Net promoter score: Difference between revisions
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removed non-encyclopedic content, rephrased several statements. Still needs more input from relevant scholarship, though, as this metric is amazingly prevalent in market research in the English speaking world. Huge thanks to user:Sennecaster for their contributions! |
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| ⚫ | '''Net Promoter''' or '''Net Promoter Score''' ('''NPS''') is a widely used market research metric that typically takes the form of a single survey question asking respondents to rate the likelihood that they would recommend a company, product, or a service to a friend or colleague. The NPS is a proprietary instrument developed by [[Fred Reichheld]], who owns the registered NPS trademark in conjunction with [[Bain & Company]] and Satmetrix.<ref name="OneNumber">{{Cite journal| author = Reichheld, Frederick F.| title = One Number You Need to Grow| journal = [[Harvard Business Review]]|date=December 2003| pmid = 14712543| url = http://hbr.org/2003/12/the-one-number-you-need-to-grow/ar/1}}</ref> Its popularity and broad use have been attributed to its simplicity and transparent methodology of use.<ref name=":0" /> |
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| ⚫ | The NPS assumes a subdivision of respondents into "Promoters" who provide ratings of 9 or 10, "Passives" who provide ratings of 7 or 8, and "Detractors" who provide ratings of 6 or lower. Usually, users of the NPS perform a calculation that involves subtracting the proportion of Detractors from the promotion of Promoters collected by the survey item, and the result of the calculation is typically expressed as an [[integer]] rather than a percentage.<ref name=":2">{{Cite web|title=Measuring Your Net Promoter Score℠|url=https://www.netpromotersystem.com/about/measuring-your-net-promoter-score/|access-date=2021-02-13|website=Bain|language=en}}</ref> The core ''How likely would you be to recommend...'' question is sometimes accompanied by additional open-ended or so-called "driver" questions.<ref>{{cite journal|last=Burnham|first=Thomas A. |author2=Jefferey A. Wong |author3= |title=Factors influencing successful net promoter score adoption by a nonprofit organization: a case study of the Boy Scouts of America|journal=International Review on Public and Nonprofit Marketing|date=2018|url=https://link.springer.com/article/10.1007%2Fs12208-018-0210-x}}</ref> |
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| ⚫ | The NPS is typically interpreted and used as an indicator of customer loyalty. In some cases, it has been argued to correlate with revenue growth relative to competitors,<ref>Call Centers for Dummies, By Real Bergevin, Afshan Kinder, Winston Siegel, Bruce Simpson, p.345</ref> although it has also been demonstrated that NPS scores vary substantially between industries.<ref>{{Cite web|title=Net Promoter Score - The Ultimate Guide {{!}} Feedough|url=https://www.feedough.com/net-promoter-score/|access-date=2021-02-13|language=en-US}}</ref> NPS has been widely adopted by Fortune 500 companies and other organizations.<ref>{{Cite web|url=https://www.bloomberg.com/news/articles/2016-05-04/tasty-taco-helpful-hygienist-are-all-those-surveys-of-any-use|title=The Inventor of Customer Satisfaction Surveys Is Sick of Them, Too|last=jennymkaplan|first=Jennifer Kaplan|website=Bloomberg.com|access-date=2016-06-05}}</ref><ref name=":0">{{Cite news|last=Colvin|first=Geoff|date=18 May 2020|title=The simple metric that's taking over big business|work=Fortune|url=https://fortune.com/longform/net-promoter-score-fortune-500-customer-satisfaction-metric/|access-date=3 June 2020}}</ref> Proponents of the Net Promoter approach claim the score can be used to motivate an organization to become more focused on improving products and services.<ref name="The Ultimate Question 2.0"/>{{rp|199–200}} As of 2020, versions of the NPS are now used by two-thirds of Fortune 1000 companies.<ref>{{Cite web|title=The simple metric that's taking over big business|url=https://fortune.com/longform/net-promoter-score-fortune-500-customer-satisfaction-metric/|access-date=2021-02-06|website=Fortune|language=en}}</ref> |
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== Origins == |
== Origins == |
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The |
The origins of NPS as a proprietary instrument date to 2001, at which point Reichwald and Satamatrix built on their earlier, ongoing market research efforts to distill and promote a single survey item that was easy to administer to large numbers of respondents, as well as easy for stakeholders to use and interpret. Early efforts to promote the use of the NPS to corporate clients notably include a 2002 Harvard Business Review article by Reichenwald entitled ''The One Number You Need To Grow<ref name="OneNumber" />.'' |
