer the NPS gives, is not the same across the branches. A simple example: The tourism industry depends on word of mouth propaganda in order to be successful whereas the same doesn’t apply on the branch of consumer products like for instance toilet brushes.

To sum it up with Ashby’s law: complex systems can only be controlled by systems of the same complexity. Or in a very simplified way, there is no easy answer on a complex issue. Like, for instance measuring customer loyalty definitely is.

To include the NPS in the planed media simulation is difficult, because of the weaknesses of the NPS . Therefore we came up with two possible adoption methods.

The First one would be to use the NPS before the simulation as an indicator on how good or bad the customer relationship, loyalty with the brand already is. The indicator will now affect further proceedings in the simulation.

The second method to embed the NPS in the simulation would be to place it at the end as a controlling tool to be able to  measure quickly the success rate of the campaign right after the launch.

 

Michael Waltinger & Jörg Milde

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