Since its inception by business strategist Frederick Reichheld in 2003, the net promoter score (NPS) method of assessing a brand’s customer satisfaction levels has been widely adopted by marketers.
Reichheld claims the system attributes a brand’s predicted revenue growth to the responses given to just one question – how likely out of 11 would you be to recommend this company to another person?
Those who score a brand between 1 and 6 are classed as “detractors”, while those who score a brand 9 and 10 are “promoters” and those who score a brand 7 and 8 are seen as “passive”.
While Reichheld’s theory has its critics, there is no doubt NPS has proved useful for marketers. Mark Blayney Stuart, head of research at the Chartered Institute of Marketing (CIM), believes the use of NPS continues to increase because the system is so straightforward and easy to use.
He says: “So much information is available these days that one of the problems can be how you make enough sense of that data to do something with it. NPS can give a clear picture.”
Good and bad feedback moves exceptionally swiftly. You need a mechanism to ask customers why they have scored the way they have
Phil Evans, Carole Nash Bike Insurance
However, Blayney Stuart acknowledges that NPS has flaws and says marketers should treat it as a springboard to prompt more in-depth research using other methodologies.
He argues: “One inherent risk of NPS is that it turns things into a black and white picture. If you are only looking at ’promoters’ and ’detractors’ you’re only seeing a broad-brush picture and stripping out lots of qualitative information.
“The key is to use NPS as a prompt for obtaining more qualitative views to find out why people are recommending you or not. That can start to give you the insights for the direction you might want to take in the future.”
Group marketing director
When I joined Hays three years ago, I found the net promoter score (NPS) concept to be a one-dimensional tool.
However, about a year ago we introduced some extra dimensions. We allow respondents to give free text feedback. With these additions NPS becomes incredibly valuable as a richer tool to measure service and satisfaction.
It’s fantastic to have promoters, but we want to understand just how satisfied our customers really are. We have eight stages of the recruitment process from the initial encounter through to job placement so we ask candidates and clients to rate us out of 11 for those key stages to help us build a picture of genuine satisfaction.
The managing director or regional director reviews every free text comment. All comments from those who score us 9 or 10 are passed on to the individual consultant so they can see the benefits of their professionalism. We also draw out the positive comments and anonymously showcase them on our intranet. This is a way of demonstrating how much good service is appreciated.
The way NPS has been measured has been consistent over the past five years and the operational side of the business has really bought into it. I’m on the management board so every quarter I do a presentation that is shared with company directors. By making NPS broader, the sales and management teams here see the benefits of this three-dimensional approach.
Marketers who use NPS must then take the initiative to bolster their quantitative results with qualitative methodologies to delve deeper into why a respondent has given a certain score, as well as make more use of respondents who are identified as promoters.
One of the latest brands to join the NPS party is insurance and investment firm Standard Life, which is running a pilot among its network of intermediary financial advisers. Standard Life head of group insight Carol McCreadie explains that finding out who is favourable towards the firm, and why, is essential to the business.
She says: “Recommendation is really important within the financial services sector, particularly with financial advisers, who have a lot of clients coming through their doors and are looking for advice.
“We want to understand how often they are choosing Standard Life over a competitor and why. We will look at individual accounts to find out how much business clients are actually placing with us, and monitor this as we work with them to see how our score can increase and how it impacts on our business.”
Like many brands, Standard Life will continue conducting its brand tracker activity alongside NPS, which will be reviewed by senior managers.
Sholto Douglas-Home, group head of marketing at Hays Recruitment, explains that NPS gives marketers a numerical, results-based language that they can use to speak to their company board (see Viewpoint, above).
The key is to use NPS as a prompt for obtaining more qualitative views
Mark Blayney Stuart, CIM
While some brands are still experimenting with the scoring system, others are incorporating it with a social media strategy. Aviva, for example, uses software from provider ServiceTick that prompts respondents who score the brand a 9 or 10 to post a recommendation to their Facebook or Twitter pages.
Aviva online customer experience manager Liz Habgood explains that the survey automatically generates some text for the relevant respondents to edit if they wish, and post with one click to a social network site. She says: “It can be risky if it looks contrived, but we have tried to word it in a way that sounds fairly natural. People can add their own comments to reduce the chance of it looking too forced.”
Aviva is using social media in anticipation that these positive sentiments could be streamed in search results in the future, she explains.
Social media isn’t currently used in web search rankings, but people do use social media to gauge opinions of brands. And it could be that Google will eventually use social media feeds in search.”