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== Predicting |
== Predicting customer loyalty == |
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The primary objective of the Net Promoter Score methodology is to |
The primary objective of the Net Promoter Score methodology is to infer customer loyalty (as evidenced by repurchase and referral) to a product, service, brand, or company on the basis of respondents' responses to a single survey item.<ref name="The Ultimate Question 2.0">{{cite book|last1=Reichheld|first1=Fred|last2=Markey|first2=Rob|title=The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World|date=2011|publisher=Harvard Business Review Press|location=Boston, Mass.|isbn=978-1-4221-7335-0|page=[https://archive.org/details/ultimatequestion00reic_0/page/52 52]|url=https://archive.org/details/ultimatequestion00reic_0/page/52}}</ref>{{rp|49–51}}<ref name="The Ultimate Question 2.0" />{{rp|61–65}}<ref name="The Ultimate Question 2.0" />{{rp|77–81}}<ref>{{cite web|last1=Markey|first1=Rob|last2=Reichheld|first2=Fred|title=The Economics of Loyalty|url=http://www.bain.com/publications/articles/the-economics-of-loyalty.aspx|website=Loyalty Insights|publisher=Bain & Company, Inc.|access-date=9 August 2015}}</ref> For some industries, in particular annuity-based business-to-business software and services, it has been shown that Detractors tend to remain with a company, while Passives are more likely to leave.<ref>{{cite web|date=September 2015|title=Maurice FitzGerald - Satmetrix|url=http://uk.events.satmetrix.com/portfolio_page/maurice-fitzgerald-speaker-presentation/|url-status=dead|archive-url=https://web.archive.org/web/20151218162335/http://uk.events.satmetrix.com/portfolio_page/maurice-fitzgerald-speaker-presentation/|archive-date=18 December 2015|access-date=11 December 2015}}</ref> |
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As it represents responses to a single survey item, the [[test validity|validity]] and [[Reliability (statistics)|reliability]] of any corporation's NPS score ultimately depend on collecting a large number of ratings from individual human users. However, market research surveys are typically distributed by email, and response rates to such surveys have been declining steadily in recent years. <ref>{{Cite journal|last=Sheehan|first=Kim Bartel|date=2006-06-23|title=E-mail Survey Response Rates: A Review|url=https://doi.org/10.1111/j.1083-6101.2001.tb00117.x|journal=Journal of Computer-Mediated Communication|volume=6|issue=2|pages=0–0|doi=10.1111/j.1083-6101.2001.tb00117.x|issn=1083-6101}}</ref> <ref>{{Cite journal|date=2020-08-05|title=Physical measures and biomarker collection in health surveys: Propensity to participate|url=https://www.sciencedirect.com/science/article/pii/S1551741120306653|journal=Research in Social and Administrative Pharmacy|language=en|doi=10.1016/j.sapharm.2020.07.025|issn=1551-7411|doi-access=free}}</ref> In the face of criticism of the Net Promoter Score, the proponents of the Net Promoter approach claim that the "recommend" question is of similar predictive power to other metrics, but that it presents a number of practical benefits to other more complex metrics.<ref name=":0" /> Proponents also argue that analyses based on third-party data are inferior to those conducted by companies on their own customer sets, and that the practical benefits of the approach (including a short survey, a simple concept to communicate, and corporations' ability to follow up with customers) outweigh possible statistical inferiority to other metrics.<ref name="businessweek.com">[http://www.businessweek.com/stories/2006-01-29/would-you-recommend-us "Would You Recommend Us?" Business Week, 29 January 2006.]</ref> |
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For some industries, notably annuity-based business-to-business software and services, it has been shown that Detractors tend to remain with a company and Passives leave.<ref>{{cite web|date=September 2015|title=Maurice FitzGerald - Satmetrix|url=http://uk.events.satmetrix.com/portfolio_page/maurice-fitzgerald-speaker-presentation/|url-status=dead|archive-url=https://web.archive.org/web/20151218162335/http://uk.events.satmetrix.com/portfolio_page/maurice-fitzgerald-speaker-presentation/|archive-date=18 December 2015|access-date=11 December 2015}}</ref> |
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== Artificial Intelligence and Machine Learning applied to NPS == |
