The Net Promoter Score (NPS) has been gathering promoters and detractors ever since Fred Reichheld created it- but most especially since his paper entitled ‘The one number you need to grow’ appeared in the Harvard Business Review in December 2003. In the last three and a half years, businesses all around the world have been assessing the value of NPS. Some of the largest and most successful have adopted it as not just the key metric for their business but also an enabling technology for business improvement.
Meanwhile some research firms have been working hard to undermine its value – perhaps because they see Reichheld’s ‘Ultimate Question’ as a threat to their income. Despite their efforts, NPS is gathering ground – perhaps because for those that use it, it exceeds their expectations – a key tenet of the metric itself. Whatever the reason, NPS looks here to stay. In fact there is sufficient interest in the metric in this country to support a two day sell out conference this week in London. Does this conference represent a tipping point in its use in the UK – or is it just another business fad reaping the benefits while it is flavour of the month? If the marketing for the conference is anything to go by, its future is assured. It begins…. The culmination of more than 20 years of work, the Net Promoter® measure of customer loyalty is much more than a metric — it is a discipline your company needs to master if you want to make a lasting impact on the bottom line. Discover how companies are boosting customer loyalty and revenue growth using Net Promoter, the most important management discipline since Six Sigma
Its strength is its simplicity – its simplicity could be its undoing
I’ve been working with NPS since 1995 – an early adopter and now a confirmed promoter. I like its simplicity. After all it is a metric that requires just one question to be answered – see the box below. It creates a snapshot of your recommendability – the difference between your positive and negative word of mouth. The better the score, the more likely you are to perform well. Reichheld, and NPS, is criticised for using the metric as a predictor of future growth potential – although work at the London School of Economics has confirmed the link. In my opinion, this ‘predictor’ quality can be a distraction because some organisations may stop at this simplistic level. It is better to use the metric to identify the causes of detraction and promotion and to adjust both your operations and your marketing accordingly. This is the real strength of what Reichheld created. If organisations ask their customers these profound questions on a regular basis and then act on the answers, they can deliver a lasting impact on the bottom line.
So why should PR people be interested?
NPS should be a metric that is embraced by communications professionals of all disciplines because it both connects to what they do and resonates in the boardroom. Few, if any, other measures that PR has mustered to prove its credibility in the past, are as meaningful to the CEO. AVEs, OTSs and even brand affinity simply do not have the same cut through as the answer to question: “Are we creating advocates?”
There are perhaps two powerful reasons why business and communication people alike should sit up and take notice. Firstly, recommendations create recommenders. It is a positive reinforcement loop of huge value to a business. Look at the chart of Simple’s recommendability. A low NPS for non-users is to be expected because they have not yet had the experience. A good NPS for users that shows Simple (the UK’s #1 brand for sensitive skin) is a strong word of mouth brand. But look at the impact of recommendations on the NPS! Users who arrived at the brand via a recommendation have an NPS of 65% – almost three times the standard NPS, with double the level of promoters and almost zero detractors. Setting expectations where they can be exceeded is the key to business and PR success. On the strength of this research we created for Simple a breakthrough recommendation generator www.SimplyCity.me.uk that has already attracted thousands of brand advisers in under three months. Secondly, negative recommendations are almost four times more influential than positive ones – so it pays to identify and remove the sources of detraction. PR people are used to the twin disciplines of protect and promote – so NPS should be manna from heaven in the search for a place at the boardroom table.
There is another reason why NPS can be vital to business today. Personal recommendations appear on the Internet in multiple forms – blogs, forums, social networks to name but three. PR people need to have their finger on the pulse of the Web 2.0 recommendability. That’s why Kaizo created its Advocacy Index – an NPS rating using the power of Google.
So is NPS the most important management discipline since Six Sigma, as Reichheld suggests? I’m not sure. But my work in the last three years proves that it can deliver untold value to organizations that are prepared to embrace it fully.
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