By Larry Freed
Download the free white paper, Net Promoter Score: The One Number You Need to Evolve
There’s something to be said about the digital world we live in today and how it’s hurling change at us at the velocity of a Justin Verlander fast ball.
Through the last decade we’ve seen incredible advances in technology that has led to the fierce evolution of the consumer and their constantly changing expectations, which has resulted in the need for more and better ways for companies to measure their experiences.
For many organizations the Net Promoter Score (NPS) has been the extent to which they measure customer experience. The problem is, as the world around NPS has changed, NPS remains the same. It is stranded in a land that time has forgotten, outliving its usefulness as a metric.
Don’t get me wrong, NPS has served a valuable purpose through the years. When it first came onto the scene in 2003, it helped to elevate customer satisfaction from being a “nice to have” to a strategic “need to have” requirement during a time when consumers were just gaining unprecedented power when making purchasing decisions. And it’s easy to implement and understand.
The main fault I have with NPS, however, is that it (on its own) never was and never will be a true measure of the customer experience. It is a measurement of an outcome of experience: word-of-mouth. Today, organizations need more precision than NPS can offer in order to make the most informed decisions. It is time for NPS to evolve.
How NPS Works
Developed by Fred Reichheld of Bain & Company, NPS was designed to be a simple way to categorize customers based on a single question: “On a zero-to-10 scale, how likely is it that you would recommend us (or this product/service/brand) to a friend or colleague?”
Reichheld then categorized respondents based on three classifications: Promoters (people who responded with a nine or 10), Passives (people who responded with a seven or eight), and Detractors (people who responded with a six or below. NPS is then calculated by subtracting the percentage of detractors from the percentage of promoters. For example, if 60% of your customers are promoters, 30% are passives and 10% are detractors, your NPS is 50.
Sounds simple enough, right? If only we could stop there.
The Problem with NPS
The first real problem is that NPS takes an 11-point system and turns it into a three-point one. This diminished scale seriously undermines the accuracy and reliability companies need in a measurement.
Furthermore, NPS fails to measure how likely or unlikely someone is to recommend or detract. In a ForeSee survey of more than 20,000 consumers that NPS labeled “detractors,” only 1% said they would be likely to communicate a bad experience – meaning the other 99% were passive detractors (in fact, a large percentage of those turned out not to be detractors at all!). ForeSee’s analysis also found that 60% of those so-called “detractors” were actually loyal customers, indicating they had paid for the company’s service for two years and would continue to do so in the future.
In the real world, detractors do not always detract, and promoters do not always promote. NPS misses this nuance, and ForeSee found that NPS overstates detractors by an average of 260-270%.
Imagine, for a moment, the key performance indicators (KPIs) on your executive dashboard being off by a factor of 270%. And now, imagine the poor decisions you would make based on this faulty information. If you believe 30% of your customer base is made up of active detractors, but really it’s only 10%, then you may very well invest significant money and manpower into trying to “convert” detractors who simply do not exist.
Organizations need and deserve more depth and precision than NPS can provide.
To help companies move beyond NPS, ForeSee developed a new word-of-mouth metric: The Word of Mouth IndexSM (WoMISM).
ForeSee tested and refined WoMI over a two-year period with more than 300 companies and through nearly 1.5 million customer surveys. The result is a much deeper and more precise categorization of active promoters and detractors than is possible with NPS, while still preserving NPS-caliber ease-of-use and understanding. WoMI does this by augmenting the NPS “How likely are you to recommend?” approach with a second question: “How likely are you to discourage others from doing business with this company?” WoMI then subtracts the percentage of 9 and 10 ratings from “likelihood to discourage” from the percentage of 9 and 10 ratings from “likelihood to recommend” to arrive at the balanced and accurate WoMI score.
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WoMI offers more sophisticated analytics to understand what consumers want and where to allocate resources, using a simple, precise metric. Like NPS, it is a single number that is easily shared with business leaders, enabling executives to manage the customer experience across the organization as part of a comprehensive measurement system. And like NPS, organizations need to understand that WoMI is just one metric within the customer satisfaction ecosystem.
Today’s customer experience champions are organizations that use a comprehensive system of metrics measuring the customer experience across all channels (Web, store, contact center, mobile, or social media). This type of system pinpoints the exact elements that most directly impact overall satisfaction, enabling organizations to identify priorities for improvements and optimize their investments in customer experience management.
It’s time for NPS to evolve. It’s time for WoMI.
Download the full and free white paper, Net Promoter Score: The One Number You Need to Evolve.
ForeSee is not affiliated with Net Promoter or Satmetrix Systems (and/or Fred Reichheld or Bain & Company) or any of its subsidiaries or affiliates. Furthermore ForeSee is not associated with, licensed by, endorsed by, or funded by Satmetrix Systems (and/or Fred Reichheld or Bain & Company), and no effort has been made to falsely suggest a connection with any of those entities or the products/services offered by Satmetrix Systems (and/or Fred Reichheld or Bain & Company).