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Artificial Intelligence and Machine Learning techniques are already starting to greatly influence NPS. The main challenge of the approach that has been used since 2003 is that it depends on people answering surveys. Email is the principal method companies use to distribute surveys and response rates have been declining steadily, according to multiple peer-reviewed studies. <ref>{{Cite journal|last=Sheehan|first=Kim Bartel|date=2006-06-23|title=E-mail Survey Response Rates: A Review|url=https://doi.org/10.1111/j.1083-6101.2001.tb00117.x|journal=Journal of Computer-Mediated Communication|volume=6|issue=2|pages=0–0|doi=10.1111/j.1083-6101.2001.tb00117.x|issn=1083-6101}}</ref> <ref>{{Cite journal|date=2020-08-05|title=Physical measures and biomarker collection in health surveys: Propensity to participate|url=https://www.sciencedirect.com/science/article/pii/S1551741120306653|journal=Research in Social and Administrative Pharmacy|language=en|doi=10.1016/j.sapharm.2020.07.025|issn=1551-7411|doi-access=free}}</ref> Respondents therefore represent a fraction of the true target populations. Concerns are addressed and loops closed for Detractors who answer the surveys, but not for those who don’t. However, AI can use companies’ operational and other data to identify Promoter, Passive, and Detractor attributes and identify shortcomings and improvement opportunities for 100% of customers, rather than just respondents. Surveys, particularly double-blind competitive benchmark surveys, are then used for occasional calibration and competitive comparisons. |
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== Building on the Net Promoter Score == |
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As distinct from the Net Promoter Score, the Net Promoter System (a registered service mark of Bain & Co.) adds various processes, including a process to ''close the loop''. In closing the loop, the provider actively intervenes to learn more from customers who have provided feedback, and also to change a negative perception, attempting to convert Detractors into Passives and Passives into Promoters.<ref name="The Ultimate Question 2.0" />{{rp|175–198}} |
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Proponents of the Net Promoter approach claim the score can be used to motivate an organization to become more focused on improving products and services.<ref name="The Ultimate Question 2.0"/>{{rp|199–200}} The Net Promoter Score is now used by two-thirds of the Fortune 1000 companies as of May 2020.<ref>{{Cite web|title=The simple metric that's taking over big business|url=https://fortune.com/longform/net-promoter-score-fortune-500-customer-satisfaction-metric/|access-date=2021-02-06|website=Fortune|language=en}}</ref> |
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In the face of criticisms of the Net Promoter Score, the proponents of the Net Promoter approach claim that the statistical analyses presented prove only that the "recommend" question is of similar predictive power to other metrics, but fail to address its practical benefits.<ref name=":0" /> Proponents also counter that analyses based on third-party data are inferior to those conducted by companies on their own customer sets, and that the practical benefits of the approach (short survey, simple concept to communicate, ability to follow up with customers) outweigh any statistical inferiority.<ref name="businessweek.com">[http://www.businessweek.com/stories/2006-01-29/would-you-recommend-us "Would You Recommend Us?" Business Week, 29 January 2006.]</ref> |
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==Criticism== |
==Criticism== |
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While the Net Promoter Score has gained popularity among business executives and is considered a widely used instrument for measuring customer loyalty in practice, it has also generated controversy in academic and market research circles.<ref>{{Cite journal| author = Atilla Wohllebe |author2=Florian Ross |author3=Szilárd Podruzsik| date=November 2020| url = https://www.online-journals.org/index.php/i-jim/article/view/17027/8225| title = Influence of the Net Promoter Score of Retailers on the Willingness of Consumers to Install Their Mobile App| journal = International Journal of Interactive Mobile Technologies| volume = 14| issue = 19| pages = 124-139| doi = 10.3991/ijim.v14i19.17027| doi-access=free }}</ref> |