While incorporating social media adds value to Aviva’s use of NPS, Habgood acknowledges that NPS is not all-encompassing. To get around this, the company also uses a brand tracker, focus groups and analyses the transcripts of its online customer service web chats.
Specialist motorcycle insurance broker Carole Nash also uses ServiceTick technology, but has expanded the use of NPS by allowing customers to add verbal comments after completing a telephone survey.
Q+A: Brand in the spotlight
Head of customer experience and market driven information
Marketing Week (MW): How long have you been using net promoter scores (NPS) and how has it impacted on your business?
Suhail Khan (SK): We started using NPS about four years ago. We wanted to increase our market share and understand where we stood compared with our competition. We also wanted to obtain insights in terms of how we go to market with our products. Our pilot led to some great insight, so we have now activated it through a large portion of our company. We try to get a proxy of how our business is behaving in all markets and how much the promoters are working for us in our markets.
MW: How can you act on the insight delivered by your NPS programme?
SK: NPS is a fantastic way to get a quick insight to what’s happening in a market at a given time, for a given product in a given sector. That’s step one. Step two is root cause analysis – that is to understand what causes a particular response.
NPS is also a great indicator of market behaviour. When NPS goes up we can anticipate that revenues will follow. When NPS goes down, we can warn the rest of the enterprise to take action because of this feedback. And our management has formulated NPS-based deliverables as far as growth and providing the right customer experience.
MW: How are you using the views of your “promoters”?
SK: We launched the Promoter Reference Programme last year to capture the voice of our customers through video, audio and case studies. We feed that back into our sales organisation so we can use the voice of the customer in our pitches. We have stopped talking about NPS as a score because if you think of it as a number that’s all it will be without an understanding of what it means.
Phil Evans, head of operations at Carole Nash, explains that bikers are enthusiasts so it’s important to keep them onside. He says: “There are just over 1 million bikers in the UK, and good and bad feedback moves exceptionally swiftly among groups of people who are exceptionally passionate about what they do. You need a mechanism to ask customers why they have scored the way they have.”
Carole Nash’s NPS activity also incorporates internal advocacy, through a monthly survey asking employees how likely they would be to recommend Carole Nash as an employer to friends and family.
“A high internal NPS will actually deliver on and attract the external NPS,” claims Evans. “If you have people who are advocates of the organisation, that will come across on a customer service call.”
Harnessing the word of mouth power of promoters is high on the agenda of consumer electronics giant Philips. Suhail Khan, head of customer experience and market driven innovation, explains how the launch of a Promoter Reference Programme last year allows Philips to pinpoint people who score the brand 9 or 10. Philips not only uses their positive comments but also investigates the motivations behind their score and how it extends to their real-life behaviour.
Blayney Stuart at the CIM says such activity illustrates how NPS can be the starting point for brands to engage further with their advocates. He is clear that NPS is a tool that can help marketers develop a broad understanding of how the company is rated. But he warns that marketers must assess what role NPS has to play in understanding their brand’s performance, and if it really is the best measure for what they want to achieve.
Criticism of NPS
The American Customer Satisfaction Index (ACSI) was developed by Claes Fornell in 1992 and has been used to predict sales and profit but in 2003 Frederick Reichheld claimed that NPS could be used as a single measure of word of mouth to provide a better prediction of brand performance.
However, Kingston University professor of strategy, marketing and entrepreneurship Robert East argues that NPS does not measure negative word of mouth effectively because ex-customers and non-customers are never sampled, and these are the people who would express negative sentiments about brands.
East, whose paper on the topic will be published in a forthcoming issue of The International Market Research Journal, adds that the ACSI is also “insensitive to dissatisfaction”.
He says measuring the effect of word of mouth through its volume and impact on purchase probability expressed by users of the category would be more effective rather than just users of a specific brand.
Meanwhile, senior vice-president of Ipsos Loyalty Tim Keiningham claims that NPS has been “vastly oversold to companies”. In 2007, Keiningham and a team of academics took NPS measures from 15,000 consumers and 21 firms, and compared them with actual revenue growth. They concluded there was no real link between the two. Keiningham says business leaders should not adopt NPS if their only reason is that they have been sold on the superiority of the metric.
Other criticisms of NPS include that it uses an over-simplified scale and doesn’t take into account cultural relativity. For example, NPS dictates that people who score a brand 9 or 10 are “promoters” but in some countries those who score 7 or 8 might also be very satisfied.