Tuesday, April 10, 2007

What's The Score -- More Coverage of NPS in UK-Based Research.

I was interviewed some time ago for an interesting article about the Net Promoter Score that appears in the March 2007 edition of Research, a UK-based trade publication serving the market research industry. The thrust of the article is that NPS is becoming an industry-standard in many companies but its academic grounding is hotly contested.

There's a neat timeline of events on page 36, which I'll summarize as follows (since I have commented on a number of these before I'll include links to my blog posts where the events intersect):

2003 -- Fred Reichheld's "One Number You Need To Grow" article in Harvard Business Review was published (hadn't started my blog yet!)

2004 -- Researchers Neil Morgan and Ron Rego offer early criticisms of NPS in a letter to the editor (this wasn't mentioned in the Research article but it should have been; I summarized their critiques here)

2005 -- Study by Paul Marsden and others at the London School of Economics (LSE) reporting results that seem to validate NPS as predictor of growth

2006 -- Reichheld's best-selling book The Ultimate Question was published in March.

Study by Alain Samson at LSE introduced the Net Advocacy Score arguing researchers need to better account for negative WOM and actual behavior (not just intentions). Robert East from Kingston University has also offered developments about actual WOM behavior rather than just intentions (details to come about that)

Interesting article in AdAge about NPS becoming an industry-standard metric (July 2006 -- not mentioned in the Research article). There was also an article done in Business Week in January 2006 about this too.

In September, the Morgan & Rego article in Marketing Science was published arguing NPS had little to no predictive power.

But later Morgan & Rego was criticized, on my blog and in academic publication (Keiningham et al.), for not making an "apples-to-apples comparison"

Riechheld responds to critics on his blog with an entry entitled "NPS does not work" -- the intersting point here is that there is a shift away from the statistical correlation between revenue growth and the NPS and towards linking revenue growth to individual behaviors

Article in Australia's Business Review Weekly cautioning those who adopt NPS to be aware of the limitations of reporting just one number (there have been a number of blog posts offering similar criticisms for a number of years before this). For this and other articles about the Net Promoter you can visit the "What They're Saying" section of Net Promoter site hosted by Satmetrix.

2007 -- Article to be published in Journal of Marketing that criticizes the predictive ability of NPS, but this time making a much better apples-to-apples comparison. There was also an important story published in the Wall Street Journal about this forthcoming article and mentioning other researchers who are seeking to advance the study of the role of word of mouth, loyalty, and the power (or lack thereof) of recommendation intentions and behaviors.

First annual Net Promoter conference held in New York City, sponsored by Satmetrix (one of the companies associated with the development of the Net Promoter metric)

Stay tuned for much more in 2007, on both the academic and industry fronts!
The final thing I'll note about this article is that it does a good job of raising the issue of whether or not the Net Promoter Score is good for the research industry or not. One the pro-side, Paul Marsden is quoted as saying that it allows researchers to have the ear of those high up in the executive food chain and that it "speaks the language" of key decision-makers in companies. On the con-side, there's a sense that executives and clients will get used to simplistic measures and forcing metrics to do what they are not designed to, or can't do.

A further criticism is that it could reduce the credibility of researchers. That is, if a metric doesn't do something its proponents said it could do, then how much faith will key decision-makers have when the next new metric comes along? Will it limit adoption of that new metric?

From my conversations with folks in the industry and readings, it seems the value of the NPS is not the score itself, but the institutionalization of a customer feedback system across organizational units that people actually pay attention to. To accomplish this it seems you need something that is relatively easy to communicate and that people at various levels have the time and patience to get their heads around. Time will tell if NPS becomes that metric, or part of a package of key performance indicators, for the long-term.

Ultimately, the gold standard for any metric is how well it allows people to make timely and responsive decisions that allow an organization to achieve its goals, and there are many innovative researchers in industry and academia seeking to answer that "ultimate question."

ADDED: Here's a post by Alain Samson about the same article, and his thoughts on the pros and cons of using the Net Promoter Score.