While the Net Promoter Score has gained popularity among business executives and is considered a widely used instrument for measuring customer loyalty in practice, it has also generated controversy in academic and market research circles.<ref>{{Cite journal| author = Atilla Wohllebe |author2=Florian Ross |author3=Szilárd Podruzsik| date=November 2020| url = https://www.online-journals.org/index.php/i-jim/article/view/17027/8225| title = Influence of the Net Promoter Score of Retailers on the Willingness of Consumers to Install Their Mobile App| journal = International Journal of Interactive Mobile Technologies| volume = 14| issue = 19| pages = 124-139| doi = 10.3991/ijim.v14i19.17027| doi-access=free }}</ref> Scholarly critique has questioned whether the NPS is at all a reliable predictor of company growth.<ref>{{Cite journal| author = Timothy L. Keiningham |author2=Bruce Cooil |author3=Tor Wallin Andreassen |author4=Lerzan Aksoy| date=July 2007| url = https://pdfs.semanticscholar.org/dfe0/4f3d83fee37a617d9cacfebc331605dc4bfc.pdf| title = A Longitudinal Examination of Net Promoter and Firm Revenue Growth| journal = [[Journal of Marketing]]| volume = 71| issue = 3| pages = 39–51| doi = 10.1509/jmkg.71.3.39|s2cid=54726616 }}</ref> Other researchers have noted that there is no empirical evidence that the "likelihood to recommend" question is a better predictor of business growth than other customer-loyalty questions (e.g., overall satisfaction, likelihood to purchase again, etc.), and that the "likelihood to recommend" question does not measure anything different from other conventional loyalty-related questions.<ref>Hayes (2008), "The True Test of Loyalty," Quality Progress, June 2008, 20–26.</ref> Several studies have shown that there is little statistical difference in reliability, validity, or discriminating power between the NPS and other metrics.<ref>{{cite journal |last1=Preston |first1=Carolyn C. |last2=Colman |first2=Andrew M. |title=Optimal number of response categories in rating scales: reliability, validity, discriminating power, and respondent preferences |journal=Acta Psychologica |date=14 September 1999 |volume=104 |pages=1–15 |url=https://www2.le.ac.uk/departments/npb/people/amc/articles-pdfs/optinumb.pdf|doi=10.1016/s0001-6918(99)00050-5|pmid=10769936 |hdl=2381/3937 }}</ref> |
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Research by Keiningham, Cooil, Andreassen and Aksoy disputes that the Net Promoter metric is the best predictor of company growth.<ref>{{Cite journal| author = Timothy L. Keiningham |author2=Bruce Cooil |author3=Tor Wallin Andreassen |author4=Lerzan Aksoy| date=July 2007| url = https://pdfs.semanticscholar.org/dfe0/4f3d83fee37a617d9cacfebc331605dc4bfc.pdf| title = A Longitudinal Examination of Net Promoter and Firm Revenue Growth| journal = [[Journal of Marketing]]| volume = 71| issue = 3| pages = 39–51| doi = 10.1509/jmkg.71.3.39|s2cid=54726616 }}</ref> The non-correlating data they identified was entirely with retail gas stations in Norway. Furthermore, Hayes (2008) claimed there was no scientific evidence that the "likelihood to recommend" question is a better predictor of business growth than other customer-loyalty questions (e.g., overall satisfaction, likelihood to purchase again). Specifically, Hayes stated that the "likelihood to recommend" question does not measure anything different from other conventional loyalty-related questions.<ref>Hayes (2008), "The True Test of Loyalty," Quality Progress, June 2008, 20–26.</ref> |
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While several studies, such as one by Preston and Colman,<ref>{{cite journal |last1=Preston |first1=Carolyn C. |last2=Colman |first2=Andrew M. |title=Optimal number of response categories in rating scales: reliability, validity, discriminating power, and respondent preferences |journal=Acta Psychologica |date=14 September 1999 |volume=104 |pages=1–15 |url=https://www2.le.ac.uk/departments/npb/people/amc/articles-pdfs/optinumb.pdf|doi=10.1016/s0001-6918(99)00050-5|pmid=10769936 |hdl=2381/3937 }}</ref> have shown that there is little statistical difference in reliability, validity, or discriminating power, an unpublished paper by Schneider et al (2008) found a more nuanced pattern. Out of four scales tested in two studies (the original LTR with neutral label, a 7-point version with neutral label, a 7-point fully labeled, and 5-point fully labeled), the 7-point scales were better than the 11-point scale advocated by Reichheld, with partly-labeled scale outperforming all others by a smaller margin in predicting stated historical recommendations .<ref>{{cite web|last1=Schneider|first1=Daniel|last2=Berent|first2=Matt|last3=Thomas|first3=Randall|last4=Krosnick|first4=Jon|title=Measuring Customer Satisfaction and Loyalty: Improving the 'Net-Promoter' Score|url=http://www.van-haaften.nl/images/documents/pdf/Measuring%20customer%20satisfaction%20and%20loyalty.pdf|website=van Haaften|publisher=Annual Conference of the World Association for Public Opinion Research (WAPOR)|access-date=13 August 2015|location=Berlin, Germany|date=June 2008}}</ref> |
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==See also== |
==See also== |
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Revision as of 22:26, 24 April 2021
