Tuesday, March 4, 2008

A View of NPS from South Africa

I just read an exerpt from an article by Craig Kolb, a merketing research specialist who has authored papers and articles on customer satisfaction, loyalty and brand equity in Wouth Africa. Apparently Craig is not sold on NPS because his article is not very positive and carries some impressive statistics to go with his conclusions.

Here are some of the points that Craig makes:
1. He conducted a study of a number of different markets from short term insurance to cars and found that differences in the tendency to recommend don't automatically mean there will be differences in loyalty behavior. He found that the Net Promoter Score does not relate to the percentage of customer switching away from each institution. According to the article he quotes a study of 8000 customers in banking, retail and ISP industries, conducted by Keiningham, et. al. (2007) that lends support to his conclusions.
2. Another problem that Craig uncovered was there were hidden differences among cunsumers who were identified as "promoters." He found that far from being uniformly loyal, some were far more prone to being tempted by competitor offers than others.
3. One more point he makes is that a study of 80 companies over a seven year period, the researchers, Morgan & Rego (2006), found that the Net Promoter Score was not predictive of company growth rates.

The conclusion of the article is that there is another side of the story of NPS and that is that the "Ultimate Question" is far from being the most predictive measure of loyalty, and so will more often mislead than help.

The Bottom Line: NPS needs to do some more publishing of data and cases which proves their metric does what they say it does.

1 comment:

SteveBernstein said...

2 quick notes to keep the conversation going:

1) You're right that "NPS needs to do some more publishing of data and cases which proves their metric does what they say it does." There can never be too much data and proof points. As a start, I would like to provide a pointer to a blog that does have a some great findings:

2) The Net Promoter community agrees that NPs isn't always the most predictive indicator (see above link), but NPS does provide an excellent mechanism to drive customer-centricity in large organizations and does provide results. The same blog entry I referenced above also has more detail on this. I believe we'd all agree that the point is to listen to customers and to generally act on what they tell you. Programs that use Net Promoter to report aggregate results may have some value, but such programs are especially beneficial if the feedback is being heard and used to drive the right changes across the enterprise.


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