Customer Experience News & Trends

New research says NPS is failing you miserably

If you’ve been using Net Promoter Score (NPS) to measure customer satisfaction – and guide business decisions – you’ve wasted time and money in all the wrong places, at least according to one group of researchers.

A group of researchers at ForeSee, a customer experience analytics firm, suggest that the decade-old method for determining customer loyalty and customers’ propensity to recommend a company overstates detractors — customers who say they won’t recommend a company to others — by an average of 299%.

Instead, many customers a company will label as “detractors” under the NPS system actually recommend the company or never discourage people from buying from the company, ForeSee researchers found.

What they’ve studied

ForeSee researchers spent two years looking at more than 1.5 million survey responses to test the accuracy of the NPS methodology.

What they found: Because NPS users only measure “the likelihood to recommend,” they assume that if people aren’t recommending a product, service or company, they’re saying negative things about them. Then companies spend money chasing those customers who were dubbed “detractors” and perhaps less money on keeping the “promoters.”

Fred Reichheld, a partner at Bain & Co., introduced the NPS 10 years ago. Satmetrix currently markets NPS measurement programs. Representatives from both companies weren’t available for comment before the ForeSee research was released.

New methodology

ForeSee has introduced new methodology predicting customer loyalty and promotion inclinations, The Word-of-Mouth Index (WoMI). It measures both the likelihood to recommend and likelihood to detract from a specific brand by adding a second question to the NPS method: “How likely are you to discourage others from doing business with this company?”

Regardless of the customer feedback tool you use, the most important key is probably variety. When measuring customers’ experiences with your organization and its people, try more than one method — post-transaction phone surveys, customer advisory panels, annual written surveys, etc.

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