Net Promoter or Net Promoter Score (NPS) is a widely used market research metric that typically takes the form of a single survey question asking respondents to rate the likelihood that they would recommend a company, product, or a service to a friend or colleague. The NPS is a proprietary instrument developed by Fred Reichheld, who owns the registered NPS trademark in conjunction with Bain & Company and Satmetrix.[1] Its popularity and broad use have been attributed to its simplicity and transparent methodology of use.[2]
The NPS assumes a subdivision of respondents into "Promoters" who provide ratings of 9 or 10, "Passives" who provide ratings of 7 or 8, and "Detractors" who provide ratings of 6 or lower. Usually, users of the NPS perform a calculation that involves subtracting the proportion of Detractors from the promotion of Promoters collected by the survey item, and the result of the calculation is typically expressed as an integer rather than a percentage.[3] The core How likely would you be to recommend... question is sometimes accompanied by additional open-ended or so-called "driver" questions.[4]
The NPS is typically interpreted and used as an indicator of customer loyalty. In some cases, it has been argued to correlate with revenue growth relative to competitors,[5] although it has also been demonstrated that NPS scores vary substantially between industries.[6] NPS has been widely adopted by Fortune 500 companies and other organizations.[7][2] Proponents of the Net Promoter approach claim the score can be used to motivate an organization to become more focused on improving products and services.[8]: 199–200 As of 2020, versions of the NPS are now used by two-thirds of Fortune 1000 companies.[9]
Origins
The origins of NPS as a proprietary instrument date to 2001, at which point Reichwald and Satamatrix built on their earlier, ongoing market research efforts to distill and promote a single survey item that was easy to administer to large numbers of respondents, as well as easy for stakeholders to use and interpret. Early efforts to promote the use of the NPS to corporate clients notably include a 2002 Harvard Business Review article by Reichenwald entitled The One Number You Need To Grow[1].
Predicting customer loyalty
The primary objective of the Net Promoter Score methodology is to infer customer loyalty (as evidenced by repurchase and referral) to a product, service, brand, or company on the basis of respondents' responses to a single survey item.[8]: 49–51 [8]: 61–65 [8]: 77–81 [10] For some industries, in particular annuity-based business-to-business software and services, it has been shown that Detractors tend to remain with a company, while Passives are more likely to leave.[11]
As it represents responses to a single survey item, the validity and reliability of any corporation's NPS score ultimately depend on collecting a large number of ratings from individual human users. However, market research surveys are typically distributed by email, and response rates to such surveys have been declining steadily in recent years. [12] [13] In the face of criticism of the Net Promoter Score, the proponents of the Net Promoter approach claim that the "recommend" question is of similar predictive power to other metrics, but that it presents a number of practical benefits to other more complex metrics.[2] Proponents also argue that analyses based on third-party data are inferior to those conducted by companies on their own customer sets, and that the practical benefits of the approach (including a short survey, a simple concept to communicate, and corporations' ability to follow up with customers) outweigh possible statistical inferiority to other metrics.[14]
Criticism
While the Net Promoter Score has gained popularity among business executives and is considered a widely used instrument for measuring customer loyalty in practice, it has also generated controversy in academic and market research circles.[15] Scholarly critique has questioned whether the NPS is at all a reliable predictor of company growth.[16] Other researchers have noted that there is no empirical evidence that the "likelihood to recommend" question is a better predictor of business growth than other customer-loyalty questions (e.g., overall satisfaction, likelihood to purchase again, etc.), and that the "likelihood to recommend" question does not measure anything different from other conventional loyalty-related questions.[17] Several studies have shown that there is little statistical difference in reliability, validity, or discriminating power between the NPS and other metrics.[18]
See also
References
- ^ a b Reichheld, Frederick F. (December 2003). "One Number You Need to Grow". Harvard Business Review. PMID 14712543.
