Announcing A New NPS Metric

Sufferers from Net Promoter Syndrome share a common symptom with those afflicted with another marketing malady called Simplificosis, the tendency to believe that just because a marketing or management metric is simpler to understand or measure than other metrics, then it must be better.

I understand that companies often make things more difficult than they need to be and that simplification has its benefits.

Example: Applying for a mortgage. The complex way: Filling out a 15 page form and waiting three weeks for an answer. The simple way: Answering three questions (what’s your name, what’s the address of the home you’re looking to buy, and how much money do you make) and getting your answer immediately.

But sometimes, simplification isn’t an improvement.

Example: Getting directions from Boston to New York. The complex way: Take the Mass Pike to the Rte 84 exit, merge onto Rte 15 south towards I-91, go east on …. and so on. The simple way: Go southwest. Correct, simpler, but not exactly an improvement.

This is the trap that Net Promoter Syndrome sufferers fall into. Paul Marsden, writing on his Viral Culture blog, wrote “the simplicity of the model…has made research intelligible at the board level.”

It’s intelligible, however, not because it’s right, but because Reichheld knows how to communicate with senior management. I hate to say it, but many market researchers don’t. Citing margins of error, R-squared scores, etc. doesn’t resonate with a lot of senior execs.

But the reality of the Net Promoter Score is that it’s really not that simple. The common practice is to only consider customers as promoters if they give a 9 or 10 on the 10-point scale. But in comparing NPS between time periods, it’s quite possible that the net score could increase while a significant number of customers shift from 7s and 8s to 1s and 2s. Not so simple, after all.

Bottom line: Simpler doesn’t mean better, nor does it make it “more right” than complex.

But hey, if it’s simpler you want, it’s simpler I’ll give you. Here’s a new metric for you. And since it might be too complex for some people to remember a new acronym, my new metric will keep the NPS moniker. Announcing the new NPS:

Net Purchaser Score — The net difference between the number of people who bought your product and the number of people who returned it.

I haven’t done the “research” yet, but I just know that my NPS will correlate with revenue and profitability growth. And the beauty of my metric is that it:

  1. Measures behavior (not intention)
  2. Encompasses all customers (not just a sample)
  3. Directly impacts the bottom line (not indirectly)
  4. Can be measured in real-time (or at least more often than surveys)
  5. Is simple!

As soon as I finish the “research”, I’ll publish the book (and I’ll even send you a signed copy if you leave a comment here). And I’ll expect all the Net Promoter promoters to drop their support of their metric, since something better — and simpler — will have come along.

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p.s. Check out Adelino’s take on this


9 thoughts on “Announcing A New NPS Metric

  1. This sentence in your post really resonates with me: “It’s intelligible, however, not because it’s right, but because Reichheld knows how to communicate with senior management.”

    Like you, my experience has shown that analytical types have a hard time articulating their findings in language that management can, not only understand, but also make actionable in their day-to-day life.

    Regardless of which type of measurement/analysis you employ, I believe that if you take the time to develop a ‘story’ for management–present the findings in their language, the research will be appreciated, understood and acted upon.

    And, that’s what we want, right?

  2. Ron,

    I am responding first because I want a copy of your book when it comes out.

    Now that that’s out of the way – I read the Mardsen comment and I knew it would get a rise out of real researchers (i.e. people who get paid by the pound).

    I do suffer from NPS syndrome. Why? Because I was a teller. A damn good teller. I KNOW I created profit for my credit union in the form of loyalty and repeat business. But no one ever measured that. Which is why tellers continue to get paid nothing. Pond scum.

    I guess most research focuses on the product, not the person. When I saw Fred speak – his message was really about the golden rule. Treat people well, and they will come back and bring their friends. Maybe it is too hard to really measure and plot on a graph on such a touchy feely subject- but my hope is that somewhere, someone will have the guts to realize the value of the front line.

    I remain,
    Simplificosis in Seattle,

  3. Ron

    I think that one of the biggest issues with NPS is that it reflects what people say that they are going to do (“I will recommend”) not what they will actually do.

    I was in a presentation of a an online portal that showed that those who gave it high NPS scores were not more likely to actually recommend the company.

    So maybe NPS is ok as a measure of overall satisfaction but the case for linking NPS and growth needs to be re-examined by more studies. The bottom line is that NPS is one out of many evaluations a business can use to assess its position – one of many ultimate questions.

    Arnon Vered
    Author of: “Tell a friend” a word of mouth strategy book

  4. Pingback: More on Net Promoter Score « The Bankwatch

  5. I really like your mortgage application example, especially in light of the recent subprime mortgage lending market collapse. I’m sure many of the subprime lenders that are now facing bankruptcy had simple, easy-to-understand three-question loan applications similar to the one your propose!

  6. The problem is not that researchers cannot effectively communicate the survey results. The problem is that rampant favoritism has created top managers who are frankly not that bright.

    Most survey results are communicated as percentages or averages. This is not rocket science. The fact that most managers cannot get this, aludes to my first point. Throw in a confidence interval, and their feeble brains melt.

    Favoritism is ruining this country. Idiots have taken over leadership positions. All of this is acceptable and “the way it is”.

    That’s the problem with survey results – actual smart people have to hold these highly skilled jobs and if you can’t understand them, then perhaps you should get an MBA too, instead of sitting there looking stupid.

    Am I bitter? Perhaps.

  7. I’m doing research on how exactly NPS marketing is going to help out my company. I am looking forward to hopefully receiving the book and getting an in depth description of what it can do for me.

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