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Following on from blog article – Keep it short, keep it focused we felt it appropriate to continue the discussion around keeping things simple when asking customer satisfaction questions. This article puts forward the argument that there is no such thing as the ‘ultimate question’. With customer satisfaction surveys increasing in length, the marketing industry will always be seduced by statements such as ‘this is the single most reliable indicator of a company’s ability to grow’. However, is the Net Promoter Score (NPS) concept oversimplifying things and losing sight of what customer satisfaction and loyalty studies really aim to deliver? The fundamentals of the Net Promoter Score are that every company’s customers can be divided into three categories: Promoters, Passives, and Detractors. By asking — How likely is it that you would you recommend us to a friend or colleague? you can find out how likely a brand is to be recommended, and it will provide a good indicator of how well it will grow. Customers respond on a 0-to-10 point rating scale and are categorized as follows:
To calculate your company’s Net Promoter Score (NPS), take the percentage of customers who are Promoters and subtract the percentage who are Detractors.
Many large consumer brands have integrated the NPS into their customer loyalty programmes from Amazon, Apple and eBay through to Harley-Davidson, Google and Dell. However, despite its popularity amongst large corporates, research by Hayes (2008), "The True Test of Loyalty," Quality Progress, June 2008, shows that the "likelihood to recommend" question is no better predictor of business growth compared to other customer loyalty questions used over time e.g., overall satisfaction, likelihood to purchase again. The attraction to the Net Promoter Score is its simplicity in that it requires just one question, it is easy to benchmark and implement across individual divisions or organisations as a whole. However the real driver of its ubiquitous use has been its claim that it is the only question you need to ask that tells you everything you need to know and this is where the problem lies. Word of mouth does not always boost sales and distribution and pricing can mitigate effects too. In conclusion, there is no single question that can be used to monitor customer loyalty and satisfaction. NPS is a useful measure enabling changes over time to be tracked but a customer survey needs more elements to it to facilitate the changes to take place. Customer loyalty and recommendation behaviour are products of satisfaction with the total customer relationship from the product and service, they cannot be fully understood by one question. The key to any customer satisfaction and loyalty survey is about understanding how satisfied customers are, why they think the way they do and how change can take place to increase satisfaction and loyalty in the long-term. The Net Promoter Score has been around for over 5 years now and was announced as the ‘ultimate question’. Tracking a number over time is only a marked indicator and does have its values but the real work is understanding what makes customers satisfied and loyal and then delivering that through change management. This entry was posted on Wednesday, January 7th, 2009 at 5:05 pm and is filed under Customer Retention, Customer Satisfaction, Market Research, Net Promoter, Recommendation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site. 5 Responses to “Customer satisfaction – is there an ultimate question?”Leave a Reply |
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January 8th, 2009 at 9:49 am
Interesting post… hopefully this will help businesses develop a range of ultimate products.
January 14th, 2009 at 7:09 pm
This is a really interesting post as it highlights one of the misunderstandings about Net Promoter. Just asking one question is interesting, it provides a helpful benchmark and it is very helpful in segmenting your customers. But without knowing why customers score the way they do AND what they would like to see improve, it doesn’t really point the business in the right direction.
I have been using Net Promoter in just this way ever since the team at the London School of Economics, who proved its value in the UK, introduced it to me back in 2005. And, one of the creators, Satmetrix, drives global business improvement programmes for its customers by asking these additional questions. In my experience there is an uncanny correlation between the Net Promoter score received and the propensity for the customer to stay loyal and also to spend more.
So I totally agree that one question isn’t enough and that likelihood to purchase can also be an accurate predictor BUT I believe that Net Promoter’s true value is not as a predictive question but as a driver of customer-focused business improvement. In my view Net Promoter produces a recommendability Balance Sheet for an organisation and that business leaders who nurture their recommendability Balance Sheet as much as they do their financial one are much more likely to succeed – especially in today’s difficult economic conditions.
January 15th, 2009 at 2:56 pm
Mike and Crispin – thanks for your comments.
One difficulty we find in business to business market research is that we can be dealing with small sample bases (sometimes as low as 30 customers in total). When using such a methodology it is sometimes difficult to insightfully deliver a robust NPS score due to the huge variability in results and the fact that half of all respondents can end up as Passives (scores of 7 or 8 out of 10).
What I do find interesting is how different companies stack up on this measurement. While the likes of Apple (NPS of 79%), Google (NPS of 73%) and American Express (NPS of 47%) the average firm splutters along at a Net Promoter Score efficiency of only 5 – 10%. In other words, promoters barely outnumber detractors. Many firms—and some entire industries—have negative Net Promoter Scores, examples of which include businesses with an associated social stigma (e.g., cigarettes) and businesses with different levels of service fulfillment.
Here at B2B International we do think that Net Promoter Score is a useful tool but care needs to be taken when comparing results and it is defintely more applicable when looking at larger sample sizes.
January 15th, 2009 at 3:08 pm
Readers of B2B International’s excellent blog might want to view another post on http://blog.futurelab.net/2006/04/lousy_customer_satisfactionits.html that talks about the Net Promoter Score and business to business markets.
One of the comments on this site states that branding plays a very minor role in B2B, if much of a role at all – http://www.mindtimegroup.com/
The author states that after an exhaustive search of statistical and academic data, she didn’t find one study to show branding in b2b matters.
NPS can be useful for B2B, but studies by Maritz for example, have shown that customer perceptions of value, have even greater relevance to customer loyalty/advocacy than the “recommend” question used in Net Promoter. Makes sense really … businesses tend to be more rational and value is something that carries more weight than the smoke and mirrors you get with B2C brands.
January 20th, 2009 at 3:27 pm
The issues of sample size, low or negative Net Promoter scores and the comparison of results, are all really helpful in focusing users of Net Promoter on its true value. I have run surveys that range in number from about 20 to several thousands in both B2B and B2C.
From a B2B perspective I have found an uncanny correlation between the score received and the immediate intentions of the customer. Detractors usually leave within six months unless the sources of detraction are addressed. Promoters usually spend more. Both are good reasons to ask the Net Promoter question.
The efficiency of Net Promoter – and its success in securing high response rates – really helps in a B2B environment because it allows an organisation to survey the views of users and economic buyers and get a view from a very high proportion of customers. In this sense sample size doesn’t matter because what NPS measures is the personal experience of the individual NOT the organisation and the gap between this and the expectations the individual had. This allows B2B organisations to take action customer by customer, secure in the knowledge that they have been given a clear guide where to look for both issues and solutions. Readers of this blog might be interested in a new book called Answering the Ultimate Question written by senior executives at Satmetrix is a really practical guide to using Net Promoter productively. It can be purchased at Amazon via this link http://www.amazon.co.uk/s/ref=nb_ss_w_h_?url=search-alias%3Daps&field-keywords=Answering+the+Ultimate+Question
The issue of the score is one area where people need to really understand what NPS can show them. It VERY DEFINITELY isn’t about the absolute number in a comparative sense. In our experience beauty products average about a score of 40 whereas software averages about zero but one wouldn’t rank a firm like Oracle a failure simply because its score is lower than Olay! The critical thing to do is collect regular data and thus build up a trustworthy picture of what the score means to the organisation. With reliable data it is then possible to run correlation or regression analysis to be able to identify any causal links if they exist.
In the meantime proving that you have listened to the customer feedback by closing the loop and acting on it will do much to help organisations improve their NPS score but more importantly improve their customer loyalty and business performance.