- ^ a b c Colvin, Geoff (18 May 2020). "The simple metric that's taking over big business". Fortune. Retrieved 3 June 2020.
- ^ "Measuring Your Net Promoter Score℠". Bain. Retrieved 13 February 2021.
- ^ Burnham, Thomas A.; Jefferey A. Wong (2018). "Factors influencing successful net promoter score adoption by a nonprofit organization: a case study of the Boy Scouts of America". International Review on Public and Nonprofit Marketing.
- ^ Call Centers for Dummies, By Real Bergevin, Afshan Kinder, Winston Siegel, Bruce Simpson, p.345
- ^ "Net Promoter Score - The Ultimate Guide | Feedough". Retrieved 13 February 2021.
- ^ jennymkaplan, Jennifer Kaplan. "The Inventor of Customer Satisfaction Surveys Is Sick of Them, Too". Bloomberg.com. Retrieved 5 June 2016.
- ^ a b c d Reichheld, Fred; Markey, Rob (2011). The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World. Boston, Mass.: Harvard Business Review Press. p. 52. ISBN 978-1-4221-7335-0.
- ^ "The simple metric that's taking over big business". Fortune. Retrieved 6 February 2021.
- ^ Markey, Rob; Reichheld, Fred. "The Economics of Loyalty". Loyalty Insights. Bain & Company, Inc. Retrieved 9 August 2015.
- ^ "Maurice FitzGerald - Satmetrix". September 2015. Archived from the original on 18 December 2015. Retrieved 11 December 2015.
- ^ Sheehan, Kim Bartel (23 June 2006). "E-mail Survey Response Rates: A Review". Journal of Computer-Mediated Communication. 6 (2): 0–0. doi:10.1111/j.1083-6101.2001.tb00117.x. ISSN 1083-6101.
- ^ "Physical measures and biomarker collection in health surveys: Propensity to participate". Research in Social and Administrative Pharmacy. 5 August 2020. doi:10.1016/j.sapharm.2020.07.025. ISSN 1551-7411.
- ^ "Would You Recommend Us?" Business Week, 29 January 2006.
- ^ Atilla Wohllebe; Florian Ross; Szilárd Podruzsik (November 2020). "Influence of the Net Promoter Score of Retailers on the Willingness of Consumers to Install Their Mobile App". International Journal of Interactive Mobile Technologies. 14 (19): 124–139. doi:10.3991/ijim.v14i19.17027.
- ^ Timothy L. Keiningham; Bruce Cooil; Tor Wallin Andreassen; Lerzan Aksoy (July 2007). "A Longitudinal Examination of Net Promoter and Firm Revenue Growth" (PDF). Journal of Marketing. 71 (3): 39–51. doi:10.1509/jmkg.71.3.39. S2CID 54726616.
- ^ Hayes (2008), "The True Test of Loyalty," Quality Progress, June 2008, 20–26.
- ^ Preston, Carolyn C.; Colman, Andrew M. (14 September 1999). "Optimal number of response categories in rating scales: reliability, validity, discriminating power, and respondent preferences" (PDF). Acta Psychologica. 104: 1–15. doi:10.1016/s0001-6918(99)00050-5. hdl:2381/3937. PMID 10769936.