Recently talked with 3 sector-leading firms obsessed with their NP score – the % of customers who are Promoters minus the % who are Detractors. Having more people like you than not is for sure “a good thing”, and NPS advocates like to point out that firms with a high score out-perform others (never mind how the causality actually works, or what to do with it!).
But others already saw that it’s badly flawed, with illogical reasoning and a disconnect from what really matters. First, it’s supposed to be a metric about customer loyalty, but to most of us “loyalty” = probability of not leaving – not whether they like or dislike us. And “Promoter” implies it’s about recommending others to become our customers, not whether current customers will be lost.
The companies I talked to have no idea what proportion of new customers are won by others’ recommendations, or the degree to which that recommendation actually features in their choice, even if it occurs. In one case (a particular banking service), recommendation is almost certainly close to zero because it’s simply not a product people enthuse about.
Next, there is the “net” word … “net” is the difference between plus and minus, and +90/-80 is very different from +15/-5.
… and NPS says nothing about competition !! None of the companies I met with know anything at all about their competitors’ NPS, let alone what the respective values might actually influence, or to what degree.
The whole concept needs replacing with a decent model of what is actually happening in any real case. Serious marketing professionals can say much more, but in summary we want some mix of 3 things, that are completely standard in dynamic models of customers and sales (see video, skip to 19min:30sec). Each implies distinct questions …
(1) winning new customers … so first, ask recently-new customers “Why did you become our customer?” and for that fraction where recommendation featured “Where you recommended to us?” and “How much did that influence your choice?” … and ask current customers “How often do you discuss our product/service with others?” then “When you do, would you recommend or discourage?”
(2) keeping current customers … this is simpler … “How satisfied are you with our product/service?” – “What factors might cause you to leave us?” – “How much will your dissatisfaction [if any] feature in that decision?” … even better, ask customers who actually did leave.
(3) getting more purchases from current customers [where possible] … “Are you likely to buy more or less from us?” – “How satisfied are you with our product/service?” – “How much will this satisfaction/dis-satisfaction feature in that decision?”
… and do all this for the competition to understand the competitive dynamics.